‘A partnership between banks and fintechs is a win-win situation’

Standard Chartered’s Regional CEO Sunil Kaushal talks to Dianna Games about Africa’s prospects for growth in 2020, the bank’s sustainability strategy and how it is capitalising on digital trends

Standard Chartered is optimistic about the opportunities for growth in 2020 and beyond as it moves into a future-ready space, embracing sustainable finance and digital banking alongside other profitable enterprise.

Sunil Kaushal, regional CEO Africa and Middle East for Standard Chartered says the company remains focused on its unique strengths while exploring new initiatives.

Africa is very much on the radar. Kaushal reckons the two biggest economies, Nigeria and South Africa, both have potential to contribute to growth in 2020, despite the fact they have been performing well below their potential in recent times.

Nigeria, he says, saw a strong oil sector recovery in 2019 and recent changes in legislation will have a positive impact on the state’s revenue share from oil production. The bank also expects fiscal and monetary policy to provide more support for the non-oil growth outlook in 2020. 

South Africa’s recovery hinges on its ability to carry out proposed reforms in its power sector, which remains vulnerable to significant risk, as rising debt and power cuts in 2019 have shown. However, balance-sheet repair by households and higher investment from a low base favour rising growth, he says.

Growth will come from variety of sectors

He says growth in Africa broadly is expected to come from an array of sectors from infrastructure to renewable energy and agricultural technology: “The commodity-driven boom in Africa may be over, but a new, more resilient kind of growth is taking root in the continent, one that is driven by economic and social reforms and a focus on non-oil sectors.”

Growth in African markets in 2019 was driven by strategic priorities including digital transformation, sustainable finance, growing the group’s network, and trade and investment.

“We have made significant investments in exciting transformative initiatives while also becoming agile in capturing attractive opportunities in markets like Nigeria and Kenya, which remain the largest markets for us in Africa.” 

The bank remains focused on facilitating cross-border trade and investment into and out of Africa.

With world trade growth under threat from rising protectionism, he says it is encouraging that many emerging markets are still improving their trade growth potential in the wake of new agreements being signed with the EU and the fact that the African Continental Free Trade Area comes into force in 2020.

He cites Côte d’Ivoire and Kenya as being key among those countries with strong trade readiness as they continue to improve their business environments and develop enhanced digital and physical infrastructure. Ghana, too, is performing well.

Benefits of Belt and Road

Globally, trade tensions between China and the US could add to downside risks to global growth in 2021, he says, and a slowdown in China is expected to continue. However, he notes that even at a slower pace, the Asian giant will be still be growing at more than double the average rate of any advanced economy.

The bank is heavily invested in China’s Belt and Road Initiative (BRI), which aimed to leverage investments of more than $20bn in infrastructure development up to 2020. Kaushal says a commonly held misconception is that the initiative is exclusively Chinese-led and funded. In fact, international commercial banks are heavily involved in structuring financing and providing services for major BRI projects across the world.

Standard Chartered is one of them. Its footprint spans 70%of the BRI’s markets, which allows it to facilitate trade, capital and investment flows across these markets, and it is well-placed to connect African companies to the renminbi (RMB) and its growth belt. 

For many emerging markets, the BRI provides a unique opportunity to improve competitiveness, attract foreign investment, enable economic diversification, upgrade their physical infrastructure, enhance trade flows and increase fiscal revenues, he says. Chinese trade with countries along the BRI corridors is growing fast; it exceeded $6 trillion between 2014 and 2019.

The bank has organised Africa and Middle East roadshows to promote the benefits of the initiative in order to cement existing partnerships and forge new opportunities across its footprint.

Making the bank ‘future ready’

Standard Chartered is moving quickly in the digital space to capitalise on new trends and opportunities and become “future ready”. 

It has already rolled out full-service, cost-efficient digital banks in nine markets across Africa and digitised small ticket wealth management products (general insurance and mutual funds) in Kenya, Ghana and Nigeria. The bank has also launched online mutual funds in Nigeria and Kenya, providing a mobile-first, self-directed mutual fund channel for customers. 

There are plans to adapt and replicate these capabilities across the bank’s regional network. 

Kaushal admits that traditional banks cannot match the pace of innovation by the fintechs, and the latter are challenged to meet regulatory compliance measures that come with financial services.

“A partnership between banks and fintechs is a win-win situation,” he says, citing the bank’s launch of SC Ventures. A fully owned subsidiary of the bank, it has a $100m innovation investment fund to back fintech companies with potential. One example is Ripple, which connects banks and payment providers via RippleNet.

“We are also working closely with technology companies to speed up our tech transformation and to find and use the best ideas that are out there.”

“We are working with the bank’s eXellerator innovation lab, which was inaugurated in Singapore in 2016, with labs now in London and Hong Kong. In 2019, the first innovation lab in Africa was launched in Kenya to collaborate with fintech organisations on the continent.”

The bank is also supporting women’s access to tech through its Standard Chartered Women in Technology incubator, which now has a presence in Kenya, Nigeria, the UAE and Pakistan.

Sustainability strategy

The bank is also strongly focused on issues of sustainability and social development in its product and financing priorities.

Sustainable finance has become a fast-growing area of business, driven by a mix of community awareness and public policy reforms.

Sustainable debt issuance is expected to have reached a record high of $350bn in 2019, with the issuance of sustainability-linked loans approaching $35bn in late 2019. 

In 2019, the bank launched its Sustainability Bond focused on emerging markets, which will finance projects that are aligned to the UN’s Sustainable Development Goals (SDGs).

“In keeping with our commitment, we have developed an organisation-wide sustainable finance strategy, further incorporating sustainability into the bank’s financing decisions and identifying new sustainable financing opportunities for the clients.”

In partnership with donors such as the World Bank, Standard Chartered has mobilised more than $5bn in blended finance to tackle social development problems in Africa and Asia, such as food security and job creation, and address low carbon energy issues in the Middle East.

The bank has also issued the world’s first blue bond, on behalf of the Seychelles, which raised $15m from impact investors to develop its blue economy.

“Driven by the fact that finance touches every aspect of the economic cycle, there are huge opportunities for banks to shift more of their balance sheets into sustainable projects to support economic and social development for the future wellbeing of the planet,” says Kaushal.