{UAH} Allan/Pojim/WBK: Trust your money to a mzungu fool, not to a thief - Comment

http://www.theeastafrican.co.ke/OpEd/comment/Trust-your-money-to-a-foreign-bank/-/434750/3162820/-/item/0/-/m36hxk/-/index.html

Trust your money to a mzungu fool, not to a thief

The collapse the week before of Chase Bank Kenya — the third small-sized lender in nine months to go into statutory management — revived an old uncomfortable debate: Can the "natives" — both the African and Asian variety — be trusted to run a bank?

In Kenya, the Dubai Bank Kenya and Imperial Bank were taken over by regulators in August and October respectively.

And sure, banks collapse everywhere. In Europe, North America, Asia, name it.

Also, there are successful locally-owned banks. It's hard to imagine that the Centenary Bank in Uganda, or Kenya Commercial Bank, could crash to the pavement tomorrow.

In the 1990s, when locally owned banks were folding every few months in Uganda, the nationalists outside and inside parliament rallied. They argued that in allowing local banks to fail, the country was allowing itself to be "enslaved" by foreign-owned financial institutions.

Their faith in the local banks they were campaigning for was tested. It turned out that the politicians who were batting for the local banks didn't have important accounts there.

The school fees accounts for their children, and the earnings from their real estate, those ones they put in "mzungu" banks.

So what is the difference between the local and mzungu banks, I asked someone who follows these things closely.

In nearly all these cases, he told me, the owners and managers of the banks lent themselves huge amounts of money without security, and didn't pay it back. Put bluntly, they "ate" the banks.

The mzungu banks mainly fail because of bad lending decisions, incompetence, and adverse economic conditions. It's not because the chairman lent himself 30 per cent of the bank's loan book.

It seems then that people would rather keep their money with a fool, than with a thief.

But that the problem is more complicated. In many ways, banks are dinosaurs and remarkably anachronistic.

A bank is probably the only institution in the world to which people willingly surrender their most precious asset. Almost every other precious thing, human beings keep with themselves, often where they can see it; jewellery and land titles in the home safe, and your precious smuggled goods in the ceiling.

It's why banks are so susceptible to disruptions like mobile money. If you have an app for the ride-hailing service Uber, you use that single app and the credit card you are charging it against wherever you go in the world. In the not-too-distant future it should be possible to associate your Uber account with the mobile money wallet.

If payment solutions like Apple's ApplePay become ubiquitous, and most of the places where you shop and the services you use could develop Uber-like apps, the two most critical things will be a mobile phone and credit card.

Employers would no longer need to send your salary to a bank. They would send it, essentially, to MTN or Safaricom, or your credit card – and it's for the latter that banks would be necessary.

So while in the decades to come we shall still have banks, they will not have money in the vault for the chairman to steal, or managers to gamble with.
Essentially, we shall walk around with all our wealth in our pockets. In the phone and card. Welcome to 2040.

Charles Onyango-Obbo is editor of Mail & Guardian Africa (mgafrica.com). Twitter@cobbo3

Trust your money to a mzungu fool, not to a thief - Comment

http://www.theeastafrican.co.ke/OpEd/comment/Trust-your-money-to-a-foreign-bank/-/434750/3162820/-/item/0/-/m36hxk/-/index.html

‎

Sent from my BlackBerry 10 smartphone.