How Standard Chartered Bank has benefited EA economies

It has lent out US$3.4bn and employed 2500 permanent staff

Kampala, Uganda | JULIUS BUSINGE | Commercial Banks all over the world are portrayed as profit oriented and only work with customers they think have firm foundations to meet credit obligations.

But the Standard Chartered Bank’s recently released independent study on the social and economic impact of its operations in East Africa (Kenya, Tanzania and Uganda) shows that there is value added to these economies.

The study, which was conducted by Steward Redqueen, a research firm last year, shows that the Bank’s outstanding loan portfolio in the three countries represents nearly 10% of total credit provided to the private sector by commercial banks.

As a consequence, the bank supports local employment, wages, profits, and tax payments in many different value chains.  The Bank, for instance, employs more than 2,500 permanent staff in Kenya, Tanzania and Uganda, and directly and indirectly, supports suppliers in various economic sectors.

It had also provided financing to businesses, consumers and government agencies of $3.4 billion (UShs 12.4 trillion) across the three markets.

This is in addition to directly and indirectly supporting $2.8 billion of value-added impact, which is equivalent to 2.1% of the region’s GDP.

In terms of taxes, the Bank supports around $0.3 billion of tax payments to the governments of Kenya, Tanzania, and Uganda.

Apart from its employees, the bank supports direct and indirect employment to over one million people working as its clients and the associated value chains which is equivalent to almost 1.7% of the region’s labour force.

In Kenya, for instance, which is the region’s largest economy, the Bank supports $1.5 billion in value-added impact (1.9% of its GDP) and it supports 330,000 jobs (1.6% of the labour force).

In Tanzania, it supports $579 million in value-added (1.1% of GDP) and it supports 222,000 jobs (1% of the labour force) while in Uganda, the Bank supports $896 million in value-added impact (accounting 3.5% of GDP) and supports 491,000 jobs (3.5% of the labour force).

The company’s business to East Africa’s value-added impact in particular, relates to the wholesale and retail trade and manufacturing sectors. Most employment impact is supported in the region’s agriculture, manufacturing, and wholesale and retail trade sectors.

The report says that in order to further enhance sustainable development, regional commerce should be increased, the manufacturing sector expanded and inclusive growth promoted.

What it finances

The Bank finances international commerce and thus plays an important role in connecting the region’s commercial sector to the world. The Bank also contributes to the growing regional commerce using its size, expertise, and presence to enhance the region’s growth.

The report says that if the Bank can assist local companies generate higher value-added impact and source more from companies within the region, it can contribute to economic growth, create client benefits, and grow the value of its client base.

This is through working with its broad network of East African companies to establish relations among these firms via initiatives like ‘Banking the Ecosystem’.

Furthermore, expanding loans in business banking (predominantly small-and-medium sized enterprises) and commercial banking (mainly local corporates) could ensure that indigenous companies have the financial means to develop increasingly complex capabilities, thereby adding to the manufacturing sector’s competitiveness.

In order to compete, the report says, manufacturing companies need access to reliable sources of energy. Through its financing of the utilities sector, the bank supports power projects. As such, the Bank’s emphasis on utilities indirectly contributes to manufacturing.

Inclusive growth

According to the report, opportunities to help raise the incomes of the region’s poorest inhabitants are necessary to generate inclusive growth. It adds that although the Bank primarily focused on the emerging affluent, it can expand its Development Financial Institutions and Business Banking portfolios to reach parts of the population that it only indirectly affects.