BML 211 MONEY AND BANKING (WBA)

SEPTEMBER-DECEMBER 2021
INSTRUCTIONS:

1. Use Times New Roman font type.

2. Font size 12
3. MINIMUM number of pages for CAT should be 10 pages and for WBA should
be 10 pages.
4. Clearly show the beginning of every new concept by using paragraphs.
5. Have a cover page that shows Name of University, students full name, student
Admission number, Unit title, Unit code, nature of assignment (CAT or WBA),
Lecturers name, Semester and Year (See Sample Cover Page Below-for use by
students)
6. Use APA style (latest edition) for reference & Citation
7. Use clear examples.
8. Use Ideas from the Notes presented & enhance your assignment by undertaking
a comprehensive research using material in the University Library, off campus
library material or any other reference material relevant to this course.
9. All Students must hand in a soft copy through Moodle online system
10. No assignment will be accepted after the due date.

MANAGEMENT UNIVERSITY OF AFRICA

BML 211 MONEY AND BANKING WBA SEPTEMBER-DECEMBER 2021 Page 1

 STUDENT’S NAME: JOHN MALEMA

ADMISSION NUMBER: BDS/1/00900/3/2011

UNIT TITLE: MONEY AND BANKING

UNIT CODE : BML 211

WORK BASED ASSIGNMENT (WBA)

LECTURER’S NAME: ISABELLA SILE

SEMESTER: SEPTEMBER-DECEMBER 2021

WORK BASED ASSIGNMENT (WBA)

ANSWER ALL QUESTIONS (15 MARKS)

BML 211 MONEY AND BANKING WBA SEPTEMBER-DECEMBER 2021 Page 2

USE CLEAR EXAMPLES IN ALL POINTS PRESENTED

BANKING IN EAST AFRICA

The overall objective of the EAC Financial Sector Development and Regionalization
Project (FSDRP) is the establishment of a single market in financial services. In this
regard, the main objective of the EAC policies regarding the banking sector is to attain a
single market in banking services as a means to promote sustainable economic growth
in the Partner States and higher levels of financial inclusion.

 The banking sector is playing a major role in propelling regional financial integration in
the EAC region by adopting a regional business model motivated by a range of factors
including client-demand and opportunities perceived along the regional trade
corridors.

 The commercial banking industry in Kenya is the fourth largest in Sub Saharan Africa
after South Africa, Nigeria and Mauritius with 43 commercial banks and 2 mortgage
finance institutions. The Tanzania Banking system has 26 commercial banks whereas
there are 21 commercial banks in Uganda. The Rwanda banking system has 8
commercial banks, 1 development bank and 1 mortgage bank. The Burundi banking
industry is comprised of 7 commercial banks, 1 development bank and 1 housing fund.

 Cross-border expansion of banking in the region started in the 2000’s with Kenyan
banks setting up in other EAC Partner States. As at the end of 2012, Kenyan banks had
set up a substantial branch network with 251 branches in the EAC (and also 31 branches
in South Sudan). A total of 11 multinational and Kenyan owned banks are performing
with cross-border banking business in the EAC.

Five (5) Kenyan banks with branches within the region include Kenya Commercial
Bank (KCB), Equity Bank, Fina Bank, Commercial Bank of Africa. Interest from banks

BML 211 MONEY AND BANKING WBA SEPTEMBER-DECEMBER 2021 Page 3

domiciled in other EAC Partner States in cross border expansion is increasing with
CRDB Tanzania setting up a branch in Burundi in 2012.

In all EAC countries, the commercial banks established national umbrella bodies,
known as Bankers’ Associations to promote member banks’ interests and endeavor a
reputable and professional banking sector. From the perspective of EAC
regionalization, an efficient and stable banking sector is a prerequisite for achieving
sustainable growth in EAC countries where the majority of financial intermediation
takes place through commercial banks.

With this regard, moving towards legal and regulatory harmonization against the
international standards known as the Basel Core Principles (BCPs) is critical to achieve
an effective functioning of a single market in banking services.

Required;

a) From the case study above, discuss five (5) reasons for the slow growth of
commercial banks in Africa (5 Marks)
First, the capacity for fiscal intervention – at least among developed economies – has been

underutilized. As former United States Deputy Secretary of the Treasury Frank Newman argued

in a recent book, Freedom from National Debt, a country’s capacity for fiscal intervention is

better assessed by examining its aggregate balance sheet than by the traditional method of

comparing its debt (a liability) to its GDP (a flow).

Reliance on the traditional method has resulted in missed opportunities, particularly given that

productive public-sector investment can more than pay for itself. Investments in infrastructure,

education, and technology help drive long-term growth. They increase competitiveness, facilitate

innovation, and boost private-sector returns, generating growth and employment. It does not take

BML 211 MONEY AND BANKING WBA SEPTEMBER-DECEMBER 2021 Page 4

a lot of growth to offset even substantial investment – especially given current low borrowing

costs.

Research by the International Monetary Fund has indicated that these fiscal multipliers – the

second factor overlooked by forecasters – vary with underlying economic conditions. In

economies with excess capacity (including human capital) and a high degree of structural

flexibility, the multipliers are greater than once thought.

In the Kenya, for instance, structural flexibility contributed to economic recovery and helped the

country adapt to long-term technological changes and global market forces. In Europe, by

contrast, structural change faces resistance. Fiscal stimulus in Europe may still be justified, but

structural rigidity will lower its impact on long-term growth. Europe’s fiscal interventions would

be easier to justify if they were accompanied by microeconomic reforms targeted at increasing

flexibility.

A third piece of the forecast puzzle is the disparity between the behavior of financial markets and

that of the real economy. Judged only by asset prices, one would have to conclude that growth is

booming. Obviously, it is not.

A major contributor to this divergence has been ultra-loose monetary policy, which, by flooding

financial markets with liquidity, was supposed to boost growth. But it remains unclear whether

elevated asset prices are supporting aggregate demand or mainly shifting the distribution of

wealth. It is equally unclear what will happen to asset prices when monetary assistance is

withdrawn.

BML 211 MONEY AND BANKING WBA SEPTEMBER-DECEMBER 2021 Page 5

A fourth factor is the quality of government. In recent years, there has been no shortage of

examples of governments abusing their powers to favor the ruling elite, their supporters, and a

variety of special interests, with detrimental effects on regulation, public investment, the delivery

of services, and growth. It is critically important that public services, public investment, and

public policy are well managed. Countries that attract and motivate skilled public managers

outperform their peers.

Finally, and most important, the magnitude and duration of the drop in aggregate demand has

been greater than expected, partly because employment and median incomes have been lagging

behind growth. This phenomenon preceded the crisis, and high levels of household debt have

exacerbated its impact in the aftermath. The stagnation of incomes in the bottom 75% of the

distribution presents an especially large challenge, because it depresses consumption,

undermines social cohesion (and thus political stability and effectiveness), and decreases

intergenerational mobility – especially where public education is poor.

b) The case study explains that the commercial banks established national umbrella

bodies, known as Bankers’ Associations. Discuss five (5) benefits of banker’s

association (5 Marks)

 Members also benefit from regular updates and bulletins concerning compliance issues

including calendars for final rulings, as well as group discussions about how to

implement strategies to be compliant with all current federal rulings.

 Associations offer extensive training in other banking areas, often breaking such training

down by standard job description so that members may best take advantage of training

BML 211 MONEY AND BANKING WBA SEPTEMBER-DECEMBER 2021 Page 6

 that is job-specific to them personally.  This saves time and money for the bank and for

the busy executive individually.

 Not to be overlooked is the advantage of having a platform for advocacy.  Banking

associations understand the needs of the banking industry, and united groups can effect

real and lasting change in legislation that leads to economic growth.

 Generous Benefit Packages

Most bankers enjoy comprehensive benefits packages. Large banks typically offer medical,

dental and vision insurance to its bankers and their families. Bankers have access to a

retirement plan, life insurance, disability insurance and flexible spending accounts for health

care and child care. Other commonly offered bank job benefits include paid time off, free

financial services, adoption assistance and fitness programs.

 Fulfilling Career

Banking is a fulfilling career choice for individuals who want to help the public. Bankers

play an essential role in society by protecting, investing and lending money. Many play a

direct role in helping clients' make some of the most important decisions of their lives,

such as saving for college, purchasing homes and planning for their business and

retirement needs. Bankers also have opportunities to fulfill their civic desires

c) Explain five (5) strategies that banks in East Africa can use in order to develop

rapidly

(5 Marks)

BML 211 MONEY AND BANKING WBA SEPTEMBER-DECEMBER 2021 Page 7

Community Marketing

Banks range in size and capabilities, so banking business development will vary from market to

market. Small banks may only have one or two branch offices whereas large commercial banks

may have thousands of branches across the nation. Regardless of the size of the bank, each

branch needs to tailor local marketing strategies to serve the immediate community. Consumers

bank in a place where they feel safe and comfortable. This means tellers and account

representatives who speak English as well as any prominent language in the community. By

having branch managers look at the local community needs, the bank can attract a larger

percentage of the target market.

Product Bundling

A successful strategy employed by all banks is product bundling, such as offering a free

checking account for those who open a savings account, according to Bank Systems &

Technology. Because this has become common practice, successful strategies implement creative

bundling solutions. An automatic home line of credit with a mortgage refinance might be a

solution when interest rates are low or the community has a large percentage of consumers

looking to consolidate debt.

Pre-Approved Products

Consumers are more likely to say yes to something when they already know they are approved

for it, including pre-approved products that pop up on a computer screen, according to The

Financial Brand. Banks can review existing accounts to determine positive banking and credit

BML 211 MONEY AND BANKING WBA SEPTEMBER-DECEMBER 2021 Page 8

trends in customers. Those identified with positive trends and credit history are sent "pre-

approval" letters for credit cards, lines of credit or mortgages.

Teller Referrals

Bank tellers interact with the majority of the bank clientele. Tellers perform the day-to-day

transactions, such as cashing checks, making deposits or transferring money. Successful banks

consistently train tellers to look for opportunities to cross-sell bank products and refer customers

to the right person. A teller may see a regular customer cash a dividend check and refer the

person to the investment specialist. The teller may see a high savings balance and suggest a

higher-earning time certificate. Smart banks reward top referring tellers to entice them to take the

time to suggest a new product or service.

Premier Services

Premier services are designed to attract high net worth bank clientele; this is an effective strategy

to increase bank deposits. High net worth clients often have different needs as well as

expectations. By offering a select set of private bankers to personally handle all transactions and

account reviews, client trust increases. Service is often better with private bankers able to focus

on finding the best solutions to fit complete financial scenarios.

BML 211 MONEY AND BANKING WBA SEPTEMBER-DECEMBER 2021 Page 9

BML 211 MONEY AND BANKING WBA SEPTEMBER-DECEMBER 2021 Page 10