Prospects of the Application of Total Quality Management (TQM) Approach on Commercial Banks in Sudan

Abstract

Total quality management as a set of principles aims at transforming an organization into one capable of achieving success is gaining worldwide popularity. TQM means commitment to excellence in product and service and putting your customers both internal and external in all for do to meet their requirements. It includes all of the fundamental management techniques. Quality is key to profitability and there is correlation between customer satisfaction and quality. Satisfied customers not only bring return to the business, they represent powerful advertising force. Likewise dissatisfied customers not only become customers for competitors, but also represent negative advertising force. One of the major challenges for banks would be continuously meet the changing and rising expectations of the customers who are in fact becoming aware of top-notch services that meet their present and future needs and expectations. In view of the increasingly competitive environment it is becoming increasingly imperative for banks to provide top-notch services that match if not excel the offerings of competitors. The objective of this study is to examine the prospects of the application of TQM on Sudanese Commercial Banks. The structure of banking sector in Sudan is Consists of The Bank of Sudan at the top of the hierarchy as the central bank responsible for controlling and stabilizing the banking and monetary system of the country. It has the supervisory role over all banks operating in the country. Beside the central bank there are 26 commercial and specialized banks which are public sector banks (5 Banks) joint banks (19 Banks) and (3) branches of foreign banks and banking financial intermediaries. Due to the special intermediaries nature of Islamic banking as the case of Sudan, the Sudanese commercial Banks are facing problems to accomodate with the international standards criteria. Some examples of the these problems are : 1- Capital adequacy standard according to Basel Accord. 2- Lack of transparency and certain disclosures related to investment account. On the other hand there are the problems related to the over banking condition (225 branches of public sector Bank) and (323 branches of joint banks). There is also the aggravation problem of non performing loan (N.P.L), week innovative utilization of advanced banking technology, and signs of poor management skills where the proportion of expenses to revenue is far above the optimal level. It is likely with the recent banking reform and restructuring programs the Sudanese commercial Banks be competitive and most of the above problems be overcome. In this regard The Bank of Sudan, to accommodate the special nature of Islamic banking into capital adequacy standard (Basel Accord), amended some of the risks, weights by introducing other risk weighs that are unique to Islamic banks .e.g commodity bought and sold by Salam, and goods purchased for trading purposes. The Bank of Sudan now is proceeding to apply the capital adequacy standard according to the model of the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI). The use of International Accounting Standards (IAS) is designed to help transparency and enable comparative analysis, but (IAS), do not go far enough where they concern Islamic Financial institutions, necessitating the more specific role of Islamic accounting standard. Therefore Sudanese bank adhere to (AAOIFI) in issues of accounting, auditing, governance, ethical, Sharia rules for investment and financing instruments. Administrative and financial penalties on banks that do not adhere to it is exercised. The Bank of Sudan optioned commercial banks either merger or increase of capital in order to solve the over banking condition and creation of huge banking identities. To solve the problems of non performing loans The Bank of Sudan stringent policies and rigorous professional management exercised by commercial banks reduced loans to an appreciable level –though not reached the optimal international standard-. As the results The Bank of Sudan policies, Sudanese commercial Banks by the end of 2003 recorded progress as shown below: Indicators 99 2000 2002 2003 1- Capital adequacy 6.5% 7% 8.8% 10% 2- Non performing loans 23% 16% 12% 11% 3- Assets in (SD billions) 444 357 635 789 4- Expenses/ Revenue 86.5% 65% 55% 48% 5- Profits (SD billions) 2 5 13.8 30 6- Credit and finance (SD billions) 47 79 172 357 7- Deposits (SD billions) 145 199 366 436 Source : Bank of Sudan.

Other further pending problem of Sudanese commercial Banks is that in the absence of international Islamic Money Market they face serious liquidity constraints. This is because they cannot borrow from the international money markets which extend retard interest bearing loans. Also there is competitiveness problems of Sudanese commercial Banks with other external conventional banks where dealings and transaction are based on interest rate. Also Sudanese commercial Banks need personnel adequately trained in Islamic Finance and well acquainted with both economic and Sharia aspects of banking business. Finally there is the problem of how to manage risks in the absence of international financial engineering products like securitization, and financial derivatives. The most important finding of the study are that some of the positive elements which make up TQM environment are exercised by the surveyed ed banks. This is natural because TQM philosophy does not mean to cancel all the existing issues and start from the scratch. TQM includes all fundamental management techniques. Some of its positive elements are inherent in the existing traditional management. But the emphasis of TQM is on continuous improvement. Existence of these elements doesn't mean that adequate comprehension and consciously proceeding to apply TQM approach by Sudanese Commercial Bank is exercised. In fact Sudanese Commercial Banks lack other more essential elements of TQM philosophy such as measuring of customer's satisfaction (both internal and external) vide various measuring methods in order to meet their present and facture requirements and needs. Also Sudanese Commercial Banks lack method of measuring their employees attitudes and the impact of job satisfaction on productivity. The employees are not well acquainted with TQM concept as prescribed by ISO. In view of the above the researcher recommends focusing on customer satisfaction vide real measuring and creation of clear relationship with them to retain their loyalty and avoid transferring to competitors. In this regard, the impact of poor quality and customer's dissatisfaction on bank's profits and reputation should be disclosed. As far as employees are concerned, it is recommended to create team spirit and harmony among them and between departments. There is need for real measurement of staff performance and un- leach the creativity talents and energy of the vast majority of employees. There is need to get people and culture aligned with the strategy of the bank so that every one in the bank is committed as those who formulated it. Finally the researcher recommended encouraging commercial banks accreditation to international standard (ISO). As Sudanese Commercial banks have been slow to enter era enlightened TQM approach; training in methods and step by step procedures to apply TQM approach is highly demanded. This can be done with the help of the institutions or identities engaged in quality field- to encourage spirit of competition among banks, the researcher recommended creation of a prize for the excellent performance of commercial bank in Sudan