STANBIC BANK UGANDA BETS BIG ON YUAN-BASED PRODUCTS

Stanbic Bank Tower, Kampala, Uganda.

Stanbic Uganda’s new package of yuan transactional products has raised the stakes among local lenders in the battle for a stake in trade between Uganda and China.

The listed bank joined the exclusive club of local lenders offering yuan transactional products.

The Industrial and Commercial Bank of China (ICBC) currently owns 21 per cent shares in Standard Bank Group of South Africa, a strategic position that has created numerous synergies in areas of trade, investment and financial trading operations.

Through this partnership, ICBC will offer settlement services for foreign exchange transactions between the Uganda shilling and the yuan.

Standard Chartered Uganda rolled out yuan business products in 2010.

Besides offering direct conversion of Uganda shillings into Chinese yuan or Renminbi, Stanbic’s package includes yuan-denominated current and savings accounts alongside customised letters of credit, bank officials said.

While the direct currency conversion window yields lower transaction costs for both traders and investors compared with multiple conversion options, savings accounts denominated in the yuan are expected to minimise risks of exchange rate fluctuations for businesses preparing future import orders but faced with unstable cashflows.

Growth in trade volumes between Uganda and China passed 15 per cent per year, with overall import turnover estimated at $568 million, according to Stanbic Uganda data.

Common imports include motorcycles, mobile phones, computers and shoes.

Besides high foreign exchange transaction costs, rigorous immigration procedures adopted by the Chinese government have discouraged Ugandan business people interested in trade opportunities in China.

Massive competition

“Savings on currency conversion costs amount to 5 per cent of the total import trade values recorded between Uganda and China. Massive competition in this segment has depressed many players’ business margins and any transaction-related savings appear worthwhile.

“We have also introduced a yuan savings account for local traders eager to shield themselves from the effects of frequent foreign exchange rate fluctuations,” said Patrick Mweheire, executive director at Stanbic Bank Uganda.

Apart from tapping into trade flows between Uganda and China, some banks are aggressively wooing Chinese businesses into the country.

“Competition for the Chinese has heated up of late, with some banks training staff in Mandarin in order to engage these clients better. But Chinese clients are more sensitive about fees and easily change banks on account of a Ush100 ($0.04) difference in charges. They also migrate across financial institutions as a bloc,” said Phillip Sendawula, finance manager at Diamond Trust Bank Uganda.