Centenary Bank Chief on the future of banking

Whatever innovations in jazzy products that come, they must be in a context where people’s money is safe and people have confidence that it

Whatever innovations in jazzy products that come, they must be in a context where people’s money is safe and people have confidence that it is safe”, Dr Simon Kagugube, Acting Managing Director of CERUDEB. [Note: This article was first published in Summit Business August 2009 issue.]

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The recent entry of many international banks into the Ugandan market has created stiff competition in the industry and brought in a wave of innovative products. Banks are increasingly looking for a competitive edge through innovation, cost-cutting, and mass marketing.

Mustapha Bernabas Mugisa met with Dr. Simon Kagugube, the Acting Managing Director of Centenary Rural Development Bank, which has been with the middle and low-end market niche since inception, with a belief that people need low-cost capital if poverty is to be eradicated. Below are the excerpts.

Mustapha Mugisa:  Looking at recent innovations, the future of banking will be facilitated by mobile and online technologies. Which plans does Centenary Rural Development Bank have to remain relevant in the future?

Dr. Simon Kagugube: The future of banking will be facilitated by mobile technology and the internet, I agree. However, whatever innovations in jazzy products that come, they must be in a context where people’s money is safe and people have confidence that it is safe.

The principle purpose of a bank is the traditional one of keeping people’s money safely and to intermediate (to use this money to lend to people who can use it to develop the economy). If you introduce all sorts of products without ensuring that your risk management is completely solid and robust, you run the danger all the time of losing people’s money, and it does not matter how innovative you are, people will lose interest in you, and the regulator won’t let you continue. Banking is all about trust, and that has not changed. At Centenary Bank, we’re investing in technologies and platforms that support innovations, without compromising on trust, i.e. confidentiality, security, and accessibility to finance. The technology we currently have is ideal for the biggest percentage of our customers and will continue availing them leading solutions as the need arises.

The key thing remains: the confidence between the banked and bankers have to be maintained as you introduce innovation. This is our challenge and the challenge for banking in the future. At Centenary Bank, we are ready to jealously guard our position in terms of market share in micro-finance, while diversifying our target markets to increase our involvement in small and medium-sized enterprises and the corporate and high-end market and we are investing in products relevant to each of those segments.

Regarding this challenge, we are seeing the emergence of services like online banking (e-statements, etc), mobile banking, etc. which may increasingly affect the importance of ATMs since they are expensive to operate compared to electronic and mobile banking. Are we likely to see Centenary Bank gradually reducing its investments in the ATM network in preference to online banking? There have been so many innovations in the industry, usually geared towards moving customers away from coming to the bank physically to see the teller; ATMs were an innovation to reduce this necessity and also enable longer hours of accessibility to the clients’ money. We have since moved on to where money may be transferred without having to come to the bank or without even having to go to the ATM. All these are new with their own advantages as well as dangers; we need to understand the risks involved and plan to ensure that as we move away from the little inconvenience of having to come physically to the bank, we don’t lose an even more important thing of security of customers’ deposits.  The recent multi-million-rand SMS banking authentication scam in South Africa, where a staff of Vodacom was able to steal money in an SMS scam considered the World’s first big one, is a reminder that the risks of innovations are real and big. As I said earlier, we shall implement solutions that we are sure of, and our clients trust.

Some of us see Centenary Bank as being a truly Ugandan bank because it has traditionally remained local in terms of ownership; do we see this success is shared with the rest of all Ugandans in terms of listing on the Ugandan Stock Exchange?

We already share a lot of the advantages of our indigenous nature with Ugandans. Our products are priced relatively lower than comparable products in the market. We started as an indigenous bank and as you know our history, most of our clients were our founders.

Many people contributed as little as Ushs. 1,000 at various parishes of the Catholic Church, these contributions were made to the Dioceses so that the Dioceses could become the major shareholders of the bank. That is why our mission remains as it was from the beginning “to provide affordable finance to all Ugandan, and especially to the economically active poor.” When we started this, hardly any of the traditional banks would venture into that untested ground; they had the capacity but could not because they thought it was not worth their while.

“Our visionary leadership was able to venture and demonstrate to the rest of the industry that the people you think are not capable of sustaining your business if assisted can develop themselves, contribute to your wellbeing and help you to grow,” Dr. Simon Kagugube

Currently, we see much competition in the industry against Centenary Bank because everybody is now moving down into our market niche. We welcome it but it comes with challenges of improving our entire range of service, and we are happy to say that our customers have responded by largely staying with us. We will always struggle to improve our services to fit the customers’ requirements because they deserve it and it is good business for us. The microfinance section is no longer regarded as the banking for the poor but the very successful.

Where do you see Uganda’s financial industry heading and what should stakeholders be doing? how do you see banking evolving in the next two to five years?

The industry will continue to be very competitive especially due to the entry of well-capitalized and take banking services closer to the people With the establishment of the Credit Reference Bureau (CRB), which enables banks to know their customers better, loan processing will be faster and the cost of lending will be lower with lower default rates, again hopefully leading to lower interest rates.

Tell us more about Centenary Bank’s network, portfolio, and clientele? Which are your mid-term plans?

The Bank currently has a total of 32 fully-fledged and networked branches with a total of 61 ATMs. Four more new branches and additional ATMs will be opened before the end of the financial year, bringing the total number of branches to 36 by Christmas, 2009. The Bank is also considering the introduction of many and varied other service points and facilities in the near future.

As at close of June 2009, the Bank’s Assets were UShs 553.9 billion above the

budget of UShs 516.6 billion, Gross loans stood at UShs 319.1 billion above the budget figure of UShs 315.3 billion while deposits were UShs 419.2 billion compared to the budget of UShs 400.2 billion. The Bank’s deposit accounts were 804,608 while the Loan accounts were 100,882

Any message to our readers?

We continue to make concerted efforts to renovate and refurbish our banking halls to increase space and offer a more conducive banking environment to our customers. Our strategy continues to be to increase our outreach, take our services nearer to our customers, and develop new, appealing, and practical products and services. With the construction of our new headquarters and permanent home, Mapeera House, Centenary Bank is pledging to increase its operational efficiency that will enable us to offer superior customer service that is in tandem with our re-branding process and our traditional leadership role in innovation and courage to tread where others have feared to venture before.

The Bank is determined to retain its Number One position in Microfinance but will continue to tap into the SMEs and the corporate business to meet all its customers’ needs and to serve all segments of the economy better – as only a fully indigenous bank can – at an enhanced level of efficiency, dedication and superior customer satisfaction.


  1. Dr. Simon M.S. Kagugube completed formal education at Yale University Law School in 1988 with a doctorate in the Science of Law (JSD), specializing in Company Law, Corporate Taxation and Humanitarian, Immigration, and Refugee Law. He obtained a Bachelor of Laws (Upper Second) degree from Makerere University in 1979, and a Diploma in Legal Practice from the Law Development Centre in 1980.
  2. He has a Certificate in Public Finance from the University of Bath in the United Kingdom; and a Certificate in Revenue Administration from Her Majesty’s Inland Revenue.
  3. He is an Advocate of the High Court Extracted-pages-from-SB-Mag_August2009-Final_v.3.pdf_Dr-Simon.pdf (217 downloads ) of Uganda and all courts subordinate thereto, which entitles him to practice law in Uganda, and is a Commissioner for Oaths. He also was Chairman, Microfinance
  4. Support Center Program, Government of Uganda, Commissioner for VAT, Uganda Revenue Authority and Director, and Member of the Executive Committee, East African Business Council.
Extracted-pages-from-SB-Mag_August2009-Final_v.3.pdf_Dr-Simon.pdf (217 downloads )

This article first appeared in the Summit Business Magazine August 2009

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