How KBZ Bank, the country’s biggest lender, pursues SME banking


Zaw Lin Aung, the managing director of banking and finance at KBZ Bank, told Mizzima in a recent interview that his bank plans to grow from being the biggest bank to the strongest bank as it grows together with local SMEs.

KBZ Bank or Kanbawza Bank has long been providing banking services and now has more than 470 branches throughout the country. The bank has also set up a division devoted to SMEs which has been running for a year.

Small and medium enterprises-SMEs - are the country’s economic drivers and more than 90 percent of the country’s businesses falling into this category.

Mizzima’s chief business reporter Aung Thura met KBZ Bank Managing Director Zaw Lin Aung to discuss how KBZ Bank is working with SMEs.

Can you tell us about KBZ’s new services?

Zaw Lin Aung: As you know, KBZ is the leading bank in Myanmar and therefore we are always looking at improving the banking services. As the country has been changing and the system alternates, we have to transfer our banking regulations and increase the services. So for that, we have been grouping three main customer groups in which each customer group has same nature and ability, for example, they are the Corporate Customer Group, the SMEs Customer Group and Retail Customer Group. Then we are going to provide the best products and services to each customer group by considering what kind of services are appropriate to each group customer in terms of their nature and needs. So we have to communicate with each group of customer, connect with them and we have to accept their feedback and advice.

Can you explain the SME Banking out of the three Customer Groups that you mentioned?

Almost every person thinks that SME Banking involves borrowing money from a bank and that customers know that the SME department is just a loan providing department.It does not mean in KBZ’s SME banking and we define SME banking as a total solution for all small and medium businesses in a country by inventing the products which are going to be dedicated to the needs of business. For example, we will provide an appropriate finance and a loan product as well to the SMEs when someone wants to expand business or they need more working capital in their business by looking at the business nature of each business. Besides, there has different kinds of loan service in SME banking. The first thing is the working capital financing that I have explained to you, and another service is investment capital financing,which means not just a loan and that means loan plus advice for the business when the SMEs spend more money as he or she wants to build a new factory or they want to open a new shop or they want to buy materials. So our KBZ’s SME banking attends the businesses in terms of not only loan support but also by giving advice because we realize that every SME does not need only loans. Thus, sometimes we advise them about the advantages of saving money.

And there is another SME banking service that is called the Transitional Banking Product. The service offers a card management solution. If I give an example to you, when some SME has to recollect money from their customers, they can do it through our network and otherwise they can apply for our card collection service. Additionally, the SMEs can purchase the materials and products through online platforms that KBZ has already improved.

How has KBZ’s SME banking been faring?

The system is about a year old. To do so, we had to redevelop and change mindsets. Like I said, not every SME needs a loan, so KBZ assists them not only by providing loans but also by providing supporting advice so that they can improve the business by getting consulting from us.

We aim for SMEs to be cost effective, so we always consider how they will have cost saving. In this way, their businesses could increase quality and they reduce the work load.

What problems do you come across with customers?

Sometimes the customers do not understand well what SME banking entails. They do not know how to use bank services, and how to improve their businesses by using our bank products. When this is  happening, we at KBZ Bank arrange short day training or longer day training for our customers by providing financial literacy training and sharing banking knowledge to them so that they can realize how to build a basic plan, how will create a marketing plan.

How effective is this training?

There is always a practical purpose with our training. Because, as you already may know, there usually are different changes when we are working with the customers practically and when we were explaining to them. Sometimes, we see the customers do not want to participate or join our questions for reviewing the collateral issue when they take a loan from our bank. I think banker’s questions are very important and we bankers also need to know the nature of each business, the reputation and the relationship between the customers and the bank. Indeed, we bankers must know each of the customer’s financial statements because we always have to view every assessment when we are considering the collateral. Therefore we usually educate them.

Some private banks have been introducing SME loans without collateral, which is known as Credit Guarantee Insurance or CGI. Has your bank started with this?

Yes, of course, we are starting that system. I mean this CGI is included as one of our lending policies. We are always looking at the lending methodology as well. And we are transferring the assisting system. What we like to do is improve the bilateral relationship in that we do not want to depend on collateral 100 percent. So we think collateral is not our priority in our lending process. We are always seeing what we have built in the bilateral relationship, by that I mean the customer’s reputation.

What about of the risks of CGI?

In this system, the businessman can apply for a loan from the bank without collateral after he or she has bought guarantees from our bank. As for us, we have to buy full guarantees from Myanmar Insurance that is owned by the Ministry of Planning and Finance.If the businessman had defaults for many reasons and the customer could not pay back the borrowed money, the Myanmar Insurance will return just 60 percent of the loan to the bank. Therefore our bank is going to take a 40% loss. So our working risk on CGI is going to be 40% as well. Thus, I think this system is not fully secure.

Do you have a support programme for business start-ups?

I think it is very important. This is another strategy for our SME banking system and we are always looking at these kinds of businesses that have been successful or are new. When they take a step to further growth, we may help them in terms of supporting finance according to their business plans. And the other point is that we also have a business network programme like business matching, the programme aims to connect the businesses into the market. In the system, we like to say openly, our bankwould like to create access to the market giving a holistic total solution.Like I said, we will facilitate this for them by doing such business matching when they face difficulty to get a loan or capital even though he or she has an excellent business plan or idea to do a business. Moreover, we also have provideda roadmapthat will issue a credit product, which is going to be served for start-up companies.

Do you think that KBZ is a trusted bank and why?

It is clear to say. As all know, KBZ is a leading bank in Myanmar and all know the bank is biggest one as well. In the KBZ family, we often say that we need to become Myanmar’s strongest bank rather than becoming the biggest bank. This is our direction, and we possess the best practices to grow as an international bank.Now you all have seen, our KBZ Bank became the first bank to enter the international financial market, and we could open representative bank offices in Thailand, Singapore and Malaysia. To do so, we had to show our financial portfolio, procedures and so on. Besides, the monetary authorities from each host country made assessments of our bank standards, rules and regulations and risk management,etc. If we did not have conformity, they would not allow. So I think these are some examples to show how we are a trusted partner for people, customers and businessmen. And hence, we eagerly build KBZ as the most trusted and most reliable bank in Myanmar.

So what have you done to implement this programme?

Now we have more than 470 branches all over the country and we have been working with more than 40 percent of the customers according to the third party release. In terms of investment to be improved, as we know the investments and services are directly proportional, we have to invest in core banking. I think core banking is of essential importance to penetrate the international market.

What we have done in preparation is investment in IT, the transformation of human resources, the setting up of the branch operations and so on. These all have been integrated since three years ago.

In terms of financials, we are going to release an International Finance Report soon.

Is there anything would you like to add?

There is still some uncertain and insufficient infrastructure in our banking sector. However, as far as my personal point of view is concerned, I view the Myanmar banking sector as very promising, judging by the performance of the last three to five years. And we see the potential growth as well. As for KBZ Bank, although the system downtime sometimesmay interfere with our banking services due to the infrastructure, we have been setting  up the KBZ Gateway that is very good system to connect everywhere and it offers VSAT technology which helps improve connections around the country.

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