Introduction

Welcome to the latest edition of Financial Focus. The publication date for this edition coincides almost exactly with the one year anniversary of COVID-19 having been declared a global pandemic. As of this writing, the business environment remains challenging due to unfavourable macroeconomic factors which are largely attributable to the pandemic. For the financial services sector, these factors have influenced low credit growth, loan restructures, a decline in interest, premium and other income, increased credit impairment provisions, higher insurance claims in certain classes of insurance business and significant unpredictability across-the-board. At the same time, the disruption has accelerated strategic reorientation and operational turnaround as well as certain innovations and technology investments that allow many financial services institutions to operate differently and improve service delivery. As the large listed institutions in the region start to announce their 2020 results, we are seeing significant declines in profit, attributed mainly to increased impairment charges, reduced fees and commissions, and fair value losses in investments reflecting the decline in the value of stocks in the securities exchanges. Many players in the financial services sector have understandably concentrated their efforts in 2020 on survival and containment measures in the face of the pandemic. They now need to proactively plan and position themselves for the post Covid period. We are optimistic of recovery in 2021 and this is supported by the growth projections for the region given by organisations such as the World Bank and IMF. In this edition of Financial Focus, our contributors share insight on a variety of relevant, timely issues that impact financial services institutions. Many of our financial services clients and contacts operate regionally, serving a diverse clientele with a growing array of customer-centric products. Our contributors reflect that regional outlook from East Africa, hailing from six different countries in this region, and yet their topics are cross-cutting and cross-border in orientation.

In his article, Moses Nyabanda shares insight on four areas that financial services organizations should keep top of mind in 2021 and beyond. Focusing on cybersecurity, customer loyalty and employee retention, digital technology and good governance, he emphasizes the need for financial services to be bold in their responses, anticipating and planning for the future in real time.

Other contributors also focus on trends and issues that remain very relevant to the sector. Timothy Karweti and Kunal Shah explore ways in which banks can maximize their options on non-performing loans. Justice Kimotho and Paul Maina discuss the tax implications of non-performing loans for banks. George Weru, Akinyemi Awodumila and Gideon Otai share insights on preparing for a post-London Interbank Offered Rate - or post-LIBOR - world.

Customer experience and digital transformation continue to play a major role in shaping the financial services industry, as discussed in Diya Guttoo’s article. In her article, Nelly Lacaze discusses rethinking customer experience in the insurance industry. This is particularly timely, since customer preferences have certainly shifted over the last year. In their article, Robert Aswani and Josephat Muchiri take a closer look at deterring identity-related fraud transactions, a high risk area particularly as many financial services institutions and their customers digitise in response to the pandemic. The pandemic is also influencing the structuring of deals to align with current business activity, according to Isaac Otolo.

Several of our articles address country-specific trends, although these insights are broadly applicable to financial services institutions in other markets. In his article, Cletus Kiyuga discusses the high potential for growth in Tanzania’s banking sector, attributed to innovation and a rich pool of talent, among other factors. In his article, Martin Bamukunde discusses PwC Zambia’s recent bank and non-bank survey, highlighting a number of changes in the sector such as digital transformation and leaner operating structures, new ways of working and other opportunities. In his article, Uchenna Unuoha discusses opportunities resulting from the digital revolution with a focus on harnessing Tanzania’s fintech potential. Frobisher Mugambwa shares insights on efforts to build and advance the competitiveness of Rwanda’s financial centre.