Callixte MUTABAZI, Managing Director : “Because we believe that this management readjusted on the activities of our Bank is the important instrument for the reinforcement and the support of our position gained in the course of these past eleven years”

n our message closing the year 2002, we forecasted a 2003 environment still non-conducive to business, marked by a monetary policy of rigour and a mitigated resumption of the international cooperation.

This environment will have been finally unfavourable since the follow up of the programme of macro-economic reforms agreed upon with the IMF and the World Bank led the Central Bank review all the regulatory and prudential provisions except the unique exchange regulation.

Hence, at the level of the provisions raising, whereas a credit declared bad was provisioned only after 24 months without creditor movement covering the interests and commissions, that period of follow up and search for alternative solutions has been reduced to 6 months since February 2003.

This situation had a negative impact on the results of banks and financial institutions; hence the comparison with the results of 2002 will have to take this fact into account.

In the same time, the rate of obligatory reserves went up from 7.5 to 8.5 % with the establishment of zero tolerance with respect to their insufficiency, whereas the refinancing which is another instrument of the monetary policy of the Central Bank, on which eventual overruns are hence forth heavily overloaded, was seriously reduced and reviewed on a monthly basis since January 2003.

Fortunately enough, and with the compliance to reforms agreed upon with the Bretton Woods institutions, the exchange has been progressively liberalized all along the exercise, a process which was opportunely followed by a substantial releasing of funds by multilateral, bilateral donors and NGOs, thus enabling the Auction Market to operate all the year and the International Banking to maintain an sustained activity.

An economic environment that we had forecasted and anticipated by designing strategies aimed at consolidating the achievements of the Bank i.e. the development of all its activity portfolios, the reinforcement of the contribution of the network to the realisation of results as well as the induction of the earnings from the productivity through the rationalizations of the functional and operational organization.

Anticipation strategies that helped us to determine orientations and to take priority options and thus to neutralize the adverse effects of those regulatory and environmental changes.

The results of those actions, whose pillars were a more rigorous supervision of he credits, a new impulse to our distribution policy, the boom of the activity at the International Banking and the reduction of overheads, are definitely appreciable, the fiscal year 2003 closing with a net profit of more than a billion for the fourth consecutive year, i.e. 1,110.5 M favourably comparable with the one of the fiscal year 2002, which was established at 1,085.3 M.

These performances, therefore maintained, are all the most appreciable that they embody the new regulations of the Central Bank as far as provisions on bad debts are concerned, with a considerable effort to raise provisions during the fiscal year 2003.

They show an increasing improvement of the operational profitability of the Bank.

More rigorous credits supervision.

In the field of credits, the Bank's policy since 2001 gives priority to the control of outstanding and the strict supervision of the portfolio.

With respect to the tightened up regulatory environment and economic context marked by the degradation of macro-economic indicators, the deterioration of the economy and the increase of poverty of the population, this approach has been enhanced in 2003, in two ways :

Those orientations, which have been subject to several assessments, training and information sessions, have given an opportunity for a strict monitoring of the credit activity with regard to supervision and recovery yielded highly appreciable results.

A new Boost to our Distribution policy

In January 2003, the Bank has given a new direction to its distribution policy with the resumption of the establishment of branches and counters on he working sites, while the Bujumbura Port Branch was inaugurated.

Seven months later, and after the opening of three counters operating on sites, the Bank resumed the development of the network at the national level with the establishment of a new branch southern Burundi, at Rumonge.

This new boost to our corner policy shows the maturity of the policy launched with the birth of the Bank in 1993, while the Brarudi counter was opened.

It also proves our capacity to ensure to our clientele a banking support free of any contingency in space and time and capable of responding satisfactorily to its expectations.

Empowered with this maturity and considering that the rapidity and the reliability in the management of operations are important parameters of the service to the clients, we have consolidated that support through the establishment of new instruments of control of inter-branch operations and new means of credit follow up in our branches.

Those actions of development and consolidation of branches have strongly contributed to the efficiency of our distribution network which is henceforth a reference on the Burundian banking market.

Enhancement of the Trading Approach at the International Banking

Parallel to this development of retail banking, an orientation aiming at increasing the revenues has been given to our trading policy through several actions of research and securing of the hard currencies clientele, internal organization and offer of new products at the International Banking.

Hence, at the internal level, with the aim to better respond to the expectations of the clientele, the exchange section has been reorganized while at the same time a proximity supervision of our hard currency clientele was ensured.

Concerning payments in hard currency, the Bank is affiliated to the VISA and EUROCARD/MASTERCARD since August 2003, this "cash advance" service completes the traditional system of payment and the transfer and payment service FIRST REMIT already in force at its counters.

All these moves have been seconded by an ongoing supervision of the clientele which has focussed on the explanation of various modifications of the General Exchange Regulation adopted in the course of the year.

Reduction of Overheads

If the increase of revenues is a vital condition for the improvement of results, it remains insufficient if it is not seconded by a good control of operating overheads.

As a matter of fact, in sight of the tremendous reduction of margins, amplified by the very net increase of the cost of the resource due to, among other things, the distortion of the structure of resources to the profit of expensive resources and to the detriment of none or weakly remunerated resources, the reduction of overheads becomes a priority objective.

Consequently, we have conducted a constant reflection on those costs, which have been increasing these past years, being always a heavy drain on the profitability of the Bank, even though their increase has been progressively reduced.

This reflection has notably resulted in the establishment of a decentralized management unit in charge of general services called Futura Management Applications, FUMAP in short.

Indeed, this new entity has already adopted important measures regarding the management of printed materials and office furniture, petrol or communication fees with tangible results.
Moreover, those measures have been completed by the lightening of all the operational organizations with the aim to accelerate the decrease of the operating expenses.

They are notably those actions which enabled the Bank to adapt itself to the degraded economic environment of the year 2003.

PROSPECTS

The political developments encountered at the end of the year 2003 give grounds for great hopes for a rapid restoration of peace and, consequently, a sustained recovery of the economic activity and the international financial assistance.

Indeed, substantial releasing of funds is already expected in 2004 on the current programmes agreed upon with the two Bretton Woods Institutions, the European Union and the UNDP.

The respect of the time schedule for the implementation of reforms agreed upon by the Government and the Monetary Authority in the field of budgetary, credit and exchange policy, will be undoubtedly the condition for that releasing; reforms that imply a regulatory environment still tightened for the financial system, following the example of 2003, be it for the refinancing, the obligatory reserves or the prudential regulation.

In sight of this context, 2004 will have therefore to respond to a "management of proximity" which means the search for opportune profits, scale economics, internal rationalizations that can help avoid wasting and disfunctionings as well as the optimum productivity of our entire activity portfolio.

It is in this only way that the fiscal year 2004 will confirm our position on the Burundian banking market.

Because we believe that this management centred on the professions of our Bank is the important instrument for the reinforcement and the support of our position gained in the course of these past eleven years.

Reinforcement and support through the consolidation of results, whose evolution is impeded by the erosion of margins and the increase of credit risks.

Consequently, for the fiscal year 2004, the behaviour of the management of the Bank will continue to be considered as the management of an activity portfolio, in its various services, sections and agencies.

This vision rules that those entities should be managed as autonomous profit and cost centres whose contributing capacities for the realization of the result have to be assessed and analyzed on a regular basis.

I therefore invite the staff and our entire social body to share this vision, for better results in 2004.