By David M ARUNA
The banking industry is one of the formal sectors that contribute immensely to the economic growth of any nation. The Sierra Leone financial system began way back in the 1894 with First Bank being the first colonial bank, followed by the British West Africa Limited (BWA Ltd) in 1989 which was the first commercial bank to gain operation in the money market. The battle for independence in 1961 brought the establishment of the Central Bank through the legislative body in 1964
Banking operation before the war was so primitive that traditional banking dominated the financial systems and causes a huge challenge in facilitating transactions.Difficulties in recoding transactions, issuing of payments and ascertaining of account balances encumbered account holders not to parcel accurate banking product and services offered.
Customer retention was also another great issue in the dark age of banking, because not everyone was prone to banking services due to the low rate of wages and salaries likewise a shadow investment climate.
Banks in Sierra Leone were few then and the ones available then included the Sierra Leone Commercial Bank, The Barclays Bank, The Meridian Bank, Standard Chartered Bank and First Bank being the oldest foreign bank before the war.
The political and economic instability between the years 1991 to 2000 distorted the entire financial systems, causing banks to loss customers, assets, domestic and foreign investment yielding no returns.
The pronouncement of the end of the Sierra Leone civil war created the platform for foreign banks to infiltrate the Sierra Leone economy and to strategically gain grounds in the banking industry in the chronological order.
Guaranty Trust Bank being the first to enter after the war commenced operation in 2002, Ecobank 2006, Procredit Bank 2007, Access Bank 2007, Keystone Bank now Bloom Bank 2007, Syke Bank 2007, United Bank for Africa 2008, Zenith Bank 2008, International Commercial Bank and the rest, all incorporated and licensed by the corporate commission and the Bank of Sierra Leone respectively.
The current economic climate gives the ratio of 10:4 foreign banks to indigenous banks, constituting 71.57 % and 28:43% respectively.
The rate of percentage clearly shows that foreign banks are the key players in the Sierra Leone’s financial system.
The entry strategy of these foreign banks in the financial system is being categorized in five areas:
- Aiding trading and limiting the risk in financial assets,
- To make financial resources available among competing users,
- Strong managerial team to enhance effective corporate service,
- Expand and allocate more resources in their outlets or branches,
- Efficient exchange of goods and services
Most foreign banks are totally controlled by their parent body except otherwise but their game plan affects economic growth by increasing the incentives for capital accumulation and technological innovation.
In their day-to-day operation, the firms and individuals within financial systems can be observed advising clients, structuring and arranging deals, providing finance to borrowers and equity issuers, and managing the funds and investments of their respective clients.
Impacting the financial sector, strategies like merger and acquisition is very common among foreign banks to gain more grounds in the financial sector, thus Guaranty Trust Bank acquire 90% shareholding of First Merchant Bank, Eco bank also acquired Procredit Bank a former German bank now called Eco bank Microfinance Ltd, Bloom Bank likewise took over Keystone Bank , Access Bank (SL) Ltd now in control of Standard Chartered Bank, First International Bank now VISTA bank , whilst International Commercial Bank branded as First Nigeria Bank ( FBN)
Retail banking is another entry mode these foreign banks are highly involve in. Retail banking is more on credit to facilitate the growth of (SMEs) businesses, educational pursuit and construction of houses. Retail banking has been among the domestic bank since the inception of the foreign banks, but the transformation of new generational banking through the foreign banks innovation and technology, and the technology driven product created by foreign bank has changed the entire scenario about retail banking.
In the olden days of banking, to ascertain bank balances will take week or days, but with the introduction of internet banking among these foreign bank, access to account balances can been done in a quarter of seconds depending on the rigidity of the internet .
The traditional banking service gives eight or less than eight credit hours for banking transaction to carry out in a day, thus limiting savers to access to financial resources. The used of debit and credit cards has override the timing factor in facilitating transaction. These plastic services can now aid transaction 24 hours rounds the globe with ease. Transactions like bank to wallet, wallet to bank is a platform that requires no further visit to the physical location of the bank
Accessibility to fund was another dispute during domestic banking. But the growth in banking technology and automation of banking process has facilitated the retail sector. The innovation by the foreign bank in installing this money machine has now given access to fund at any point in time of the night through the use of the Automated Teller Machine (ATM)
Clearing of cheques and transfer of fund was also a burden in the banking sector, as physical instruments were taken by clearing offers to drawing banks for the collection of fund and then deposited into individual or business respective checking account
Foreign transactions and off shore financial centers were constraints too because bank draft and traveler’s cheques needs to be posted overseas before fund can be deposited into foreign account. But with the electronic financial plate called Society for Worldwide Interbank Financial Telecommunication (SWIFT) fund is wire in an easy and convenient timely manner.
Finally, by domestic deregulation, including the removal of entry barriers, technological advances allowing for easier telecommunication, increased financial integration, and more generally heightened globalization, the relative importance of foreign banks has increased substantially in many torn war countries by creating job facilities hence reduce the rate of unemployment.
