The banking and financial services industry is much maligned in Zimbabwe, perhaps deservedly so. None the less, banking in all its forms is one of the biggest businesses in the world. The lessons I’ve drawn in this article are largely drawn from traditional banking setups while some may extend to new and alternative banking & financial services businesses. They certainly do have a lot to teach us. Specifically focusing on traditional banks in Zimbabwe they have recorded bumper profits year after year while the economy seems to get worse and worse.
Never enter a deal where you don’t win
These banks are notorious for but entrepreneurs, especially in smaller setups are not so skilled at. Many times I’ve dealt with entreprenuers who had a seemingly viable business idea until we looked at their costs and expenses to realise they were actually losing money on each transaction. Banks and their counterparts dont engage in this sort of behaviour. A good indicator of this is the Non performing loan ratios of Zimbabwean Banks over the years. As things have gotten tighter in the economy banks have reduced lending and it shows by the low no performing loan ratios (as low as 3%) that they are choosing wisely. The listen is simple, if the deal isn’t a complete and clear cut win for you perhaps you shouldnt be sitting at the table.
You can make money in a downturn
Banks have continued to enjoy great results though the economy itself has gone in the opposite direction. The fact is you can make money in booms just as you can make money in busts. It’s not always going to be the same for every industry but the fact of the matter is someone out there is making money off the same conditions that another person is complaining about. Sometimes it’s a matter of paradigm shift or perspective that is required to see how you can use conditions to your advantage.
Only give credit where you’re sure…
“In order to qualify for a bank loan, all you have to do is prove that you don’t need the loan” as the old joke about banks and how difficult they are with lending. Truth is the banks provide a valuable lesson when it comes to lending and extension of credit. Firstly banks like to make sure that the chances of the money being paid back are highly likely. Secondly, the onus of proof is upon the borrower, not the lender. Employing just a little bit of the same thinking is very useful when it comes to your business. It could save you a whole lot of trouble.
…If you’re not sure, think contingency
In the event that you still want to extend credit to someone even though the likelihood is less than acceptable, you need to discuss contingencies. For example, if someone asks to borrow money from you and promises to pay by a certain date you may want to include in the agreement what happens if the date comes around and they have failed to pay. In so doing you have managed to the downside. So before extending that credit talk contingency. If contingencies are agreed on it is best to have them included in the agreement.
While some businesses run on a boutique basis and that’s fine most entrepreneurs would want to scale their businesses. Scaling comes with a sometimes unforeseen burden of work. Therefore automation becomes important to the scaling of a business. While banks have not always been quick to adopt automation methods they certainly have adopted them wholly when they have. While the Zimbabwean situation may not suggest this the ATM was quite a leap in automation and the thinking in banking long term has been to leave rudimentary tasks to the machines while retraining staff to take on higher-level functions. This fell foul of South African Bank workers who had a potential strike by a court interdict. The fact is banks are automating and are happy to do so. Automation is not about having chatbots, at least at first. It may be small things like streamlining your order process and payments. These go a long way to helping in automation.
What other lessons do you think these behemoths have to teach us?