An Interview with Atif Bajwa, CEO, Bank Alfalah
Starting off with just a handful of branches in 1997, today Bank Alfalah operates steadfastly with a vast footprint in order to provide creative, customized financial solutions to over 1 million consumers, corporations, institutions and governments. With a broad range of products and services as well as an experienced team set to adapt to today’s rapidly changing global environment, the Bank aims to understand its clients’ unique needs, expand opportunities, meet tough challenges, fuel economic growth and hence create value for its stakeholders in everything it does. An institution that connects over 150 cities, over 400 branches and thousands of people, Bank Alfalah strives to ‘enable progress’ by being one of the most admired financial services institution in Pakistan and beyond.
Mr. Atif Bajwa, CEO Bank Alfalah, is a veteran banker with global professional experience of over three decades through his association with several international as well as local banks. In the following exclusive interview with Blue Chip Magazine, in addition to sharing his vision and experiences with Bank Alfalah, he also discusses other relevant trends and issues currently prevalent in Pakistan’s Banking Sector:
First of all, we would like to know about the major milestones of your extraordinarily brilliant professional career, leading up to your present post as Bank Alfalah’s CEO.
Atif Bajwa: “I have mostly been associated with the financial services industry. During my over 30 year career, I have had the opportunity of working in a diverse range of roles both within and outside Pakistan. I began my career with Citibank in 1982 and assumed various roles with the Bank for 11 years across Karachi, Lahore, New York and Bahrain – a truly enriching experience. Thereafter, I joined ABN AMRO Bank in Pakistan and served as its Country Manager for three years. In 1998 I was transferred to Singapore to run ABN AMRO’s Asia Pacific consumer banking business followed by a stint at the headquarters in Amsterdam. During my time in Europe, I had the opportunity to rejoin Citibank and look after the Bank’s Corporate and Consumer businesses for the Central and Eastern Europe region for the next 4-5 years. Post that, I assumed a two year position in Dubai after which I returned to Pakistan in 2007 as President for MCB, with an opportunity to be reintroduced to the dynamics of the local financial services industry. In 2011, after a fulfilling three years at MCB and a short stay at Soneri Bank, I joined the Abu Dhabi Group, one of the largest investors in Pakistan with a diverse range of businesses in the country. This led to my current role as President of Bank Alfalah. The Abu Dhabi Group has a robust platform in Pakistan and I look to the future with excitement and optimism.
As for my academic background, I received my schooling at Aitchison College in Lahore after which I studied Economics at Columbia University in New York.”
How has your experience with running Bank Alfalah been so far?
AB: “The Alfalah journey has indeed been quite exciting – the Bank is growing at a rapid yet reasonable pace and there is great momentum and energy. Our aim is for Alfalah to become the most efficient transaction bank in the country, to take an important position in corporate, commercial and SME banking, to help develop a vibrant capital market, to retain our premier positions in Islamic and Consumer Banking and to reach out to a wider customer base using innovative technology platforms. There is scope for further innovation and we are fortunate that our shareholders are extremely supportive of new, unique initiatives. To this end, we remain focused on introducing new products based on customer needs and providing exceptional services to our diverse client base. I am fortunate to be supported by a highly talented and experienced leadership team that believes in working collectively to deliver upon our common goals. Our staff across the country is dedicated and committed to being the best and to delivering high quality service to customers. However, the economic environment remains challenging and operational risk is considerably high. This coupled with the rapid pace of shifting customer demands means it is all the more important to adapt and manage change in order to stay ahead of competition.
It has been a great experience so far and I am confident that Bank Alfalah will remain at the forefront of the evolving financial services landscape in Pakistan in order to serve our clients even better.”
Can you tell us a little about Bank Alfalah’s performance during 2012?
AB: “2012 has been an evolving, transformative but most importantly productive year for Bank Alfalah.
The Bank has outpaced the industry in terms of private sector lending. As part of our branch expansion plan, we have added 65 new branches to our already vast branch network during 2012. This year, we intend to further expand our footprint in the country. We have also introduced relevant management changes and reassessed our operating priorities, whilst ensuring that our overall growth trajectory sustains its momentum. Due to the efforts of our entire team, I am pleased to report that our deposits, advances and profitability have all witnessed significant growth over 2012.
We have also taken steps to boost investor confidence by enhancing transparency. These efforts have been well received as is evident from the improvement in our share price, which has risen from being at a significant discount to book value at the beginning of 2012, right up to the current level which is closer to book value. Looking ahead, we are confident that we are now putting in place strong management and technology platforms, both of which should enable us to remain ahead of competition.
The Chairman of our Group visited Pakistan earlier this year and during his trip, reiterated the Group’s commitment to the Bank and to Pakistan – this was a significant vote of confidence for our employees, customers and other stakeholders. Hence I am proud of all that the Bank has achieved over 2012 and am optimistic about the future.”
Could you shed some light on the challenges and opportunities for the banking sector?
AB: “As is a well known fact, the global meltdown has adversely impacted most industries. The financial services sector has experienced a hard-hitting impact and there are several lessons to be learnt. This backdrop coupled with the dismal local economic outlook exacerbates the challenges for the banking industry in Pakistan – customers are not confident of the in-country landscape; foreign entities are apprehensive of the operating risk. Moreover, whilst banks (including Bank Alfalah) continue to report strong profits, there has been growing concern in the industry’s rising trend of Non Performing Loans (NPL), peaking at approximately 17%. I am happy to report that Bank Alfalah’s NPLs reflect a lower position vis a vis the industry, at less than 9%. However, greater focus and improvements in risk management are required to create discipline and tackle this issue.
Second is the dependence of the sector on high spreads. Whilst the cause of significant spreads lies primarily in the country’s macroeconomic imbalances (manifested through a large fiscal deficit leading to high government borrowing), the banking sector is both benefiting from it and being drugged into ‘easy profits’. This has created the industry into a profitable one but is really like a plane flying on one engine. It is critical that diversification of revenue sources is pursued.
The good news is that there are several promising opportunities on the horizon. The foremost is the creation of an ecosystem that supports ‘innovation through technology’, allowing for the ‘banked’ and ‘yet-to-be-banked’ to meet more of their payment/ financial needs through a convenient set of products and services. In this ‘global village’ of rapid change it is becoming imperative for banks to have state-of-the-art technology platforms that can provide customized financial solutions delivered through an array of distribution channels. Going forward this will become a competitive edge, as electronic solutions will encompass customer convenience and ubiquity. Branchless, mobile, online and digital banking, both for corporate and retail banking customers are also likely to revolutionize the financial services industry and Bank Alfalah aims to be amongst the leaders of this transformation.
SME banking and agri-finance are also promising opportunities and address sectors that are the backbone of our economy. Bank Alfalah aims to continue investing in these areas through tailored solutions for each segment, whilst remaining cognizant of and appropriately managing the risks involved.
One other area of focus for us is the nascent capital market in Pakistan. It is critical that a vibrant and broad based capital market be developed in order to support the financing needs of a growth economy. The existing short-term debt focused capital markets are woefully inadequate to meet the requirements of industry and infrastructure if our economy was to shift gear into higher growth rates. We believe we should be playing a leading role in helping to mobilize capital and to deploy it effectively.”
How does Bank Alfalah distinguish itself from its existing competitors?
AB: “Bank Alfalah started out with a footprint of 3 branches. Over the last 15 years, our growth story in Pakistan has been significant – we have closed last year with a network spanning 471 branches across 163 cities and an overseas presence in Afghanistan, Bangladesh and Bahrain. The energy that has made this phenomenal growth possible, while gaining some of the highest customer satisfaction scores, is a key strength of Bank Alfalah. Our understanding of local and regulatory market dynamics coupled with an in-depth assessment of client requirements has enabled us to introduce innovative need-based financial products and provide exceptional customer service – this is what distinguishes us from our competitors. We are well aware that a ‘one-size fits all’ approach does not work effectively – to this end we have segmented our product offering so as to ensure a unique strategy for each requirement.
Today, I am pleased to report that Bank Alfalah is viewed as Pakistan’s premier Consumer Bank with top rankings in Credit Cards, Autos, Merchant Acquiring and Home Finance.
Further, our core banking system has also changed from a decentralized one. We have implemented new procedures and systems at all our conventional branches and in the upcoming months, our Islamic branches will follow suit. Transactional services will become faster as a consequence of this change and hence customer interface should be more efficient ago.
Amongst other priorities, as mentioned above, we are also keen to work on developing need-based, customized financial solutions with a view to introducing a larger proportion of the unbanked population into the formal fold. Our bricks-and-mortar banking model coupled with our branchless banking services should bolster our efforts on this front. With the shift of wealth from big cities to smaller towns and rural areas, there is appetite in these markets and so it makes sense to open smaller branches to tap the potential there.
Moreover, our Islamic banking also sets us apart – the Bank’s Islamic arm is a vibrant identity offering an innovative range of Shariah compliant products and services customized to cater to the individual needs of our customers. We are the no.2 Islamic Bank in Pakistan with new branches being added to our network of 86 Islamic banking branches as we speak.
As we focus on better understanding the specific needs of our clients in order to diversify and segment our product offering, we hope to continue to introduce value-added solutions for our clients. The Bank aims to invest in its core strengths to provide ‘best in class’ products and services on the Consumer and Corporate side, whilst also further exploring opportunities in SME and agri-finance.”
Could you comment a little on your product launches in the pipeline?
AB: “Our philosophy is that product launches should be preceded by a holistic assessment of client needs so that our financial solutions can be tailored accordingly. We see convenience and ubiquitous access to financial services as vital requirements today. To this end, we are investing in our technology platform and will be launching branchless banking, mobile and internet banking services in the near future this year. Through electronic solutions, clients will be able to make utility bill payments, funds transfers, buy airtime and conduct several financial transactions at their own time and convenience. On the deposits front, we hope to enhance our portfolio with segmented products for salaried individuals, kids, senior citizens and women. We are also looking to introduce a chip-based credit card soon. For protection products, we are linking up with more insurance partners to enhance our Bancassurance suite with unique, customized offerings.
We are also simultaneously working on developing a fully integrated cash management collection/ payment suite for our institutional clients.
With the support of our stakeholders, I am confident that Bank Alfalah will continue to introduce innovative products and play a pivotal role in contributing to Pakistan’s banking industry.”
Bank Alfalah has one of the strongest Islamic banking set-ups in the country – what, in your view, have been the key contributing factors to achieving this success?
AB: “Globally, Islamic Banking has witnessed great momentum over the last couple of years and Pakistan’s trajectory in this segment has been no exception. Bank Alfalah’s Islamic banking is also a considerably well recognized entity today – we have recently achieved the centennial Islamic Banking branch network milestone and currently have 110 Islamic Banking branches country-wide. The foremost factor contributing to the growth of our Islamic banking is an extensive Shariah compliant product suite, which is customized to meet the requirements of our Islamic banking customers. We continue to explore innovative avenues to further develop the product palette for customers in Pakistan. This coupled with our ‘client first’ service philosophy and bespoke marketing initiatives aimed specifically at our Islamic Banking customers has resulted in the Bank‘s Islamic offering achieving impressive growth over the last few years. Additionally, we are and will continue to invest in growing our network of Islamic banking branches to further convenience our customers and provide them even easier access to Islamic banking products and services.”
What potential do you think the SME sector has to flourish in Pakistan? Can you comment on Bank Alfalah’s performance in this area?
AB: “Today, in Pakistan, the SME sector contributes 30% towards the country’s GDP, employs more than 70 percent of the non-agricultural workforce, accounts for 35% of the value added in the manufacturing industry and generates 25% of export earnings. However, SME lending constitutes only 16% of total lending and only 4% of total banking customers. The sector has huge potential to generate employment opportunities and play a role in alleviating poverty.
The sustained, long-term growth of the SME sector in Pakistan faces several challenges on both the demand and supply side. Most SMEs are sole proprietorships or family businesses that are managed rather informally and therefore face issues such as lack of formal business management skills, poor maintenance of accounts and lack of business planning amongst others. They often do not have adequate collateral to meet the minimum criteria of banks and have little awareness about the financing options available. We believe that what SME’s would like to see is a more comprehensive banking approach to their business issues and not just a lending focused sales effort from banks. While access to capital is invariably an issue, more pressing needs are non-lending.
At Bank Alfalah we are currently undertaking a pilot project, in collaboration with the IFC, to remodel our SME strategy and better cater to this niche segment. We are optimistic that this endeavor will allow us to better assess and understand the specific needs of SME businesses and enable us to offer a holistic yet bespoke SME-centric business management platform. Such an offering shall not only support the borrowing requirements of SME’s but will also offer products and services to support their transactional and advisory requirements.
Considering the potential this vibrant sector has to offer, SME is now a priority for Bank Alfalah. The eventual aim is to positively impact financial inclusion and fuel economic growth by transforming SMEs in to profitable business ventures.”
Could you shed some light on Bank Alfalah’s Corporate Social Responsibility initiatives?
AB: “Corporate citizenship and Sustainability through a ‘Beyond Philanthropy’ approach are key agenda priorities for Bank Alfalah. The Bank is committed to growing in alignment with the core principle of responsible finance. Our goal for CSR is to work with community partners and improve peoples’ lives by going ‘beyond philanthropy’ and converting simple ideas into opportunities –the eventual aim is to serve our role as responsible corporate citizens and give back to the communities where we live and operate.
The Bank’s two-pronged social governance strategy incorporates financial investment towards meaningful community causes coupled with employee volunteer programs in order to create measurable, sustainable impact. Our focus is on strengthening education, healthcare, sports, alternate energy and entrepreneurship. We support both infrastructural development as well as capacity building endeavours. Looking ahead, we aim to also work in conjunction with reputable global organisations in order to successfully deliver our social responsibility.”
