Published: October 15, 2008
Nigeria’s biggest bank and a South African mass-market lender have joined hands with an American investment firm to form Africa’s single largest micro-lender, in a deal worth US$80mn, a top representative of the investors told emeafinance in an interview in October.
The venture Blue Intercontinental Micro Finance Bank (BIMFB), launched in early October in Nigeria, was sponsored by South Africa’s Blue Financial Services (Blue), which controls 55% of the business, Nigeria’s Intercontinental Bank (ICB) with a 35% interest, and the US- based AIG Capital Partners (AIG) which holds 10% in the company.
Blue Financial Services CEO Dave Van Niekerk tells emeafinance that the decision to launch the company in Nigeria was a culmination of two years of in-depth research and an extensive search for the right partners. “The ICB has built up its brand equity over 18 years in the market and is ranked as the second fastest growing bank in the world and the fifth largest in Africa. AIG is already a partner of ours and it has an established presence in Nigeria,” he says.
Blue Financial Services, which is headquartered in South Africa and the largest financial services firm listed on the alternative exchange market (AltX) of the Johannesburg Stock Exchange (JSE), operates in 12 African countries including Botswana, Zambia, Tanzania, Uganda, Kenya, Lesotho, Malawi, Namibia, Uganda, Nigeria and its home-base South Africa.
Van Niekerk says the BIMFB would market, distribute and sell micro-finance products through ICB’s 280-strong branch network in Nigeria.
A recent study by the Nigerian central bank shows that the banking sector in the West African nation, with an estimated population of 150mn, is “significantly under-served and unbanked” and with limited product offerings. It also shows that although there are more than 25 banks in the country, less than 10% of their lending is targeted at individuals.
“The average bank density is one outlet for 32,700 people in urban areas and one outlet for 57,000 people in rural areas. The Nigerian banking industry concentrates mainly on deposit taking and savings accounts, and consumers are constrained by requirements to have existing products with a bank before qualifying for further offerings. These limitations have led to around 60% of the economically-active population having to be serviced by informal financial sector players such as non-governmental organisations, micro-finance institutions, moneylenders, friends, relatives and credit unions,” Van Niekerk says.
He says the Central Bank of Nigeria has recently launched its National Micro-finance Policy and Regulatory Framework to provide a “conducive environment” for the provision of sustainable financial services to consumers that are currently not adequately served by the existing formal financial system.
Van Niekerk says the BIMFB venture would tap into the potential of both a heavily unbanked market and the progressive reforms in the financial services sector of the oil-rich nation. “We will be able to use Blue’s proven collection and credit scoring methodologies as well as its processes and procedures that have been specifically refined for the African market. ICB will provide invaluable local partner expertise as well as a significant footprint in excess of 200 branches across all states.”
AIG Capital Partners, which is a shareholder in both Blue and ICB through the AIG Global Emerging Markets Fund, played an instrumental role in facilitating the partnership between Blue and ICB. “The new business has been capitalised by shareholder contributions to the extent of US$80mn in this market where barriers to entry in this market are quite high and regulatory costs can be significant as a financial services licence application costs approximately US$8.6mn,” he says.