The study “CFO Survey Mozambique 2024” highlights that the volatility of the financial markets, rapid technological advances and ESG factors are other major concerns for financial leaders.

In this context, Profile interviewed Eduardo Caldas, Assurance Partner at Ernst & Young (EY) Mozambique, who describes the main findings of the report.

Profile Mozambique: Tell us about the main objectives of this Ernst & Young (EY) CFO Survey?

Eduardo Caldas: This report was carried out in line with what Ernst & Young (EY) was already doing internationally. It is a report aimed exclusively at financial services, more specifically the banking and insurance sector, where we tried to reflect on the concerns of current and future CFOs operating in Mozambique, considering factors such as the talent of the people they work with, who therefore make up the finance team, as well as aspects related to technological acceleration and investment prospects considering the challenges they currently face.

Another objective, I would say a second objective, was to provide an insight into what the current and future challenges are for CFOs operating in Mozambique, obviously considering what the current market conditions are and the level of knowledge of the teams that make up the financial areas of the various banks and insurance companies.

A third objective of the study was to provide CFOs’ perspectives on the banking and insurance sectors in Mozambique. So to get a broad, holistic view of what the CFOs’ main perspectives are on this market.

PM: How many companies were surveyed in this report?

EC: We ended up surveying 37 companies, so 22 banks and 15 insurance companies, and of these 37 entities we received a response from 24, including 14 banks and 10 insurance companies.

We had a fairly representative sample, around 65% of the total number of questionnaires and contacts we made, and of the total number of contacts to which we received a response, 12 were from Directors (CEO/CFO), 2 from first-line Directors and 10 from Coordinating Directors.

PM: Why these two sectors: Banking and Insurance?

EC: Above all because the financial system, which obviously includes banking and insurance, is currently constantly evolving, both internationally and particularly in Mozambique, where there are various challenges and many opportunities in the market, arising from the frequent regulatory changes that are taking place in these two areas, I’m talking about Banking and Insurance.

The issue of digital transformation has been very important, especially in these two lines of business, banking and insurance, as well as the impact that monetary policies, imposed by the various central banks, have had on the market in general, especially in the banking sector through higher interest rates and the increase in the minimum reserve requirements, which is obviously a general concern. It should be noted that although restrictive monetary policies increase banks’ financial margins, they can also lead to an increase in banks’ NPLs. In the specific case of Mozambique, where the net interest margin ratio grew from 64% (2021) to 68.5% (2022), the NPL trend was fortunately the opposite, rising from 10.6% (2021) to 9% (2022). It should also be noted that despite the global trend of rising/maintaining interest rates, the Bank of Mozambique recently reduced its reference rate (“Prime Rate”) from 24.1% to 23.5%, giving a sign of some stability in controlling inflation and improving the investment outlook for the main investors.

I would say that it was a choice, because these are the sectors of activity that are having and suffering the greatest impacts in terms of the current macroeconomic and geopolitical framework that exists throughout the world, of great uncertainty, and which have significant impacts on banks and insurance companies.

This is fundamentally why we decided to choose these two sectors of activity and obviously to contact these CFOs.

PM: What are the main trends and challenges facing the banking and insurance sector in the current climate?

Clearly, the trends and challenges we are seeing domestically are the same as those we are seeing globally, because of the effect of globalization and the rapid volatility in the markets. Although both sectors of activity are undergoing major changes, obviously the banking sector is moving relatively faster than the insurance sector because of the global macroeconomic framework we have at the moment. There is a constant updating and strengthening of regulations by supervisors, sometimes becoming much more complex, covering not only matters related to accounting standards and supporting the closing of accounts process itself, but also in other areas, namely issues related to the new paradigms of digital transformation, fundamentally banking digitalization, the creation of technological accelerators and the ESG agenda with new policies on sustainability, the latter clearly a concern identified by the CFOs of insurance companies.

These are two sectors that are very dependent on the macroeconomic development of the country as a whole and, therefore, they are articulating and adapting to the needs and the various changes imposed by the regulators themselves.

MP: What can be done to increase investment and transactions? And which sectors are of most interest and why?

EC: Looking specifically at the areas of banking and insurance, which were the sectors covered by the aforementioned survey, we are talking about a market with too many players, 31 banks at the moment, including 15 commercial banks, 12 micro banks and 4 cooperatives, and 16 insurance companies, including 2 in the life branch, 10 operating in the non-life branch and 4 mixed, for a level of financial and insurance operations that is not sufficiently dimensioned to the structure of the existing offer. Perhaps this is why there have been a number of mergers/acquisitions in the market recently, especially in the insurance market.

Even so, we are talking about a market that globally manages a volume of assets of around 900 billion Meticais (2022) and has generated global profits of around 30 billion Meticais, i.e. around 3% of Mozambique’s GDP considering 2021 figures.

Given the current market conditions and the recent developments arising from the current geopolitical situation, I don’t think there are any prospects for major new investments in the financial area.

There is a growing tendency for current players to invest in their businesses in order to adapt to new regulatory requirements, to improve the quality of information in information systems, which is the basis for decision-making, and to meet the challenges posed by digital transformation, forcing the implementation of technological accelerators.

An interview with Profile Mozambique by Moza Banco’s Director of Institutional and Protocol, Octávio Mutemba, highlights the institution’s different initiatives in terms of building financing solutions for 2024.

Profile Mozambique: Looking back over the last year, what were the most obvious challenges facing the institution and what measures were taken to overcome them?

Octávio Mutemba: In 2023, Moza Banco once again demonstrated its ability to overcome challenges, especially in a less favorable context of the global economic situation and the worsening of restrictive monetary policy at national level. The global economy saw a considerable slowdown as a result of preventive action by central banks to combat the general rise in inflation.

In Mozambique, the Central Bank increased the mandatory reserve coefficients for domestic and foreign currency liabilities from 10.5% to 39% and 11.5% to 39.5% respectively. This measure substantially reduced bank liquidity, adversely impacting the ability of banks in general to carry out their day-to-day activities with due normality. As a result, one of the banks’ most important functions, which is to finance the economy, was significantly affected, a reality that Moza was no exception to.

PM: Let’s talk about the main events that made a positive impact on the company and contributed to its growth during 2023.

OM: In 2023 Moza celebrated its 15th anniversary and launched the Faz Acontecer campaign, as a way of emphasizing the proactive spirit of Mozambicans who “Make it Happen” every day. In the meantime, several milestones have been marked over the past year, most notably the implementation of transformative initiatives to promote financial inclusion, particularly with a focus on the relatively more vulnerable social groups.

The implementation of the radio program “Conta com o Moza” is the result of Moza’s efforts to increase access to and use of financial services for more and more Mozambicans. Farmers, small traders, civil servants and state agents, students and low-income women represented the target audience for the first phase of the program, which took place in 5 Districts in the center and north of the country (namely: Derre, Memba, Murrupula, Chimbunila and Majune) where Moza is the sole banking operator, as part of the Presidential Initiative “Let’s Bank Mozambique – One District, One Bank”, There were a total of 12 editions that transmitted weekly and in local languages, concepts, good practices, security tips, among other useful information related to financial services and the management of personal finances. With this commitment to using predominantly local languages, Moza Banco became the first banking institution in Mozambique to adopt this approach to communicating financial content.

PM: What are the main goals and priorities for Moza Banco for 2024, particularly with regard to building financing solutions and its human capital?

OM: This year, Moza intends to continue investing in innovative and efficient solutions that will help create even more facilities for our clients and business partners. There are several projects underway in the financial and technological fields that will bring benefits to Mozambicans. We want to further strengthen the dissemination of some of the products and services created in previous years, in particular Moza Connect, which aims to integrate the Bank’s core system and the core system of companies to make life considerably easier for Mozambican entrepreneurs, especially when it comes to carrying out transfers in the comfort of the companies’ working environment and with economic benefit due to the reduced precariousness applicable.

In 2024, Moza will also invest in specific products for women, further strengthening our sense of universality as a Mozambican bank. Our big goal is to ensure that every Mozambican thinks of the name Moza when they want to sign up for any banking service or product. With regard to human capital, Moza has always prioritized the well-being of its employees, investing in various aspects that are crucial to the well-being of its employees and their families. In fact, in 2023 Moza was among the “best companies to work for in Mozambique”, according to a study carried out by Tempus Global. In 2024, we will continue to invest in our human capital, in health, education, training and in all aspects of the company.

PM: Are we going to have any concrete news in terms of Moza Banco’s products and services?

OM: A recent and noteworthy development for Moza is the signing of a Memorandum of Understanding with the European Investment Bank (EIB) to provide a EUR 10 million line of credit to finance small and medium-sized enterprises, with the main focus on women’s entrepreneurship. This line of credit covers all sectors of the economy and contributes to the country’s economic development.

The credit line in question will increase access to finance for women entrepreneurs and other small businesspeople who currently find it difficult to take out traditional credit due to the relatively penalizing interest rate environment.

There have been significant advances in the technology available to the banking industry and the entry of new players in this industry (Fintechs). Given these developments, how is Moza Banco positioning itself to respond to the technological challenges?

Since its inception on the national banking market, Moza has made a strong commitment to technology. In the light of the Bank’s strategic plan (2022 – 2026), an ambitious Digital Transformation programme is underway, aimed at integrating new technological support infrastructures and adjusting organizational processes across the board, allowing customers greater convenience, efficiency, transparency and security when carrying out their banking operations and bringing them even closer to our remote channels for providing services with quality comparable to the highest international standards.

On the other hand, Moza believes in advantageous partnerships to improve the customer experience when using banking services. This is why Moza enjoys interoperability with e-money operators, thus galvanizing its potential for contact with an unbanked public, with a greater incidence in the most remote districts of the country and without a physical presence of banks. In our view, fintechs can be the Bank’s partners in stimulating improved access to and quality of banking services nationwide.

PM: Taking into account the acceleration of digital transformation that we are seeing these days, with the adoption of digital platforms for interacting with customers and automations that promote process efficiency, what are the main impacts that can be expected on the Bank’s structures and what strategies are planned to support them?

OM: Moza is more than a bank with customers. It is a bank for customers.

For this reason, we strive to keep up to date with the various technological developments, process innovations and global paradigm shifts affecting the international, regional and national social, economic and political fabric, with an impact on the various economic sectors (which are increasingly interdependent), including banking.

In order to stimulate the organic adaptation of new technologies in the Bank, we are avid investors in the continuous training of our employees at national and international level. We participate in technological and innovation discussion forums in the region and around the world as speakers to share authentic experiences and knowledge with the various global players. As evidence of this way of being, Moza has even taken part in the 11th edition of the Webb Summit, the largest technology conference in Europe and the world, which has been held annually since 2009.

Also in 2023, Moza was represented as a speaker at the World Financial Innovation Series, held in Nairobi, Kenya, which is one of the African countries that has seen the greatest development in the digitalization of banking processes.