Why are we poor? Is it our africanness? Is it our global trade laws that allow the third world to be paid less for their goods? There are so many reasons, but the chief one is that we are not fully in this modern world. Our people are not fully subscribed to the cash economy, now cash is strange, it is built entirely on trust and suspension of disbelief. Imagine the first time our ancestors were shown a piece of paper and told “This is equal to a cow” and they laughed. How can a piece of paper be equal to a cow? A cow is equal to a cow. Money is the greatest invention of mankind, it may be the worst invention, but it has driven progress for millennia. How does one quantify labour? If a shoemaker wants to sell to a goat-herder then how many shoes equal a goat, you one need one pair, what happens to the excess money or labour? Money solves that problem of quantifying and rewarding labour. We take a piece of paper and ascribe value to it, we have wizards in BNR who have done forecasts, consulted the financial gods and all is well. When we stop believing the money is worth much we get inflation, the wizards have to come and reassure us again that all us well. Most Rwandans have not bought into the cash economy, they still live by their own sweat growing their own food and it is rare that they need money compared to a city person. There is a crop in the field, honey in the tree, meat in the bush, milk in the cow, and they have no commercialism to aspire to own the latest this or that. They need just medicine, soap, salt, and the odd utensil. School fees and uniform kit can be earned through seasonal labour, and the rest of the time is free. The global economy waits for no man, but we do not yet aspire to that. Capitalism is built on more, more, more, creating a surplus and excessive excess. What if you just want to chill?
What is the point of a bank?
You cannot just chill because population pressures are never far away, Rwanda has a high population density so Malthus will not allow us to relax. If one has not subscribed to the cash economy then banking is out of the question. Banks charge monthly fees on average of $4, if you count that annually that is $48 in fees, if you take average earnings at even $900 a year then it is substantial – THE MATTRESS CHARGES NO MONTHLY. No wonder people are not interested in opening accounts, it can cost 15% of your income. What is the point of a bank? Yes, it is to make money for shareholders, but how? Not by overcharging like my bank KCB does. I asked a question on their suggestions board. WHAT SERVICES DO YOU ACTUALY PROVIDE? ATM, Visa, Chequebook and what? Loans? What else? Ask yourself, what is the point of a bank in this day and age? You can make transactions without them, you can get loans without them, you can do anything, they are largely obsolete especially with mobile money. Quite often we hear of banks which are charged to help development instead lending money to their own employees to make massive profits on land deals. Or all the loans going to the family and friends of the employees, that is what a bank is for, to enrich the bankers at our expense.
Our banks are stuck in the 90’s even KCB comes to Rwanda to rehash its 90’s model having being thoroughly destroyed by Equity Bank. They are proud of their long queues, we even say “wow look at BK, people are queuing all the way on the pavement outside, they must have loads of money.” And the other banks are jealous, wishing they had people around the block. These queues are just bad customer service, you find at peak times only 2 counters working as workers go for lunch at the time when everyone goes to bank. The banks make money on fees, the workers, lights, water is paid by fees, so they don’t have to make a profit because the basics are paid. We need to abolish bank fees for having an account, maybe charge for services but don’t deduct 4,000 for doing nothing. Access Bank and Equity now have annual single fees, I urge other banks to do so as well. We should be earning interest and not paying just to queue for our money. Mobile money is also heavily expensive, around 1-3% charges on MTN, they punish you the higher the money you send so it will never graduate to serving big business when you can lose hundreds of dollars per day on large amounts. We are overtaxing mobile money before the sector even grows. KCB charges 1,775 to withdraw money from your online account to Mobile money, Banks are punishing customers to prevent them from moving to the inevitable to preserve their business model. We need a monthly fee and transactions to be free of charge after that.
The labour value chain
Why are interest rates high in Rwanda and Africa? The bankers give you a bullshit answer they have prepared. “You see the high interest rates are caused by low capitalization of banks due to lack of a savings culture.” Bull, crap, rubbish, lies. How can we save what we don’t have? How much can a person on $900 save? Unless they starve, they also need to spend to get out of poverty, even borrow to get out. So what chance is there we will start to save on average some $1,000 a year when we earn less than that? The REAL reason is we lend to the WRONG people (the politically connected) and secondly we lend into a messed up value chain. In order for banks to survive we need to remedy these two areas, on risk management and value chain management. Our banks manage risk proactively, by weeding out the risk ahead of time, but if you slip through the net there is a 18% to cover all eventualities. No nation has ever developed on 18%, a debt becomes unviable above 8% and you will have negative equity. In order to reduce our lending costs, we have to manage the value chain, to eliminate risk in real time.
You lend money to a farmer, they give their title deed as their collateral, and now the bank is covered whether you succeed or fail. In fact the bank will be hoping the farmer fails so they can grab the land cheaply, they pray for locusts, droughts, even plagues to hit their client just so they can profit. Our banks are equally betting on us failing and succeeding. Banks have failed to invest in farming, our basic survival, because 18% is too high to start a business on. 18% is an insult to us all, it says they do not believe in Rwanda, they are betting on us to fail, 18% is a vote of no confidence and wanting to pay off a loan within a presidential term. We need to lend longer, over 20-30 year for property at 5-7% instead of 8 years of 20% that is too steep a ladder to climb.
A bank decides to do value chain management. They decide to reduce the number of actual bankers they employ, counterintuitive like a hospital sacking doctors. Instead they replace 30% of staff with non-banking people, technical staff: engineers, lawyers, marketing, sales, distribution, transport and logistics. They never invest in a sector unless you have inhouse people who understand it fully.
A group gets together to build a mall, around 10 investors put up half, the bank the other half at 10% to be realistic, looking at a 3% margin but also a 50% stake that has to be bought out. The bank needs to be invested and not just win if you lose, you have to be tied at the hip. The bank gives you all the advantages you need instantly, engineers, architects, project managers, foremen, each reporting regularly and inspecting progress. To proactively troubleshoot in the field: if supplies are being overcharged, if transport costs are being boosted, if people are stealing cement on the site, if fake invoices are being handed in. That is why we pay 18% to pay for thug niggaz stealing money on the side. So we have to pay for the building plus a couple secret buildings where the supplies went. It is the only way a bank can protect its investment, they just watch their money flowing down the drain “Look your money is going down the drain.” The bank knows it can raise interest rates 2% and recoup that money gone down the drain, but it is a death spiral.
Bank lends money to Cooperative, a well-detailed project is written up, timelines, deadlines, but a hands on approach. Inputs, environment and farmers, to manage the whole value chain from the field to the plate. Every single risk can be mitigated until there is no risk apart from sheer bad luck. Irrigation means you don’t wait for rain, rain is a bonus to boost the harvest, you have enough to last to harvest even if there is a drought. Fertilizers and pesticides can remove other environmental risks. Machinery can increase the capacity of work you can do, then when you harvest you have adequate storage. Finally, you can add value addition and food processing to increase profits. When risk has been mitigated, then we can go into the Futures, where a farmer can sell several years ahead knowing that the return is guaranteed.
So when I asked KCB “What services do you actually have?” it seemed absurd, it is a bank, take it or leave it. Your clients need financial services, accounting, auditing, sales, marketing, logistics, payroll management, tax assessment, you name it. Banks are actually cutting staff in a time they should expand, they should invest in risk managers who work in real time to avert disasters. You lend a business money then you hear Revenue closed them down coz the books were sloppy. If that bank had sent even an intern 3 days before to sort out the books then a $100,000 loss could have been avoided. A bank has to leverage its clients to build a business ecosystem in-house, let your clients lift each other, call in favours. A bank manager should call any company that owes them money “Hey I need some help, one of my clients needs a marketing plan done for their project. By the way, your loan is up for review next week, so it would help to keep things smooth…..” Okay we’ll send someone. So your client gets a world class marketing plan as a favour for a favour.
The RSSB bank
The vast majority have not bought in fully to the cash economy, they see cash as a necessity at times when certain situations demand it. Rwandans are communal and familial, they are not yet individualistic as capitalism demands. So any economic program has to be based on the family and not the person, policies like Mutuelle should be more family centred, a premium should be per home adjusting for the number of residence. We should introduce a credit card system for work, where people can work on projects in exchange for credits that can be exchanged for health coverage, school fees, tax debts, even money. Umuganda is used in rural areas to speed up completion of projects, the community gives its labour in exchange for a new school, or clinic, or courthouse. We should be able to quantify and reward labour, Rwandans should be able to pledge their labour and get rewarded, to pledge 200hr a year to help build their country, and be credited for those hours in return for better social security. In Greece where the nation was about to default, the finance minister Varoufakis came up with a system of a digital currency to keep the nation going. It would allow citizens to trade credits instead of money, the idea was killed by the EU as Greece was forced to accept austerity. The idea of a credit system could get Rwandans into the system quicker, working for money is greed, but working to get healthcare for your family is common sense.
The Social Security Bank should be created, merge our pensions, tax and savings into one system. Revenue should issue a number to every Rwandan, that becomes your SS number, tax ID no, bank account number, and your credit risk profile. You should be able to bank money, and time, because time is money and money is time. The time worked entitles you to services in the next year, you can farm to feed your family but the basics are taken care of, and education and healthcare don’t bankrupt people. There should be no monthly charges, just premiums according to the customer’s needs. The top premiums should pay 40% of the workers last salary for 6 months if you are jobless, people would pay 10% for employment insurance, if you are never sacked in that time you can recoup 5% as savings or credits. The biggest creditor and debtor is the Government, the delays in payment by government institutions is one of the biggest logjams in doing business in Rwanda. Our strict accounting systems cause delay though debts are paid in full, a business can be bankrupt by then. Using this credit system means govt debts can be traded or borrowed against, giving a business more time and flexibility.
I don’t have all the answers, I realize the difficulty involved but this is just my opinion.