Thursday Apr 25, 2024
Thursday Apr 25, 2024
Tuesday, 26 November 2013 00:01 - - {{hitsCtrl.values.hits}}
In the last few days there was media hype on why development banks like NDB need a guarantee from the Treasury to cover one’s exchange risks when one wants to raise funding such as the said $ 250 million that was specified in the 2013 Budget. DFCC had raised the money with difficulty at a coupon rate of 9.625% whilst NDB has postponed the idea after testing the market. It’s an interesting debate if policy should drive business or market demand.
2014 focus
In the 2014 Budget reading, it was proposed that financial institutions need to focus on lending towards products and value creation industries and move away from traditional import biasness. It was also 
mentioned that banks and financial institutions to grant at least 500 working capital loans of Rs. 25,000 at an interest rate of 6% without requiring any collateral to such winners, towards developing greenhouse farms, poultry/livestock/fish farms or handloom/small industries so that Divi Neguma families could emerge as successful entrepreneurs.
The Government has also arranged for Euro 90 million low cost funds (around Rs. 16 billion), to provide credit facilities at an interest rate not exceeding 8% for manufacturing and SME industries to modernise their factories with energy efficient technology to improve international competitiveness.
A Women’s Micro Enterprise Credit Guarantee Scheme was also proposed, against which regional development banks and SME banking units of commercial banks will provide working capital loans up to Rs. 250,000 without requiring security. It was a very encouraging development when 2014-2015 was dedicated for women 
enterprise development to be facilitated by regional development banks given that women drive Sri Lankan economy, be it the apparel industry, tea or gems and jewellery businesses in Sri Lanka.
NDB Sri Lanka
One such development bank in Sri Lanka is the National Development Bank of Sri Lanka (NDBSL). It was created as a licensed specialised bank in 1979, with the aim of providing project financing to both the private and public sectors. Today, NDB has made great strides in transforming itself from a single product, credit line dependent development bank to a fully-fledged universal bank.
The bank’s strategic marketing initiatives have paved the way for NDBSL to become one of Sri Lanka’s well-established brands within a short period of time and a household brand in Sri Lanka. We have seen in the recent past how NDBSL continued to build its brand through innovative financial solutions, superior service standards, strong partnerships, an extended branch network and caring for the community through its sustainability efforts while holding on to the latest technologies.
NDB performance
If one were to analyse some of the key financial information and health of the brand, the following data can be viewed.
As the Brand Finance report shows, NDBSL is a leading brand in the country as it was able to secure its position among the top 20 
brands of the country. In 2011, it was in the 15th position with a brand value of 3.4 b but in 2012 the organisation registers a performance of 19th Position at a value of 3.2 b. On the enterprise value, though it has registered a healthy growth at 118.9 b, the overall position that the organisation occupies has declined whilst all the other banks has improved on their ranking. Refer the table for details DFCC has improved from 27th rank to become No. 17 whilst Sampath Bank from 14 to 10, but NDB has notched up marginally from 22 to 19.
However, the bank has been able to maintain its profitability irrespective of its increase in operational and other expenses which is commendable. Last year the net income of the bank crossed the Rs. 2 b level for the first time in its history. By maintaining a relatively good return for its investors, NDBSL continues to look after its stakeholders’ expectations while strengthening brand awareness. However, the bank still has a distance to cross to be among the top eight banks in the country. As at 2012 the bank is at ninth position.
NDBSL’s brand rating has been readjusted over the years in a reducing trend and now it has A- rating from A+ in 2011 rating (last year) as per the 
2012 report of Brand Finance. Though the brand position of the bank has not improved over the last four years, its investment on advertising and promotions has increased to Rs. 445 million in 2012 from Rs. 267 million in 2010.
From a more detailed analysis of the data, it reveals that the bank has stepped up the advertising, which is believed to be in line with its expanding retail operation. But a point to note is that the brand value has dropped in 2012 as against the increased advertising expenditure.
Whilst this may be a fact, in 2012 all brands in the banking industry declined in value, which could be attributed to the extended period of low interest rates. This badly influenced the income as well as brand value of most banks. Maybe more research is required if one is to understand the exact details.
However, in the case of another developmental bank like DFCC, even though it was below NDBSL’s ranking in earlier, it was able to improve its brand value in the same period, which is interesting to understand how and why.
Next steps
Given that many new NDB branches are coming up across the country, one key strategy would be to increase the brand value and thereby the equity of the brand, the logic being that at the end of the day, perception drives behaviour in the market place.
Maybe the promotional campaigns in the future will have to be evaluated for effectiveness on the brand imagery scorecard and this needs to take into account the mix between TV and radio. Whilst radio is announcer value, TV as a medium can help build brand equity. It will be interesting to analyse the strategies used by DFCC Bank (Vardhana Bank) as the overall brand value has increased by 146% from 2010 to 2012. Some of the communication sponsored by DFCC Bank has been highly rated by the viewers, which maybe needs be looked at in the comparison of the media mix of NDB Bank.
On the area of staff training, the touch point indication might be worth analysing and if the imagery that is being relayed is in line to the brand promise. A bank that has mastered this in Sri Lanka is HSBC and it can be used as a benchmark. This can also be extended to an internal branding strategy that can then be driven to the process driven factors that will help achieve efficiency objectives too. The two State banks are renowned for having well-experienced staff, which is a critical factor in delivering speedy service.
The bank can also examine the company culture on the factors of innovation, discussion and new idea development as opposed to simply maintaining the status quo, i.e. focus more on value creation rather than value appropriation. Also, one can look at the horizontally aligning people and ideas so that they can react faster and more efficiently to rapidly changing technology like the best practices we see in the banking industry in the United States.
To make NDB foresee and react to new technologies faster than their competitors, it can have a separate unit dedicated to new technology, which is an option to pursue. The innovation team could work with everyone in order to keep all operations of the bank ahead of closer competitors and research work on completely new areas that could set NDBSL apart from everyone else. This, together with stronger branding using the TV medium, can spruce up the brand value.
The brand mantra of NDBSL of ‘World Class Sri Lankan’ can be re-evaluated with a more ‘customer focused’ and ‘specific’ brand promise rather than a nationalistic slogan. Maybe a detailed brand audit can be done to understand the 
stakeholder perception of this promise. I would strongly voice that a financial services business in Sri Lanka must rework the image of a development bank mainly for project financing, long-term lending with favourable rates and conditions with more flexibility rather than diluting one’s image by going retail driven.
(The author acknowledges the research done by the MBA graduates of the University of Colombo. The thoughts shared have no links to the organisations the author serves in Sri Lanka or globally. Writing is only a hobby he pursues.)
