Prince Kofi Amoabeng co-founded lending company UT Financial Services in 1997, helped oversee its conversion into a bank about 10 years later, and is now CEO of UT Bank Ghana and president of UT Holdings.
His path to banking was a winding one that went from service in Ghana’s military to diverse industries.
“I was into timber, sawmilling,” he said at a recent event sponsored by the Stanford Institute for Innovation in Developing Economies (SEED). “I was doing imports of wine, floor tiles. I was in the air-conditioning business, I was teaching at the Ghana stock exchange, I was in the oil business, both downstream and midstream. And a lot of the businesses, I failed in them. But I learned my lessons in them and moved on.”
He spoke at Stanford GSB about how his entrepreneurial roots led him to the financial industry, and what he’s learned growing his lending company from a startup with $20,000 in assets to more than $550 million as of Dec. 31, 2013. While in California, he also met with leaders from Stanford and Silicon Valley's entrepreneurial community.
Here are key takeaways from Amoabeng’s talk.
When the system fails you, build a new one that works:
[Early in my career,] anytime I went to the banks with a good business opportunity, the banks were not there for me. Either they wasted so much time that I’d lose the business completely, or they’d approve [a loan] and tell me, “OK, you applied for $20,000 but we can give you $3,000.”
I had a good degree in business, I was a charted accountant, I was even teaching at the stock exchange, and I had done business for 12, 14 years, and I was an ex-military man so I was quite disciplined. And I still couldn’t raise money. I said, “Wait a minute. If I can’t raise money from the banks, then I’m wondering who else can’t raise money from the banks.” I decided there is a serious gap here, and I should look at providing financing for the small and medium enterprise sector, that is, people like me.
In economies of Africa, about 80% of businesses fall in the informal sector – basically SMEs. I was reflecting, a bank is a formal institution with so many years of development. There’s a disconnect: How can a formal institution serve an informal setup? So I said, let’s form a company and see how we can lend to this huge informal sector, because the banks are failing them. And that is how the UT story began.
Be careful who you fire (and hire):
In Ghana, we don’t have addresses. So if you’re trying to lend, you must find your own ways of identifying where your clients’ houses are, because the roads are not named, and the houses aren’t numbered.
One day, I heard that some of my staff, about eight people at the time, had collected money and shared it among themselves. I got so mad that I sacked everybody. So from a staff of eight, we went to a staff of one – myself. But I was thinking, how do I know where the debtors live? The people who knew where the debtors lived had all been sacked.
I didn’t have a choice. I had to eat humble pie, call two people and give them a strong warning [to never take money again], but I had to give them another chance.
Immediately I pulled the team into a room and said, “We’re going to learn how to sketch from one point to another point. If you go to a client, you find a point that can be referred to easily and you will sketch from that point to the house of the client.”
It’s not only about addresses. Anytime we found a problem, we had to sit down, strategize, and see how we could mitigate the risks.
True passion is multi-dimensional:
To have passion for anything that you’re doing, you must have two types of love. One is love for people – you must respect other people and want to see them develop. The second love is for a service or product. It may not come now. But as you try your hand in businesses, you will find a product or service and fall in love with it, what it can do for people. You say, “This is what the people I love need.” You match those loves, and in the intersection is where you have passion.
I would wake up in the morning, and I knew what these loans would do for people and their families and workers, and for eight years I didn’t go on one day’s leave. When the company was 15 years old, I went on leave – 15 days for 15 years.
To learn more about the UT story and how Amoabeng navigated other startup challenges (including reimagining the lending process to offer loans within two days), watch the video.