BANKING OPERATIONS

PROGRAMME:
EXECUTIVE CERTIFICATE IN BANKING OPERATIONS
AND MARKETING MANAGEMENT

OLAGUNJU YINKA PETERS

1
IN MODERN BANKING SYSTEM WITH REFERENCE TO MICRO-FINANCE
BANKS HOW CAN BANKS PERFECT OPERATIONS WITHOUT INQUIRING
LIABILITIES FROM THEIR VARIOUS CUSTOMERS. TO MAINTAIN THE
STANDARD PRACTICE AND ACHIEVE THE CO-OPERATE GOALS?

WHAT ARE THE STRATEGIES YOU ADOPT FOR THE MARKETING OF

SPECIALIZED SERVICES AND INVESTMENT PORTFOLIO IN YOUR BANK?

WHAT RELEVANCES DOES THE INTERNATIONAL

BANKING INSTITUES HAVE IN THE BANKING
SYSTEM OF MY COUNTRY NIGERIA:

2
In modern Banking System with reference to Micro-finance Banks How can
Banks perfect operations without inquiring liabilities from their various
customers. To maintain the standard practice and achieve the co-
operate goals?

What is bank?
A bank [bæŋk] is a business that provides financial services, usually for profit.
Traditional banking services include receiving deposits of money, lending money
and processing transactions. A commercial bank accepts deposits from
customers and in turn makes loans based on those deposits. Some banks (called
Banks of issue) issue banknotes as legal tender. Many banks offer ancillary
financial services to make additional profit; for example: selling insurance
products, investment products or stock broking.
Currently in most jurisdictions commercial banks are regulated and require
permission to operate. Operational authority is granted by bank regulatory
authorities and provide rights to conduct the most fundamental banking
services such as accepting deposits and making loans. A commercial bank is
usually defined as an institution that both accepts deposits and makes loans;
there are also financial institutions that provide selected banking services
without meeting the legal definition of a bank.

Banks have a long history, and have influenced economies and politics for
centuries. In history, the primary purpose of a bank was to provide liquidity to
trading companies. Banks advanced funds to allow businesses to purchase
inventory, and collected those funds back with interest when the goods were
sold. For centuries, the banking industry only dealt with businesses, not
consumers. Commercial lending today is a very intense activity, with banks
carefully analysing the financial condition of its business clients to determine the
level of risk in each loan transaction. Banking services have expanded to include
services directed at individuals and risk in these much smaller transactions are
pooled.

A bank generates a profit from the differential between what level of interest it
pays for deposits and other sources of funds, and what level of interest it
charges in its lending activities. This difference is referred to as the spread
between the cost of funds and the loan interest rate. Historically, profitability
from lending activities has been cyclic and dependent on the needs and
strengths of loan customers. In recent history, investors have demanded a
more stable revenue stream and banks have therefore placed more
emphasis on transaction fees, primarily loan fees but also including service
charges on array of deposit activities and ancillary services (international
banking, foreign exchange, insurance, investments, wire transfers, etc.).
However, lending activities still provide the bulk of a commercial bank's
income.

3
Services typically offered by banks
Although the basic type of services offered by a bank depends upon the type of
bank and the country, services provided usually include:
• Taking deposits from their customers and issuing checking and savings
accounts to individuals and businesses
• Extending loans to individuals and businesses
• Cashing cheques
• Facilitating money transactions such as wire transfers and cashiers
checks
• Issuing credit cards, ATM cards, and debit cards
• Storing valuables, particularly in a safe deposit box
• Cashing and distributing bank rolls
• Consumer & commercial financial advisory services
• Pension & retirement planning

Financial transactions can be performed through many different channels:

• A branch, banking centre or financial centre is a retail location where a
bank or financial institution offers a wide array of face to face service to its
customers
• ATM is a computerised telecommunications device that provides a
financial institution's customers a method of financial transactions in a
public space without the need for a human clerk or bank teller
• Mail is part of the postal system which itself is a system wherein written
documents typically enclosed in envelopes, and also small packages
containing other matter, are delivered to destinations around the world
• Telephone banking is a service provided by a financial institution which
allows its customers to perform transactions over the telephone
• Online banking is a term used for performing transactions, payments etc.
over the Internet through a bank, credit union or building society's secure
website
Accounting for bank accounts
Bank statements are accounting records produced by banks under the various
accounting standards of the world. Under GAAP and IFRES there are two kinds
of accounts: debit and credit. Credit accounts are Revenue, Equity and Liabilities.
Debit Accounts are Assets and Expenses. This means you credit credit accounts
to increase their balances and you debit debit accounts to increase their
balances. [6]
This also means you debit your savings account everytime you deposit money
into it (and the account is normally in deficit) and you credit your credit card
account everytime you spend money from it (and the account is normally in
credit).
However, if you read your bank statement, it will say the opposite- that you have
credited your account when you deposit money, and you debit when you
withdraw it. If you have cash in your account you have a positive or credit

4
balance and if you are overdrawn it will say you have a negative or a deficit
balance.
The reason for this is because the bank, and not you, has produced the bank
statement. Your savings might be your assets, but it is the bank's liability, so your
savings account is a liability account which is a credit account and should have a
positive credit balance. Your loans are your liabilities but the bank's assets so
they are debit accounts which should have a negative balance.
Below where bank transactions, balances, credits and debits are discussed, they
are done so from the viewpoint of the account holder which is traditionally what
most people are used to seeing.
Wider commercial role
However the commercial role of banks is wider than banking, and includes:
• issue of banknotes (promissory notes issued by a banker and payable to
bearer on demand)
• processing of payments by way of telegraphic transfer, EFTPOS, internet
banking or other means
• issuing bank drafts and bank cheques
• accepting money on term deposit
• lending money by way of overdraft, installment loan or otherwise
• providing documentary and standby letters of credit (trade finance),
guarantees, performance bonds, securities underwriting commitments and
other forms of off balance sheet exposures
• safekeeping of documents and other items in safe deposit boxes
• currency exchange
• sale, distribution or brokerage, with or without advice, of insurance, unit
trusts and similar financial products as a 'financial supermarket'

Types of banks
Banks' activities can be divided into retail banking, dealing directly with
individuals and small businesses; business banking, providing services to mid-
market business; corporate banking, directed at large business entities; and
investment banking, relating to activities on the financial markets. Most banks are
profit-making, private enterprises. However, some are owned by government, or
are non-profits.
Central banks are non-commercial bodies or government agencies often charged
with controlling interest rates and money supply across the whole economy. They
generally provide liquidity to the banking system and act as Lender of last resort
in event of a crisis.

Banks in the economy

Role in the money supply

A bank raises funds by attracting deposits, borrowing money in the inter-bank
market, or issuing financial instruments in the money market or a capital market.
The bank then lends out most of these funds to borrowers.

5
However, it would not be prudent for a bank to lend out all of its balance sheet. It
must keep a certain proportion of its funds in reserve so that it can repay
depositors who withdraw their deposits. Bank reserves are typically kept in the
form of a deposit with a central bank. This behaviour is called fractional-reserve
banking and it is a central issue of monetary policy.

Economic functions
The economic functions of banks include:
 issue of money, in the form of banknotes and current accounts subject to
cheque or payment at the customer's order. These claims on banks can
act as money because they are negotiable and/or repayable on demand,
and hence valued at par and effectively transferable by mere delivery in
the case of banknotes, or by drawing a cheque, delivering it to the payee
to bank or cash.
 netting and settlement of payments -- banks act both as collection agent
and paying agents for customers, and participate in inter-bank clearing
and settlement systems to collect, present, be presented with, and pay
payment instruments. This enables banks to economise on reserves held
for settlement of payments, since inward and outward payments offset
each other. It also enables payment flows between geographical areas to
offset, reducing the cost of settling payments between geographical areas.
 credit intermediation -- banks borrow and lend back-to-back on their own
account as middle men
 credit quality improvement -- banks lend money to ordinary commercial
and personal borrowers (ordinary credit quality), but are high quality
borrowers. The improvement comes from diversification of the bank's
assets and the bank's own capital which provides a buffer to absorb
losses without defaulting on its own obligations. However, since
banknotes and deposits are generally unsecured, if the bank gets into
difficulty and pledges assets as security to try to get the funding it needs to
continue to operate, this puts the note holders and depositors in an
economically subordinated position.
 maturity transformation -- banks borrow more on demand debt and short
term debt, but provide more long term loans. Bank can do this because
they can aggregate issues (e.g. accepting deposits and issuing
banknotes) and redemptions (e.g. withdrawals and redemptions of
banknotes), maintain reserves of cash, invest in marketable securities that
can be readily converted to cash if needed, and raise replacement funding
as needed from various sources (e.g. wholesale cash markets and
securities markets) because they have a high and more well known credit
quality than most other borrowers.

Bank crisis
Banks are susceptible to many forms of risk which have triggered occasional
systemic crises. Risks include liquidity risk (the risk that many depositors will

6
request withdrawals beyond available funds), credit risk (the risk that those who
owe money to the bank will not repay), and interest rate risk (the risk that the
bank will become unprofitable if rising interest rates force it to pay relatively more
on its deposits than it receives on its loans), among others.
Banking crises have developed many times throughout history when one or more
risks materialize for a banking sector as a whole. Prominent examples include
the U.S. Savings and Loan crisis in 1980s and early 1990s, the Japanese
banking crisis during the 1990s, the bank run that occurred during the Great
Depression, and the recent liquidation by the central Bank of Nigeria, where
about 25 banks were liquidated.

Regulation
Bank regulations are a form of government regulation which subject banks to
certain requirements, restrictions and guidelines, aiming to uphold the soundness
and integrity of the financial system. The combination of the instability of banks
as well as their important facilitating role in the economy led to banking being
thoroughly regulated. The amount of capital a bank is required to hold is a
function of the amount and quality of its assets. Major banks are subject to the
Basel Capital Accord promulgated by the Bank for International Settlements. In
addition, banks are usually required to purchase deposit insurance to make sure
smaller investors are not wiped out in the event of a bank failure.
Another reason banks are thoroughly regulated is that ultimately, no government
can allow the banking system to fail. There is almost always a lender of last
resort—in the event of a liquidity crisis (where short term obligations exceed
short term assets) some element of government will step in to lend banks enough
money to avoid bankruptcy.

Public perceptions of banks

Globe icon The examples and perspective in this article or section may not
represent a worldwide view of the subject. Please improve this article or discuss
the issue on the talk page.
In United States history, the National Bank was a major political issue during the
presidency of Andrew Jackson. Jackson fought against the bank as a symbol of
greed and profit-mongering, antithetical to the democratic ideals of the United
States.

Currently, many people consider that various banking policies take advantage of
customers. Specific concerns are policies that permit banks to hold deposited
funds for several days, to apply withdrawals before deposits or from greatest to
least, which is most likely to cause the greatest overdraft, that allow backdating
funds transfers and fee assessments, and that authorize electronic funds
transfers despite an overdraft.

In response to the perceived greed and socially-irresponsible all-for-the-profit

attitude of banks, in the last few decades a new type of banks called ethical
banks have emerged, which only make social-responsible investments (for

7
instance, no investment in the arms industry) and are transparent in all its
operations.

In the US, credit unions have also gained popularity as an alternative financial
resource for many consumers. Also, in various European countries, cooperative
banks are regularly gaining market share in retail banking.

Profitability
Large banks in the United States are some of the most profitable corporations,
especially relative to the small market shares they have. This amount is even
higher if one counts the credit divisions of companies like Ford, which are
responsible for a large proportion of those companies' profits.
In the past 10 years in the United States, banks have taken many measures to
ensure that they remain profitable while responding to ever-changing market
conditions. First, this includes the Gramm-Leach-Bliley Act, which allows banks
again to merge with investment and insurance houses. Merging banking,
investment, and insurance functions allows traditional banks to respond to
increasing consumer demands for "one-stop shopping" by enabling cross-selling
of products (which, the banks hope, will also increase profitability). Second, they
have expanded the use of risk-based pricing from business lending to consumer
lending, which means charging higher interest rates to those customers that are
considered to be a higher credit risk and thus increased chance of default on
loans. This helps to offset the losses from bad loans, lowers the price of loans to
those who have better credit histories, and offers credit products to high risk
customers who would otherwise been denied credit. Third, they have sought to
increase the methods of payment processing available to the general public and
business clients. These products include debit cards, pre-paid cards, smart-
cards, and credit cards. These products make it easier for consumers to
conveniently make transactions and smooth their consumption over time (in
some countries with under-developed financial systems, it is still common to deal
strictly in cash, including carrying suitcases filled with cash to purchase a home).
However, with convenience there is also increased risk that consumers will mis-
manage their financial resources and accumulate excessive debt. Banks make
money from card products through interest payments and fees charged to
consumers and transaction fees to companies that accept the cards.

The banking industry's main obstacles to increasing profits are existing regulatory
burdens, new government regulation, and increasing competition from non-
traditional financial institutions.

MICROFINANCE Banking
Microfinance is often considered one of the most effective and flexible strategies
in the fight against global poverty. It is sustainable and can be implemented on
the massive scale necessary to respond to the urgent needs of those living on
less than $1 a day, the World’s poorest.

8
Microfinance consists of making small loans, usually less than average
expected, to individuals, usually women, to establish or expand a small,
self-sustaining business. For example, a woman may borrow $50 to buy
chickens so she can sell eggs. As the chickens multiply, she will have more eggs
to sell. Soon she can sell the chicks. Each expansion pulls her further from the
devastation of poverty.
Microfinance, the Grameen way, includes several support systems that
contribute greatly to its success. Microfinance institutions offer business
advice and counseling, while clients provide peer support for each other through
solidarity circles. For example, if a client falls ill, her circle helps with her business
until she is well. If a client gets discouraged, the support group pulls her through.
This contributes substantially to the extremely high repayment rate of loans made
to microfinance entrepreneurs.

An equally important part of microfinance is the recycling of funds. As

loans are repaid, usually in six months to a year, they are re-loaned. This
continual reinvestment multiplies the impact of each dollar loaned.

Microfinance has a positive impact far beyond the individual client. The
vast majority of the loans go to women because studies have shown
that women are more likely to reinvest their earnings in the business
and in their families. As families cross the poverty line and micro-
businesses expand, their communities benefit. Jobs are created,
knowledge is shared, civic participation increases, and women are
recognized as valuable members of their families and communities.

Products and Services

They provide Banking Services such as:
 Savings Account
 Current Account
 Time Deposit Account such as:
 Fixed deposit
 Pilgrimage(Hajj) scheme and
 Daily contibution
 Small scale Project financing
 Personalised Customer Services
 Agricultural Financing
 Financial advisory services
 Cash Pick-up(on ceremonies,launchings,after-
sunday services,special prayers,etc)
 Cash deliveries
 Credit related products such as
 MOSSAD Loan (Monthly Salary Advance) for
Salary earners
 Group Lending (without tangible collateral)

9
MFB also engage on Saturday banking so as to accommodate the Civil Servants
and other people who live outside the community/state.
If Banks must perfect its operations without inquiring liabilities from their various
customers, maintain the standard practice of its institution and achieve the
co-operate goals below are necessary things a Micro finance Bank must
strictly adhered to

LAW OF BANKING A MUST

Banking law is based on a contractual analysis of the relationship between the
bank and the customer. The definition of bank is given above, and the definition
of customer is any person for whom the bank agrees to conduct an account.
The law implies rights and obligations into this relationship as follows:
1. The bank account balance is the financial position between the bank and
the customer, when the account is in credit, the bank owes the balance to
the customer, when the account is overdrawn, the customer owes the
balance to the bank.
2. The bank engages to pay the customer's cheques up to the amount
standing to the credit of the customer's account, plus any agreed overdraft
limit.
3. The bank may not pay from the customer's account without a mandate
from the customer, e.g. a cheque drawn by the customer.
4. The bank engages to promptly collect the cheques deposited to the
customer's account as the customer's agent, and to credit the proceeds to
the customer's account.
5. The bank has a right to combine the customer's accounts, since each
account is just an aspect of the same credit relationship.
6. The bank has a lien on cheques deposited to the customer's account, to
the extent that the customer is indebted to the bank.
7. The bank must not disclose the details of the transactions going through
the customer's account unless the customer consents, there is a public
duty to disclose, the bank's interests require it, or under compulsion of law.
8. The bank must not close a customer's account without reasonable notice
to the customer, because cheques are outstanding in the ordinary course
of business for several days.
These implied contractual terms may be modified by express agreement
between the customer and the bank. The statutes and regulations in force in the
jurisdiction may also modify the above terms and/or create new rights,
obligations or limitations relevant to the bank-customer relationship. This will go a
long way perfecting banks operations.

Bank size information

Top ten banking groups in the world ranked by Shareholder equity
($m)
The 2006 bank atlas was compiled from commercial banks’ annual reports and
financial statements for 2006 and 2005. Figures in U.S. dollars;

10
 1. United States, Citigroup, 112537 $mln
2. United States, JPMorgan Chase, 107211 $mln
3. United States, Bank of America, 101224 $mln
4. United Kingdom, HSBC, 98226 $mln
5. Japan, Mitsubishi UFJ Financial Group, 83281 $mln
6. France, Credit Agricole Group, 65137 $mln
7. United Kingdom, Royal Bank of Scotland Group, 64453 $mln
Top ten banking groups in the world ranked by assets
At the end of 2006 HSBC had 1738 billion while Mitsubishi UFJ Finl. had 1700
and citigroup 1630 billion assets. Figures in U.S. dollars, and as at end-2004;
1. Switzerland, UBS, 1,533 billion
2. United States, Citigroup, 1,484 billion
3. Japan, Mizuho Financial Group, 1,296 billion
4. United Kingdom, HSBC Holdings, 1,277 billion
5. France, Credit Agricole Group, 1,243 billion
6. France, BNP Paribas, 1,234 billion
7. United States, JPMorgan Chase & Co., 1,157 billion
8. Germany, Deutsche Bank, 1,144 billion
9. United Kingdom, Royal Bank of Scotland, 1,119 billion
10. United States, Bank of America, 1,110 billion
Top ten banks in the world ranked by market capitalisation
Figures in U.S. dollars, and as at 26 July 2006;
1. United States, Citigroup, 275 billion
2. People's Republic of China, ICBC, 250 billion
3. United States, Bank of America, 230 billion
4. United Kingdom, HSBC, 200 billion
5. United States, JPMorgan Chase, 150 billion
6. Japan, Mitsubishi UFJ, 145 billion
7. Italy, Unicredit, 130 billion (2007)
8. United States, Wells Fargo, 120 billion
9. Switzerland, UBS, 110 billion
10. United Kingdom, Royal Bank of Scotland, 100 billion
Following the January 2007 merger, Italy's Intesa Sanpoalo has a market cap of
$100.5 billion
Top ten bank holding companies in the world ranked by profit
Figures in U.S. dollars, and as 2006;
1. United States, Citigroup, 22.13 billion
2. United States, Bank of America, 21.13 billion
3. United Kingdom, HSBC, 14.55 billion
4. United States, JP Morgan Chase, 14.44 billion
5. United Kingdom, Royal Bank of Scotland, 12.1 billion
6. Switzerland, UBS, 9.79 billion
7. United States, Goldman Sachs, 9.34 billion
8. United States, Wells Farg, 8.48 billion
9. United States, Wachovia, 7.79 billion
10. United States, Morgan, Stanley 7.45 billion

11
Top ten banking groups in the world ranked by Tier 1 capital
Figures in U.S. dollars, and as at end-2005;
1. United Kingdom, HSBC, 79 billion
2. United States, Citigroup, 75 billion
3. United States, Bank of America, 73 billion
4. United States, JP Morgan Chase, 72 billion
5. Japan, Mitsubishi UFJ Financial Group, 64 billion
6. France , Credit Agricole Group, 60 billion
7. United Kingdom, Royal Bank of Scotland, 48 billion
8. Japan, Sumitomo Mitsui Financial Group ,40 billion
9. Japan, Mizuho Financial Group, 39 billion,
Spain, Santander Central Hispano, 38 billion

WHAT ARE THE STRATEGIES YOU ADOPT FOR THE MARKETING OF

SPECIALIZED SERVICES AND INVESTMENT PORTFOLIO IN YOUR BANK?

INTRODUCTION
BANKING has evolved from the days of ‘arm chair’ banking when the
banker was more or less king. The current dispensation has cast the
customer in the role of a choice bride with many suitors. Marketing
'aspect of services of a bank also includes customer relationship
management.

Themes of BANK products AND SERVICES

 Understand the application of marketing principles to banks
 Understand various strategies of effective bank products and
services
 Understand the promoting and pricing strategy of banks

With the above point you come up with these:

- Essential elements of marketing of bank services
- Meaning of market research and its benefits
- Promoting and Pricing strategy of bank services

12
 - Application of marketing principles to banks
- facets of customer relationship management
- elements of customer relationship management
- The phases of implementation of a CRM strategy
- The determinants of service quality

RESEARCH ON BANK PRODUCTS AND SERVICES

- The concept of market research
- The benefits of market research
- The product characteristics
- The pricing strategy
- The methods of promotion

MARKETING OF BANK PRODUCTS AND SERVICES

- The meaning of services
- The differences between products and services
- The characteristics of services
- Marketing of bank services

CUSTOMER RELATIONS AS REGARDS BANKS SERVICES

- The meaning of the ‘bank customer' and the importance
- types of bank customers
- facets of customer relationship management - customer
acquisition, customer retention, and customer attrition
- elements of customer relationship management
- phases of implementation of a CRM strategy
- The determinants of service quality

MARKETING STRATEGY AND IMPLEMENTATION

 Examined the bank's products, corporate culture, and customers
through focus groups and other qualitative research mechanisms
 Discovered that the bank status in its customer service and institutional
character
 Focused the bank's marketing on compelling stories, based on actual
events, that conveyed a sense of service and distinction
 Integrated the bank's message throughout a host of appropriate
communication channels, including newspaper, radio, and direct mail
 Created supplemental marketing material to enhance the messaging,
including online marketing, in-branch posters, and other collateral

13
BUILD REAL RELATIONSHIPS WITH YOUR CUSTOMERS

Deeper Connections with Your Customer Base is More Crucial than Ever!

Speaking as a retail customer, my plight about my business is, knowing couple of savings
accounts and an active checking account, I want some reassurance from my money
managers and banks. Is my money safe? What should I do? Where can I get the support I
need to understand what is happening with my accounts? Not surprising to most of you, I
seek several information’s about each financial institution, looking for answers. And as nice
as the ubiquitous postings are, the sing-song assurances that my money is fine haven’t done
much for my peace of mind.

And here's the crazy part. I have had a long-time account with one of the banks that recently
failed – let's keep it anonymous for the moment. And the morning I heard that it is no more, I
immediately went online to see what hiccups to expect. The new entity in control had placed
a placard on the homepage, bragging about the new security I can now look forward to, as
my money is now backed by a whole lot of other money and a whole lot of experience,
yadda, yadda, yadda.
I'm now shopping for a different place for my checking account. Why, you ask?
Because I want answers (real answers). I don’t want to leaf through press releases, I don't
want to dissect general statements spouting corporate something-or-other. I don’t want to
call and be put on hold for 20 minutes – again.
I think I'm craving “emotional” support from my money managers. I'll bet most of your other
retail customers share the sentiment.
So, if a lot of retail customers are now shopping around for money managers who will truly
reach out to them and foster a more meaningful relationship, isn't now the perfect time to
implement a strategy to do just that?

NOTE:
Here are IMPORTANT FACTORS WHEN TRYING TO GET FRONTLINE EMPLOYEES TO GENERATE MORE REFERRALS,
They are for improvement

INCENTIVES: Rewards for frontline employees for making referrals

MANAGEMENT: Management who sets referral goals and maintains their focus on achieving
those goals
PRODUCT Marketing Materials: Marketing materials that provide information on the features of
particular products under the vendor brand name
EDUCATIONAL MARKETING MATERIALS: Marketing materials that provide helpful information on life
events under the financial institution brand name
PRODUCT TRAINING: Training that ensures frontline employees understand the features of the
financial services provided
REFERRAL TRAINING: Training that ensures frontline employees know how to engage customers
in dialogues that uncover needs and steer them to the right salesperson
CHEMISTRY OF TRUSTED RELATIONSHIPS: Marketing people who have developed trusted
relationships with frontline employees
STABILITY: Frontline employees who have been with a branch for a length of time
SUFFICIENCY: Adequate numbers of branch staff that will undertake the job and tasks.

TAKING THE MYSTERY OUT OF MYSTERY SHOPPING

Gathering valid data on how well your institution's staff is performing is vital. Today's banks
must foster a competitive advantage by delivering excellent service consistently while

14
growing marketing and sales. Frequently, customers' impressions of service and sales are
formed first by what the employees do: how they sound, act or behave.

How do you collect this objective performance data? One of the best ways is through
mystery shopping. You can then use this data to set a benchmark, assess your needs, and
hold the entire staff accountable - from the manager to the receptionist to lenders. You will
also uncover exactly how your present customers or prospects are being treated. Then you
can determine your sales and service needs, how effective your marketing is, how appealing
your environment is.

An added benefit: mystery shopping as a continuous program helps monitor performance

especially in key customer contact areas. Quality service and sales are the keys - the
differential - to staying in business, to retaining customers. Quality is the key to staying
ahead in this tightly competitive market.

Your mystery shopping program should yield a detailed evaluation of each and every
location's strengths and weaknesses. Mystery shopping programs track performance
changes over a time period. Mystery shopping is also useful for:

• Identifying opportunities for improvement

• Providing an objective view of what the customer experiences from the moment he or
she steps out of the car to the moment the customer drives away

• A basis for employee incentive and recognition programs

• A coaching tool for mangers

• Baseline and follow-up data for increased accountability

• Feedback of current situation and continuous improvement of service and sales

• Reinforcement of your training program

• Using an outside vendor assures your program objectivity. Some factors to consider
when selecting a mystery shopping company include:

1) Look for a mystery shop company that employs local residents who represent a variety of
age groups and socio-economic backgrounds to help assure that the shoppers reflect your
customer base.

2) Find a company that gathers specific comments from the shoppers to insure that the
shops were actually completed. Also, if the comments are thorough, the staff will realize the
report is an actual reflection of what they do and, therefore, they will not be defensive.
Instead, they will direct their efforts to improving service and sales.

3) The mystery shop company should be able to customize an assessment form or be able
to offer you a variety of forms to ensure that the form measures what you want to focus on
and compliments your goals and mission statement. It should measure what you want to
focus on.

15
This measurement should then be stated in observable behaviors so that you have objective
- rather than subjective - data to assess performance. Oftentimes, behaviors can also be
weighted. This will help to drive the performance you want to get.

The form should provide you with information about a variety of areas. It should measure
but not be limited to these areas: environment, customer service, sales and follow up.

How does a mystery shop program work?

Mystery shops are conducted with a telephone inquiry of the bank's products and an on site
visit to gather facts about how employees interact with customers and also how your bank
looks to a prospective customer. It should also assess curb appeal along with comments
about the interior of the bank. It should also track how well the designated employees or
department work with the customer. Furthermore, it should provide information about areas
for improvement. A combination is recommended so that you get a complete and realistic
picture of how your employees are performing in sales and service. You want to see what
your customers see.

During each information gathering section of the report, the shopper should also be
commenting on the customer service and sales skills and techniques, signage, condition of
bank, grounds and follow up. Shop companies can also judge the web site as far as ease of
use, appeal and content.

A schedule is then planned by you and the mystery shop company of where, when and how
often the mystery shops will take place. To gather valid data and track trends, it is
recommended that you have the employees shopped at least once a quarter. The manager
can then coach around the behaviors. You can plan your training needs. You can address
problem areas before they become insurmountable or worse, a deterrent to a prospective
customer.

Finally, the information should be clear, concise, and practical: easy to read format. The
monthly report should track performance by employee, location, region, behavior, etc.
Generally mystery shop companies will also provide you with a monthly or quarterly graph
that tracks the data. At a glance, you will be able to track performance, make comparisons
in changes, examine trends, and plan for the future. The shop reports may also be
customized to address particular problems and concerns.

An example of a typical problem area is poor telephone skills. Personal Bankers often
simply respond to customer questions rather than inquiring about a customer's particular
needs. They may not take the time to ask incisive open-ended questions to discover
customer needs. The personal banker may not pique the customer's interest to come in.

Another typical problem area occurs on-site. The personal bankers generally do not get to
know the customer, especially the customer's specific, individual needs. Instead, they are
quick to recommend a product and then as a typical order taker, merely open up that one
account. This is such a hit-and-miss approach to sales. Think of the relationships - and
money - you are losing!

Personal Bankers sometimes don't even close on the sale or on a next step. Generally, they
do not create a sense of urgency or ask the customer to commit to at least a next step.
Since there is a 94% chance of closing if the customer comes in, you can see how this poor
performance affects your bottom line.

16
How do your employees act? Are you sure that they always taking the right steps? By
conducting mystery shops, you would have that information.

To increase closing ratios, improve service, increase cross sell ratios, increase referrals,
retain customers, employing a professional mystery shop service is one way to ensure these
goals are met. If the bank president and managers do not know what is happening to
customers and prospective customers, this can hurt that bottom line.

If you're spending time and money on service and sales training plus spending advertising
and marketing dollars, a mystery shopping program will make certain the service and sales
skills learned are being used. And that your advertising is effective! Mystery shopping offers
employees an incentive to use their skills and the accountability to perform to the highest
standard. It holds their feet to the fire even when you are not there to monitor performance.
Some banks even offer incentives to employees for meeting or improving mystery shop
scores.

Do not waste a moment of time and hire a reputable mystery shop company based on the
criteria listed in this project who will provide you with valid data. This will take the mystery
out of your marketing with strategy adopted.

ASK, YOUR CUSTOMER…INSTEAD OF TELLING STORIES

One step that I find most often used by the personal banker or the teller or even the
commercial lender and especially the investment representative is they love to tell, and tell
customer. What kind of first impression is that? Furthermore, who wants to be told what to
do?

Have the bank “marketing and sales people” ever noticed the customer’s eyes glazing over?
Have they ever asked the customer if they have any questions? Have they considered what
educators know? All educators know that hardly anyone learns or remembers just by being
told….or lectured at! Think back to your school days.. We learned most of the materials by
doing our own research, our own reading, our own note taking, our own assignment. And
not by the lecturers’ lecturing AT us.

Oftentimes, I imagine whether I should ask the investment reps and the personal bankers,
“Did you check to see if the customer died on the other side of your desk?” or “Does the
customer look like they've been snowed?” “Does the customer have that deer in the
headlights stare?” What does a marketer/salesperson accomplish by using bank lingo or
such “big” words? I fear they have only made the customer feel stupid as they have little or
no idea what that the marketer is talking about or are sometimes afraid to interrupt that
deluge of knowledge.

Furthermore, is that a good market and sales technique to make the customer feel stupid or
worse, afraid to ask a question for fear of sounding unintelligent or naive about some of the
financial products?

It is common knowledge that all a brain can take in at one time is about 4 items. Sometimes
most customers don’t grab what marketers mean. Instead, could we focus on getting all our
financial sales wizards to ask a few questions. Why?
to separate, to clarify, to check for understanding, to make sure the customer is with us, to
avoid boring the customer with all the details about all the products and services.

17
They should know that a good bank marketer asks the customer a few questions that will
separate types of product/services or investments within a category. Then next all they have
to do is discuss the one or two services or investments that are appropriate for that customer
to hear about. For example, what are you looking for in a bank, how do you do your banking,
can you tell me about your business, what challenges are you facing, what will you be buying
in the next 6 months to a year, what kinds of plans have you made for retirement, why are
you thinking about changing banks or investment representatives or mortgage lenders, for
that matter.

This is not prying. This is a savvy market and sales technique. Answer a question by asking
a question to get a clearer more precise idea of what the customer is looking for, what the
present situation is, what the future holds. How about asking, “What has changed since the
last time I saw you/talked to you?”
If a marketer or sales person merely tells and talks too much, that is basic feature selling.
The danger in that is that the he will get a “yes” or a “no.” Furthermore, he has not learned
much about the customer.
When you Ask, Ask, Ask! Different questions. You will actually sell far more, close more
often and the customer will have the appropriate products. What a wonderful idea!

IS IT SERVICE OR SALES? BELOW ARE SELLING STRATEGIES,SALES TRAINING,MANAGEMEN, THAT THE

MARKETING MANAGER SHOULD ADOPT IN ORDER FOR EFFECTIVE PERFORMANCE FROM EMPLOYEE.

Is it hype or The Edge we want over our competition?

Most of our bank products are virtually the same. As soon as one bank launches a new
product, many others jump on the 'bank wagon.' That leaves most financial services
managers and marketers with a perennial dilemma: How does one bank differentiate itself
from another in this competitive and tight marketplace?

The answer I frequently hear when I this question is: OUR SERVICE. This gives me pause,
however, and should make you analyze: how do your private bankers and lenders really
make a difference? What do they really do to give you an edge in the marketplace?

One investment representative I spoke with recently answered the question by saying he
likes to "snow the customer with hype and a lot of information." I have to ask, "How does
that make a good first impression? How does that help build rapport and trust?" Bank
employees should remember how to make it easy to shift their accounts, products and
services. Another hint: do not insult the customers' intelligence by using bank lingo and
difficult to understand terms. Most customers have a fair to pretty good understanding of
investment terms and bank products. Therefore, it would be better to treat the customer as a
partner in these decisions by talking to the customer at the same level of their expertise.

What can a manager really do to drive the kind of high level of service and sales you desire
to set yourself apart from the competition? Instead of hype, here are some successful
behaviors and strategies to use to help you gain The Edge:

1. Track issues that are brought up in customer surveys and MOVE on these by creating a
check list targeted at resolving issues, not just talking about them.

18
2. Reconnect with former customers to discover what went wrong and how the relationship
changed so we can try to woo them back.

3. Conduct customer focus groups quarterly (most banks – if they do these – conduct them
only once a year) to keep on top of changes in the market, shifts in consumer needs and
interests.

4. Keep sharing 'best practices'. For example, consider the fact that sometimes the outsider
(of a department or a consultant) can best provide valuable insight into marketing and sales,
operational issues as they are more objective. Sometimes those who are not in that
particular department have the best insights and practical ideas.

5. Require each supervisor to observe each employee at least once a week to hone their
customer service and sales skills and offer suggestions; this will reap boundless rewards.
The supervisors and managers should be spending at least an hour a day observing and
coaching immediately. Think about this: You wouldn't wait six months to coach your 16 year
old when they are learning to drive so why would you wait six months to give employees
feedback?

6. Hire a mystery shop company so you obtain objective measures of service and sales.
Even better would be to find a company who will customize the measurements to what you
want to discover about employees' performance

7. Turnover costs are equal to 40 percent of employees' earnings so preplan how to keep
good employees motivated with small rewards that change quarterly. There is no
documentation that supports the idea that spending a large amount of money motivates
performance. We have all had those employees who feel the behavior is so difficult to
perform or their attitude is so poor that no matter how much incentive money we provide, it is
not a strong enough 'carrot' to motivate them to change. Therefore, choose to give small,
meaningful rewards - meaningful is the important word- to keep morale and performance up.

I have found that a thank you note from the manager packs a powerful punch because the
employee is impressed by the fact that their busy manager took time out of their busy
schedule to write that note. Furthermore, we know it is the surprise 'reinforcer' that is
powerful like the bank president sending an email thanking the employee – use their power!
Also, 'reinforcers' have to be specific to the behavior and to that particular employee so make
sure to pinpoint what that employee did and how much you appreciated it. We have all too
often seen that blanket rewards have very little power in motivating. Everyone either basks in
the glow thinking they are all good or everyone thinks it must be someone else who is not a
good performer: it’s the ‘it can’t be me’ fallacy.

8. Hire the best employees. If you have substantial turnover, review the recruiting and hiring
processes and verify that the hirers understand all the facets of the job. It costs a small
fortune to recruit, hire, train, and then pay 3 months of salary and benefits, only to find that
this is not the best person for the job.

9. Focus on how well the employees communicate with customers and each other and you
at the interview. Spend the time and money - and in fairness to the employee – by providing
on going year-in, year-out training to hone their skills in service and sales. Employees need
to hear it over and over again, have to have a chance to practice the skills over and over
again to become comfortable with what we want them to do.

19
10. The biggest contribution a supervisor, manager, president can make is to treat the
employees with respect, dignity and sensitivity – while being mindful that employees'
personal issues cannot have too much power or influence on performance.

11. Begin a mentoring program or at least have average performing employees be paired
with outstanding employees so they learn how to apply the concepts from training, gather
good phrases to use, learn practical effective methods of working with customers.

12. Last but certainly not least - ask the employees for their input whether it is on Dress
Code issues or on the next product launch or on what their customers are saying or
complaining about.

20
WHAT RELEVANCES DOES THE INTERNATIONAL BANKING
INSTITUES HAVE IN THE BANKING SYSTEM OF MY
COUNTRY NIGERIA:

International Development
Nigeria is an active member of a number of Multilateral and Regional
Organisations such as the IMF, World Bank, NEPAD, ECOWAS, e.t.c. It also has
Bilateral Agreements and Memorandum Of Understanding (MOU) with some
Countries on economic and other issues. The Central Bank of Nigeria is an
important agency of Government in the conduct of economic policies and
economic diplomacy between Nigeria and other countries. This write-up seeks to
explain the relevance of these international institutions and the economic
developments in the international scene that could impact on the Nigerian
economy and Monetary Policy formulation.

NIGERIA PROFILE
With a population of 148 million people, Nigeria is the largest country in Africa
and accounts for 47 percent of West Africa’s population. Nigeria’s population is
made up of about 200 ethnic groups, 500 indigenous languages, and two major
religions ― Islam and Christianity. The largest ethnic groups are the Hausa-
Fulani in the North, the Igbo in the Southeast, and the Yoruba in the Southwest.
Nigeria is also the second largest economy in Sub Sahara Africa and accounts
for 41 percent of the region’s GDP.
Politics
In April 2007, Nigeria held its third consecutive national elections, further
consolidating the transition from military to democratic rule that began in 1999.
On May 29, 2007 Umaru Musa Yar’Adua was sworn in as the third
democratically elected President of the Federal Republic of Nigeria. This marked
the first handover of power from one civilian government to another in Nigeria’s
history. President Yar’Adua has committed his government to reform and his’ 7-
Point Agenda’ identifies the development of human capital; economic reforms;
transport; power; rule of law; the Niger Delta and electoral reform as key priorities
for his administration.
Internationally, Nigeria continues to be a leading player in the African Union, the
New Partnership for Africa’s Development (NEPAD), and in the Economic
Community of West African States (ECOWAS).
In the last four years, Nigeria has made important strides in economic reforms
and the fight against corruption. Government efforts are beginning to bring
results, as evidenced by Transparency International and other surveys.
Streamlined due process procedures at the federal level are ensuring that public
money cannot be disbursed for investment spending unless procurement
procedures have been respected. Fiscal reforms have also begun to roll out to
the States. The Government is committed to and forcefully implementing the
Nigeria Extractive Industry Transparency Initiative. Nigeria has also been

21
removed from the Financial Action Task Force (FATF) on Money Laundering list
of non-complying countries.
Economy
Nigeria 's economy depends heavily on the oil and gas sector, which contributes
99 percent of export revenues, 85 percent of government revenues, but recently
only about 20 percent of gross domestic product (GDP) as oil output has
declined in recent years due to instability in the Niger Delta region. The
agricultural sector now dominates economic growth, contributing 42 percent of
GDP in 2007. With its large reserves of human and natural resources, Nigeria
has the potential to build a prosperous economy, reduce poverty significantly,
and provide the health, education, and infrastructure services its population
needs. For general information on Nigeria’s economy, see the Government of
Nigeria’s web site and the Federal Ministry of Finance’s web site.
Despite the country’s relative oil wealth, GDP per capita is about US$1,161
(2007), and poverty is widespread – about 54 percent of the population lives on
less than 1 dollar per day.
Nigeria ’s macro-economic performance over the last two years has been
commendable. The economic reform efforts are showing positive results
including:
• The non-oil sector grew at a rate of 8.6 percent in 2005 and reached 9.6
percent in 2007.
• Average Inflation rate was 5.2 percent in 2007 as against 17.8 percent in
2005.
• International reserves reached about US$51 billion by the end of 2007.
• A federal Fiscal Responsibility Bill and a Public Procurement Bill were
passed into law in 2007.
• A Bank consolidation program was implemented in 2004/2005,
strengthening the financial sector and enhancing its ability to provide
credit to the private sector. It has one of the most active stock markets in
the world.
• The government made substantial progress with privatization (including
concessions) of several major companies in steel, petrochemicals, mining
and ports.
Nigeria successfully negotiated with both the Paris and London Clubs and the
country now has no major foreign debt. The US$750 million fiscal space created
by the debt deal with the Paris Club creditors has been allocated for the
achievement of MDGs and poverty reduction. The Budget classification has been
amended to help monitor and track MDG expenditures.
Donor Partnership and Coordination
Development partner coordination in Nigeria is strong. The Bank Group and
DFID have prepared a joint Country Partnership Strategy (CPS) anchored on
Nigeria’s home grown National Economic Empowerment and Development
Strategy (NEEDS). In the last two years, the partnership was extended to include
USAID, particularly at the state level, and cooperation with UNDP, EU and AfDB
is being strengthened. The partnership includes joint diagnostic, joint project
preparation and supervision, and joint Country Portfolio Reviews. A joint progress

22
report on the CPS has been prepared to take stock of implementation
experiences, developments in Nigeria and reflect the new government’s
priorities, and make the necessary adjustments going forward. A CPS II is
currently under preparation for FY10-13.
The World Bank Group
The International Development Agency (IDA) is the Bank’s interest-free lending
arm for the poorest countries. The Nigeria portfolio currently supports twenty six
IDA projects, 2 GEF grants and total commitments of about US$3.4 billion. The
Bank is the largest development partner in Nigeria and the country’s portfolio is
the second largest in terms of projects in the Bank’s Africa Region.

Through the implementation of the CPS (FY05-09), the World Bank has
strengthened the policy dialogue, analytical and advisory assistance, as well as
increased financial support to Nigeria. The strategy focuses on helping the
government to achieve results in three main areas: (i) human development; (ii)
non-oil growth; and (iii) better governance.
In FY09, the Bank has already approved two projects Community Social
Development (US$200 million) and Fadama III (US$250 million). Projects
currently under preparation include: Commercial Agriculture, Growth Pole,
Second State Education, Energy Infrastructure, HIV/AIDS and additional
financing for Polio Eradication and Second Health Systems Development.
Non-lending services are helping the Government to analyze policy options and
strengthen the analytical base for the financial program under the CPS. Over the
last few years, this work included a Poverty Assessment, an Agriculture Sector
Review, a Country Environment Assessment, a Public Expenditure Management
and Financial Accountability Review, Country Economic Memorandum, Fiscal
Federalism, and Investment Climate Assessment at the State level. In FY09,
work is being done in Employment and Growth, Community Based Health and
Energy Sector Policy.
The Nigeria portfolio is still relatively young but a few investment operations have
started to show results on the ground. Three community driven development
projects have already demonstrated an impact on poverty and improved
livelihoods (e.g. Fadama II project increased on average net incomes of Fadama
users by 60%). The Lagos Urban Transport Project has contributed to improved
quality of roads, improved access and a 30% decrease in transportation costs.

23
Second Health Systems Development is having a positive impact on primary
health care services across Nigeria.
Nigeria is International Finance Corporation (IFC)’s largest commitment portfolio
in Sub-Saharan Africa US$650 million which represents about 21% of the
region’s portfolio and focuses on: (i) financial markets, infrastructure,
manufacturing & services, indigenous oil-gas-petrochemicals, agribusiness and
healthcare; (ii) diversification within financial markets to include trade finance,
housing finance including mortgages and securitizations, insurance, MSME
finance, microfinance; and (iii) improving the investment climate and developing
the local fixed income capital market. IFC is also the lead adviser to the
government for the privatization of Nigeria airports.
The Multilateral Investment Guarantee Agency (MIGA)’s gross exposure in
Nigeria is $ 108.4 million and consists of six projects--sponsored by investors
from India, Lebanon, Switzerland, the UK and Virgin Islands (UK) -- in support of
the country’s manufacturing and services sector. Most recently, during the fourth
quarter of FY08, the Agency issued $7.3 million in guarantees to a Lebanese
bank for coverage of its investment in a greenfield milk processing plant in
southwestern Nigeria.
MIGA is currently reviewing guarantee requests from British firms for their
potential investments in the country's infrastructure and manufacturing sectors
n FY09, WBI capacity building efforts are concentrated in two areas: (1)
strengthening the National Assembly’s oversight function, and (2) urban
environment and strengthening the PSSDC in the Lagos Transformation plan.
WBI will also provide support on a regional basis in other areas such as strategic
choices for education reform; trade; and social protection, judicial reform, PPPI.

THE WORLD BANK

The World Bank is helping to fight poverty and improve living standards for the
people of Nigeria. As of August 2007, the World Bank had approved 123 IBRD
loans and IDA credits to Nigeria for a total amount of about US$9.5 billion. The
commitment value of the 23 ongoing projects is about US$2.67 billion. The 23
active projects are in all the major sectors. For more information on how the
World Bank is supporting Nigeria.
Nigeria joined the World Bank in 1961. Since then, World Bank assistance
on 123 projects has helped the country work towards achieving economic growth
and a reduction in poverty. As of August 31, 2007, 23 ongoing IDA and 2 GEF
projects with a commitment value of approximately US$2.67 billion include:

Micro, Small and Medium Enterprise Project

The Micro, Small and Medium Enterprise (MSME) Project in Nigeria aims to
increase the performance and employment levels of MSMEs in selected non-oil
industry sub-sectors and in three targeted states of the country. To achieve this,
the project in Nigeria will: (i) develop and strengthen the capacity of local
intermediaries to deliver financial and non-financial services to MSMEs; (ii)
reduce selected investment climate barriers that constrain MSME performance;
(iii) mobilize, via (i) and (ii), increased private investments in MSMEs, and

24
intermediaries. The project has the following five components: Component 1) will
seek to deepen and broaden the financial services available to MSMEs. This will
be achieved through the provision of grants to assist qualifying institutions and
companies to provide up to four types of commercially sustainable financial
services to MSMEs. These grants will be used to finance technical and capacity
building assistance to the providers. Component 2) will seek to develop the
market for business development services (BDS) by supporting intermediaries to
respond to unmet MSME demand for BDS focusing on the three target States.
This will be done through the provision of grants and technical assistance to
qualifying institutions and companies to develop products and to strengthen their
operations in order to be able to respond commercially and over a sustained
period to market demand. Component 3) Technical and capacity building support
will be provided through the IDA credit to assist in the following initiatives of the
Government of Nigeria: (a) Registration Reform, (b) Commercial Dispute
Resolution, (c) Leasing services, (d) Credit Bureau, and (e) Secured Transaction
System. Component 4) IDA resources will be allocated to provide selected
Federal and target State Government Agencies with MSME development
responsibilities the opportunity to access global best practices. Specifically,
advisory services would be available to provide best practice capacity-building to
institutions with policy and related responsibilities for the MSME sector.
Component 5) IDA funds will be allocated to finance the execution, reporting,
review (semi-annual and mid-term) and monitoring of project components and
independent evaluations of selected issues, particularly through case studies.
Provisions will also be made for equipment and operational costs and other
financial, audit, training and consultant assignments as required and laid out in
the approved annual procurement plan.**

Second National Fadama Development Project

The objective of the Second National Fadama Development Project is to
sustainably increase the incomes of fadama users -- those who depend directly
or indirectly on fadama resources, i.e., farmers, pastoralists, fishers, hunters,
gatherers, and service providers -- by empowering communities to take charge of
their own development agenda, and by reducing conflict between fadama users.
Fadamas -- the hausa name for irrigable land -- are flood plains and low-lying
areas underlined by shallow aquifers, found along Nigeria's river systems. The
capacity building component will support measures to build capacity of Fadama
community associations (FCAs), and their constituent Economic Interest Groups
(EIGs) - Fadama User Groups (FUGs), so as to be able, and equipped to access
Project advisory services and financing. Financing will be directed, and comprise,
at minimum, an agreed list of priority public infrastructure subprojects that are
technically, and economically feasible, and environmentally sustainable. The
rural infrastructure investment component, will finance the construction, or
rehabilitation of eligible small-scale infrastructure subprojects specified as
priorities. Pilot productive asset acquisition support will enhance the
improvements in fadama users' productivity, and income, by facilitating the
acquisition of productive assets by individuals, or fadama user groups. This

25
objective would be achieved by supporting the clients' enterprise management
skills, their capacity to mobilize own funds, and, by providing matching grants for
income-generating activities to fadama user groups. The fourth component
supports advisory services that will enable fadama users to adopt output-
enhancing techniques, and more profitable marketing practices in their fadama
enterprises. The Project will finance: (a) advisory services that will accompany
new investment activities in fadama areas on request by the user groups; and,
(b) advisory services that will support ongoing activities by fadama users. The
last component consists of three subcomponents: project management, support
to the Federal Ministry of Agriculture and Rural Development (FMARD, and,
monitoring and evaluation activities.**
Local Empowerment and Environmental Management Project
The project will strengthen the institutional framework at all three levels of
government - federal, state and, particularly, local government - to support an
environmentally sustainable, and socially inclusive development, and, prod state
beneficiaries' participation in the planning, co-financing, and implementation of
multi-sectoral micro-projects. Components will: 1) provide funding through grants,
for direct investments at the community level, for multi-sectoral public
infrastructure development, and/or rehabilitation micro-projects, to be identified,
and implemented by communities, through participatory processes, applying
micro-watershed planning, in compliance with environmental, and social
safeguards. Multidisciplinary implementation teams (MITs) financed under the
Project Management component, will facilitate the identification, planning and
prioritization process, as will experienced nongovernmental organizations
(NGOs). It will also include a pilot fund to test innovative approaches for
strengthening community micro-projects with greater commercial viability, e.g.,
agro-processing activities; 2) finance a comprehensive, local government
capacity assessment, to build awareness among local government authorities
(LGAs), and constituents regarding project performance, and act as a benchmark
for a training-based capacity building process for all rural LGAs; 3) finance,
through the Global Environment Facility (GEF) the incremental cost of project
activities, in compliance with National Biodiversity Strategy goals: (a) improve
conservation; (b) promote sustainable use of biological diversity through
improved management; and, (c) mainstream conservation, and sustainable use
through an integrated approach to land-use planning at the local level.
Subcomponents shall improve Protected Area management, under which
technical assistance (TA), training and study tours will support the current policy
and regulatory framework. Options for an improved strategic agenda will
emphasize collaboration with the private sector, and local communities; build
institutional strengthening, under which TA, training, and equipment will be
provided. Surveys will assess ecological, biophysical, geological, demographic,
and socioeconomic characteristics of Protected Areas. and support zones, and
strengthen the monitoring of species, and viability of ecosystems. Survey data
will also help rehabilitate roads, culverts, bridges and watering points for wildlife,
as well as sustain livelihoods of local populations; 4) improve the legal
framework, and enforcement capacity to protect the environment, and enhance

26
natural resource management; and, 5) support project management activities,
through a Community Project Management Committee, responsible for all
administrative and financial matters concerning micro-project implementation.**

THE INTERNATIONAL FINANCE CORPORATION,

The private sector arm of the World Bank Group, will become a founding
shareholder in Accion Micro Finance Company in Nigeria. The new institution
will provide credit and other financial services to micro and small enterprises.

IFC will purchase $1.89 million of common shares for an equity stake of up to
12.6 percent. The investment marks the first IFC project expected to qualify for
additional capacity building support from the Micro, Small, and Medium
Enterprise Program for Nigeria. The program was launched in 2003 by IFC and
the World Bank Group’s concessionary lending unit, IDA.

The project highlights IFC's strategic support for sustainable financial institutions
that serve micro and small enterprises in Africa. These institutions typically have
a strong developmental impact. Accion’s commercial microfinance techniques
will provide better access to finance for Nigerian micro enterprises, accelerate
their business growth, boost overall confidence in the financial sector, and create
new jobs.

IFC’s coinvestors include Nigeria International Bank, Ecobank Nigeria, Zenith

Bank, Leadbank, SME Partnership and SME II Partnership, and Accion
Investments in Microfinance. Technical assistance will be provided by Accion
International, which has received grants from IFC’s Capacity Building Facility for
this transaction.

“IFC is committed to strengthening the financial sector in Nigeria and its

supportive role for microentrepreneurs,” said IFC’s director for Sub-Saharan
Africa, Richard Ranken. He added, “We are very pleased to become a
shareholder in Accion Micro Finance Company and hope that it will soon develop
into the leading provider of credit and banking services to microenterprises in
Nigeria.”

Jyrki Koskelo, IFC’s director for global financial markets, noted, “This is an
excellent example of what public-private partnerships can achieve in Nigeria. The
government’s support for the IFC-IDA initiative and private investments will
facilitate access to finance for low-income entrepreneurs in Nigeria. This project
marks a significant milestone in the development of commercial microfinance in
Africa.”

The mission of IFC is to promote sustainable private sector investment in

developing countries, helping to reduce poverty and improve people’s lives. IFC
finances private sector investments in the developing world, mobilizes capital in
the international financial markets, helps clients improve social and

27
environmental sustainability, and provides technical assistance and advice to
governments and businesses. From its founding in 1956 through FY04, IFC has
committed more than $44 billion of its own funds and arranged $23 billion in
syndications for 3,143 companies in 140 developing countries. IFC’s worldwide
committed portfolio as of FY04 was $17.9 billion for its own account and $5.5
billion held for participants in loan syndications.

Paris Club
Paris Club is an informal group of official creditors whose role is to find co-
ordinated and sustainable solutions to the payment difficulties experienced by
debtor nations. Paris Club creditors agree to rescheduling debts due to them.
Rescheduling is a means of providing a country with debt relief through a
postponement and, in the case of concessional rescheduling, a reduction in debt
service obligations.
The first meeting with a debtor country was in 1956 when Argentina agreed to
meet its public creditors in Paris. Since then, the Paris Club or ad hoc groups of
Paris Club creditors have reached 403 agreements (breakdown by year)
concerning 85 debtor countries. Since 1983, the total amount of debt covered in
these agreements has been 511 billion (breakdown by year).
In spite of such activity, the Paris Club has remained strictly informal. It is the
voluntary gathering of creditor countries willing to treat in a co-ordinated way the
debt due to them by the developing countries. It can be described as a "non
institution".
Although the Paris Club has no legal basis nor status, agreements are reached
following a number of rules and principles agreed by creditor countries, which
help a co-ordinated agreement to be reached efficiently.
1. The Paris Club was formed in 1956. It is an informal group of creditor
governments from major industrialized countries. It meets on a monthly basis in
Paris with debtor countries in order to agree with them on restructuring their
debts.

2. The members of the Paris Club which participated in the reorganization of

Nigeria's debt were representatives of the governments of Austria, Belgium,
Brazil, Denmark, Finland, France, Germany, Italy, Japan, the Netherlands, the
Russian Federation, Spain, Switzerland, the United Kingdom and the United
States of America.

Observers at the meeting were representatives of the governments of Australia,

Canada and Norway as well as the International Monetary Fund, the World Bank,
the African Development Bank, the European Commission, the Organization for
Economic Cooperation and Development and the Secretariat of the U.N.C.T.A.D.

The delegation of the Federal Republic of Nigeria was headed by Dr (Mrs) Ngozi
OKONJO-IWEALA, Minister of Finance. The meeting was chaired by Mr. Xavier
MUSCA, Director General of the Treasury and Economic Policy Department of
the Ministry of Economy, Finance and Industry, Chairman of the Paris Club.

28
1. The Policy Support Instrument (PSI) concluded by Nigeria with the
International Monetary Fund was approved by the Fund's Executive Board on 17
October 2005.

2. The total stock of Nigeria's public sector has been estimated as at end 2005 at
US$ 36.2 billion, out of which around US$ 30 billion due to the Paris Club
(source: IMF staff report and Paris Club creditors).

Nigeria
The representatives of the Paris Club creditor countries met on 18, 19 and 20
October 2005 and agreed with the representatives of the Federal Republic of
Nigeria on a comprehensive treatment of its debt. This agreement implements
the debt treatment framework for Nigeria announced by the Paris Club on 29
June 2005.

The representatives of the Paris Club creditor countries welcomed the ambitious
economic program implemented by the Nigerian authorities since 2003 and their
desire to secure an exit treatment from the Paris Club.

This agreement takes place after the approval by the Executive Board of the
International Monetary Fund of the Policy Support Instrument (PSI) on 17
October 2005 and includes a debt reduction under Naples terms on eligible debts
and a buy back at a market-related discount on the remaining eligible debts after
reduction.

This agreement will be implemented in two phases in consonance with the

implementation of the PSI:

- in the first phase, Nigeria undertakes to pay arrears due on all categories of
debts and Paris Club creditors grant a 33% cancellation of eligible debts;

- in the second phase, after the approval of the first review of the PSI by the
Executive Board of the IMF, planned for March 2006, the Nigerian Government
will pay amounts due under post-cut off date debt, Paris Club creditors will grant
a further tranche of cancellation of 34% on eligible debts, and Nigeria will buy
back the remaining eligible debts.

In total, this agreement allows Nigeria to obtain a debt cancellation estimated at

US$ 18 billion (including moratorium interest) representing an overall cancellation
of about 60% of its debt to the Paris Club of around US$ 30 billion. Paris Club
creditors will be paid an amount of US$ 12.4 billion, representing regularization of
arrears of US$ 6.3 billion, plus a balance of US$ 6.1 billion to complete the exit
strategy.

29
This exceptional treatment of Nigeria's debt offers a fair, sustainable, and
definitive solution to Nigeria and Paris Club creditors. With the large debt relief
included in this agreement, Paris Club creditors extend their strong support to
Nigeria's economic development policy and its fight against poverty.

Nigeria and the International Monetary Fund (IMF)

Many students of Economics and Social History know that there was world wide
economic depression from the 1930s and shortages of consumer goods
throughout the period of the Second World War, 1939-1945. The depression
caused many trading nations in Western Europe and North America to introduce
trade restrictions. Some restricted imports and controlled use of foreign
exchange, while others devalued their currencies. In the aggregate, the
restrictions on trade caused further economic decline in terms of world trade,
output and employment.
In 1944 at a place called Bretton Woods, in New Hampshire, United States of
America, of forty four (44) governments agreed on a framework of economic
cooperation, designed in part, to prevent the mutually destructive policies that
prevailed in the 1930s. Out of the agreement came the International Monetary
Fund, in December 1945, with twenty nine (29) members at inception.
The purposes of the IMF, outlined in Article I if its Articles of Agreement, are:
i. To promote international monetary cooperation through a permanent
institution which provides the machinery for consultation and collaboration
on international monetary problems;
ii. To facilitate the expansion and balanced growth of international trade, and
to contribute thereby to the promotion and maintenance of high levels of
employment and real income and to the development of productive
resources of all members as primary objectives of economic policy;
iii. To promote exchange stability, to maintain orderly exchange
arrangements among members, and to avoid competitive exchange
depreciation;
iv. To assist in the establishment of a multilateral system of payments in
respect of current transactions between members and in the elimination of
foreign exchange restrictions which hamper the growth of world trade;
v. To give confidence to members by making the general resources of the
Fund temporarily available to them under adequate safeguards, thus
providing them with opportunity to correct maladjustments in their balance
of payments without resorting to measures destructive of national or
international prosperity;
vi. In accordance with the above, to shorten the duration and lessen the
degree of disequilibrium in the international balances of payments of
members.
A careful look at the above purpose will show how and why the IMF adopts
certain policies. For example, Article I (v) provides for “adequate safeguards”
when the general resources of the Fund is provided to a member country. This is

30
the source of what has been termed Conditionalities, which really are issues
which a member in difficulty needs to address in order to guarantee successful
outcome. Article I(ii) provides the basis for the IMF to verify the economic
conditions of a member country to third parties, such as is the case in debt
reduction, forgiveness, and restructuring arrangements, in order to promote
cooperative economic relations.
Between 1945 and 1971, the IMF promoted exchange rate stability under the
Bretton Woods arrangement under which the United States of America
guaranteed the value of the dollar in terms of gold, while other countries pegged
their currencies to the dollar (within a narrow band). In support of this goal, the
Bank for International Settlements (BIS), focused on implementing and defending
the Bretton Woods system.
Nigeria and the Fund
Nigeria joined the IMF after her independence in order to participate and benefit
from the purposes of the Fund. In their inter-relationships, the IMF focuses
mainly on Nigeria’s macroeconomic policies. These are policies that have to do
with public sector budgets, the management of interest rates, money, and credit
and exchange rate; and financial sector policies, particularly, the regulation of
banks and other financial institutions (as agreed by the BIS-Bassels
Agreements). The Fund also pays attention to structural policies that affect
macroeconomic performance of Nigeria. Many people are familiar with the term
“Structural Adjustment Programme” (SAP) which the Fund advised Nigeria to
undertake because by 1985, her economy, under near total management of the
public sector-Nigeria Airways, Nigerian Railways, Nigerian National Shipping
Line, National Electric Power Authority, Nigerian Telecommunications,
Agricultural Development Projects, River Basin Development Authorities, Banks
with majority government shareholding, Primary, Secondary and Tertiary schools
owned and operated by the government, National Supply Company, National
Fertilizer Company of Nigeria, all land owned by the Governors of States of the
Federation, and more,---was in continuous and rapid decline, because of the
absence of competition and efficiency. In 1986, Nigeria adopted limited
restructuring of the economy until 1988 when the programme was abandoned.
Ever since, Nigeria has been grappling with government dominance of economic
activity and neglect of the enabling environment for economic growth.
The Fund’s work with Nigeria is in three categories—Surveillance through which
it monitors economic and financial developments in the country and offers policy
advice; Lending when there is balance of payments difficulties and support
policies that are geared towards correcting underlying problems; and Technical
assistance and training where it is has expertise.
Nigeria and The IMF-PSI Program (2005 - 2007)
The IMF has programs which it provides for its member countries. One of such
program is the Policy Support Instrument (PSI). The PSI which was introduced in
October 2005, enables the IMF to support low-income countries that do not want
or need IMF financial assistance. The PSI helps countries design effective
economic programs that, once approved by the IMF's Executive Board, signal to
donors, multilateral development banks, and markets the Fund's endorsement of

31
a member's policies.
The PSI aims to: (i) promote a close policy dialogue between the IMF and a
member country; (ii) provide more frequent Fund assessments of a member's
economic and financial policies than is available through the regular consultation
process, known as surveillance; and (iii) deliver clear signals on the strength of
these policies. The PSI is voluntary, demand-driven, and intended to be
supported by strong country ownership. Therefore, it will be available only upon
the request of a member.
Nigeria was the first country to have a PSI approved by the IMF on October 17,
2005, to complement the Nigerias’ National Economic Empowerment and
Development Strategy (NEEDS). Nigeria successfully completed the fourth and
final review of the PSI in October 2007.

The Association of African Central Banks (AACB)

The Association of African Central Banks was established following the
recommendations of the first Meeting of Governors of African Central Banks
which was held in Addis Ababa from 15 to 22 February 1965. The objective of
the Association is to promote co-operation in the monetary, banking and financial
sphere in the African region and to assist in the formulation of guidelines along
which future agreements between African countries can proceed in these areas.
The Association has an Assembly of Governors (the governing body of which are
members all African Central Banks Governors), a Bureau (composed of the
Chairperson and the Vice-Chairperson of the Association and Chairpersons of
sub-regional Committees), sub-regional Committees (composed of Governors of
Central Banks of the five (5) sub-regions as defined by the African Union).
Membership of the Association and its Sub-regional Committees is open to all
Central Banks of member countries of the African Union.
In addition to these organs the Association has a Secretariat located at the
Headquarters of the Banque Centrale des Etats de l’Afrique de l’Ouest (BCEAO)
in Dakar, Senegal. As at May, 19, 2006 thirty-three central banks had signed the
revised statutes of the AACB. Nigeria signed the instrument of accession to the
revised statutes on November 6, 2003.
The AACB is instrumental to the regional aim of evolving into a single monetary
zone by the year 2021 with a common currency and a common central bank at
the continental level. This common central bank – The African Central Bank
(ACB) has been zoned to Nigeria.

African Development Bank (ADB) Group

African Development Bank (ADB) Group is a regional multilateral development
bank established in 1964, but commenced operations in 1967. It is owned by 77
nations from Africa, North and South America, Europe and Asia. Of the 77
nations, 53 are African countries referred to as the Regional Members, while the
balance of 24 other countries, made up of Americas, Europe and Asia are the
Non-Regional Members. The authorized capital of the ADB Group stands at
21.87 billion Unit of Accounts (UA),equivalent of US$33.0 billion.

32
The objectives of the ADB Group are to mobilize resources for economic and
social development of African countries. The Group comprises the African
Development Bank, African Development Fund (ADF) and the Nigerian Trust
Fund (NTF). The ADF which was established in 1973, became operational in
1974 to provide concessionary loans and grants for projects and programmes as
well as technical assistance for studies and capacity-building in low-income
regional member countries (RMCs), all of which are aimed at poverty reduction.
The NTF, on the other hand, is a special fund initiated by the Government of
Nigeria in agreement with the ADB in 1976, also to support low-income RMCs for
concessionary financing. An initial capital of US$80 million was provided, which
was replenished with another sum of US$71 million in 1982.
Available information indicates that the Bank has approved a total of 3,007 loans
and grants worth 34 billion UA or US$53 billion between 1967 and 2004. In
recent times, Nigeria has benefited from the operations of the ADB. These
include a credit support to Zenith Bank under the Private Sector window for
project financing, corporate finance, implementation of Basel 2 framework and
environmental risk assessment. The Bank has also approved the sum of
N635.44 million for strengthening institutions to support rural and agricultural
development in Nigeria under the National Economic Empowerment and
Development Strategy (NEEDS).
The ADB Group has a Board of Governors, Board of Directors, a President and
five Vice-Presidents. The Honourable Minister of Finance and the Director, Africa
and Bilateral Economic Relations Department in the Ministry of Finance stand as
Nigeria’s Governor and Alternate Governor in the Board of Governors. Mr.
Donald Kaberuka who is the 7th elected President of the ADB Group, assumed
office on September 1, 2005. The Headquarters of the ADB Group is in Abidjan,
Cote d’Ivoire; however, owing to political instability in the country, the
Headquarters temporarily relocated to Tunis in 2003.

The Economic Community of West African States (ECOWAS)

The Economic Community of West African States (ECOWAS) was established
on May 28, 1975 and is made up of Sixteen (16) countries. The major objective
of ECOWAS is to establish a common market and create a monetary union. Its
mission is to promote economic integration in “all fields of economic activity,
particularly industry, transport, telecommunications, energy, agriculture, natural
resources, commerce, monetary and financial questions, social and cultural
matters.
The West African Monetary Zone (WAMZ)
The West African Monetary Zone (WAMZ) was proposed by Nigeria and Ghana,
on December 15, 2000, as a second monetary zone in the ECOWAS to fast track
the monetary integration of Nigeria, Ghana, the Gambia, Sierra Leone, Liberia
and Guinea (a French speaking country). The major objective is to facilitate
rapidly the achievement of a WAMZ monetary union with a common central bank
and a single currency for eventual merger with the Francophone countries who
already have, in existence a West African Monetary Union known as UEMOA.

33
 • The West African Monetary Institute (WAMI)
The West African Monetary Institute (WAMI), is saddled with the
responsibility of facilitating the realization of the single monetary union of
the WAMZ.
• The West African Monetary Agency (WAMA)
The West African Monetary Agency (WAMA) is an autonomous
specialized agency of the Economic Community of West African States
(ECOWAS).
• The West African Institute for Financial &
Economic Management (WAIFEM)
The West African Institute for Financial and Economic Management
(WAIFEM) was established on July 22, 1996 by the constituent Central
Banks of The Gambia, Ghana, Liberia, Nigeria and Sierra Leone became
operational in January, 1997. The principal objective of the Institute is to
build capacity for macroeconomic and financial management in the
countries of its member central banks.
The New Economic Partnership for
African Development (NEPAD)
The New Economic Partnership for African Development (NEPAD) is a
continental idea conceived by Nigeria and the Republic of South Africa and
adopted by African leaders at the African Union summit in Lusaka, Zambia, in
July 2000.
The New Economic Partnership for Africa's Development (NEPAD) is a
continental idea conceived by Nigeria and the Republic of South Africa and
adopted by African leaders at the African Union summit in Lusaka , Zambia , in
July 2000. The goal of NEPAD is to eradicate poverty in Africa and to place
African countries both individually and collectively on a path to sustainable
growth and development to halt the marginalization of Africa in the globalization
process.

NEPAD's primary objectives are:

• To eradicate poverty;
• To place African countries, both individually and collectively, on a path of
sustainable growth and development;
• To halt the marginalisation of Africa in the globalisation process and
enhance its full and beneficial integration into the global economy;
• To accelerate the empowerment of women
One of the goals identified by NEPAD is the implementation of prudent financial
and economic management policies, such as stringent public financial
management and tight monetary policies as vital for the achievement of
sustainable growth and development in Africa. Some of the policies of the
Central Bank of Nigeria touch directly on poverty eradication and so bear on
NEPAD’s goal of acceleration of the eradication of poverty and inequality on the
continent.
Bilateral Economic Cooperation
The Monetary Policy Department inter-faces with the Central Banks of other

34
countries such as Bank of Ghana, Reserve Bank of South Africa, Bank of
England, Reserve Bank of New York and the Central Bank of Luxembourg,
amongst others to share and exchange experiences on Monetary Policy
management with emphasis on exchange rate and liquidity management.

CONCLUSION
A banker or bank is a financial institution whose primary activity is to act as a
payment agent for customers and to borrow and lend.

REFERENCES
1. ^ de Albuquerque, Martim (1855). Notes and Queries. London: George Bell, 431.
2. ^ Matyszak, Philip (2007). Ancient Rome on Five Denarii a Day. New York:
Thames & Hudson, 144. ISBN 050005147X.
3. ^ United Dominions Trust Ltd v Kirkwood, 1966, English Court of Appeal, 2 QB
431
4. ^ (Banking Ordinance, Section 2, Interpretation, Hong Kong) Note that in this
case the definition is extended to include accepting any deposits repayable in less
than 3 months, companies that accept deposits of greater than HK$100 000 for
periods of greater than 3 months are regulated as deposit taking companies rather
than as banks in Hong Kong).
5. ^ e.g. Tyree's Banking Law in New Zealand, A L Tyree, LexisNexis 2003, page
70.
6. ^ http://en.wikipedia.org/wiki/Debits_and_credits
7. ^ http://www.ifsl.org.uk/upload/CBS_Banking_2008.pdfPDF (638 KB) chart 7,
page 3
8. ^ http://www.ifsl.org.uk/upload/CBS_Banking_2008.pdfPDF (638 KB) chart 8,
page 4
9. ^ "Knowledge, the most valuable intangible" by Anju Bhargava. The RMA
Journal, June 2001;

35