GOOD GOVERNANCE IN BANKING — REDEFINED
Innovative activities flourish in an Organisation where Research efforts and creativity of the staff is suitably rewarded
By Akram Khatoon
Former President FWBL
May 06 -12, 2002
The concept of good governance in Banking industry implies to empirical application to total quality management which includes six performance areas contained in acronym "CAMELS" that is capital adequacy, assets quality, management, earnings, liquidity and sensitivity risk. The degree of adherence to these parameters determines the quality rating of an Organisation. However fast advancement in technology and pressure for globalisation and growing sophistication in clients' needs is gradually exposing the banks to international competition. As such spectrum of their quality performance areas need to be extended so as to include dynamics like innovation through research and development and quality development of human resources on continuous basis.
Online Banking which was a new product offered by leading Financial institutions in economically developed countries in the recent past is now the common banking service being offered with many facets through mobile portals even in developing countries. It is therefore imperative for the banks to develop innovative services and products on continuous basis to match the emerging sophisticated needs of the clients, which are the outcome of demonstration effect from economically developed countries and facilitated environment for globalisation.
The quality of assets, effective management and increased profitability which are the main ingredients of quality performance of an Organisation, can be achieved only through knowledge based competition which forms the very basis of creativity, innovation and research.
A financial institution in order to enhance its market share being fully aware of its competitors' strength and weaknesses, changing global environments and fastly changing needs of the clients will continue to improve existing services, and bring out new products and services and make use of innovative ideas for marketing its services. The said objective however, can be achieved only through strategy of team-work.
The culture of team work or participating style of management goes with the attributes like highly motivated staff and consultative approach to all matters in the Organisation. This however presupposes trust between management and employee, effective communication system in place (both horizontally and vertically in the Organisation), active involvement of all cadres of staff in the process of innovation by encouraging creativity among them. For that it is essential that focused information be shared with entire team and a consensus be build up. The total involvement of top management in research and development activities leading to innovation in products and services on continuous basis is Must. He / she must have understanding of each phase of new product developed.
Further, training and orientation of staff in diversified field is needed on continuous basis. This will enable them to perceive changing needs of the clients with changing environments both within the country and globally and help Organisation to develop new products and innovative strategy to market their services in order to manage the expectations of clients and to have competitive advantage over others.
The training and development of staff should be geared towards developing capability of having feedback and market intelligence regarding extent of market share of their Organisation viz. a viz. their competitors in the field, rate of retention of the customers, points of customers satisfaction / dissatisfaction regarding services and products offered etc , in order to have competitive edge over others.
The move towards globalisation has potential challenge for financial institutions of developing countries for their survival. For them it is an imperative need to develop their human resources on a very broad spectrum of areas of operations. The staff and executives need to have exposure for development of their skills in the areas which are subject of international competition presently or in near future.
In Pakistan with the advent of E-commerce and mobile portals there are ample opportunities for developing a range of new services and products suited to needs of all segments of clients and also from the organisational and business needs perspective. As such staff of all financial institutions need to be trained to make use of latest technology. This would enable them to develop innovative services / products relating to their areas of operation culminating into change in business practices and business models. It is important that these innovative efforts must match not only present needs of the customers, but also come up to future expectations of the clients who are no longer isolated and are fully aware of all happenings on the globe.
In context of Pakistan where banks are faced with the challenge of transforming their transactions, services and products in consonance with SHARIA, the staff and Management of Banks need to be given exposure to relevant Islamic teachings and SHARIA requirements. Their comprehensive training in systems and procedures is also essential for effective implementation of Deposit taking on Profit and loss sharing basis and suggested Islamic modes of Financing for various sectors of the economy.
The development of skills of the staff in area of Islamic modes of Financing should be diversified and elaborated enough to enable them to explain characteristics of each Mode of Financing to their clients and also to make improvement on procedure and method of delivery on continuous basis keeping in view aspirations and needs of various segments of clients. The focal point in the process should be its conformity with SHARIA.
In line with Government emphasis on poverty alleviation programme, Commercial Banks in Pakistan are morally bound to participate in the programme by allocating part of their funds for financing micro and small businesses. Keeping in view special needs and limitations of disadvantaged segments of population Banks need to develop simplified procedures and innovative and profitable schemes for inculcating saving habits among them and also to prompt them to enter an income generating activity. For that Management and field staff of commercial and Micro-finance Banks need to have total awareness regarding socio-economic conditions of targeted communities. In this context use of customers surveys, interviews and focus group is the appropriate strategy.
In order to address the issue of inaccessibility of institutional credit Management and Staff relating to Micro Finance desk need to develop a service delivery strategy suited to requirements of clients to whom bank branches are not easily accessible. In this regard staff of all level need to be injected a cultural mirage of helping poor.
The overall training strategy to be devised for the Organisation must have provision for self directed programmes to encourage employees initiatives. Under this process employees of a tier identified as having ample potentials of growth themselves choose what to learn and where to learn. The said strategy is in vogue with quite a number of leading Banks in United States and UK.
Further it should be kept in mind that innovative activities flourish in an Organisation where Research efforts and creativity of the staff is suitably rewarded. It is the common phenomenon in all the Banks in Pakistan, both in Public and Private sector that at the time of deciding promotions and incentives for the staff, the staff involved in Research and Development activity is treated at par with rest of the staff.
In order to have quality growth of staff in Research and development activity, they need to be given additional incentive for their each fruitful effort leading to development of new products and services found helpful in enhancing market share of the organisation.