Hopewell Radebe
18 September 2008
Lagos — AltX-listed Blue Financial Services (Blue) yesterday opened its new operation in Nigeria's commercial capital of Lagos almost six months after announcing plans to tap into the country's unbanked market.
Blue entered the Nigerian market through a partnership with one of the country's largest banks, Intercontinental Bank (ICB).
The partnership was established after Nigeria's central bank launched the Micro-finance Policy and Regula-tory Framework in December 2005. The policy framework is aimed at providing a conducive environment for the provision of sustainable financial services to consumers not adequately served by the existing formal financial system.
Blue's presence in Nigeria brings to 12 the number of countries in which the company is operating, with 175 branches and more than 2 000 employees.
Blue CEO Dave van Niekerk said the company's expansion in Africa had been through starting operations from scratch, owning businesses entirely, or buying existing companies. But in Nigeria, the company decided after doing research that it made sense to enter the market through a partnership with a local bank.
The Nigerian venture was capitalised at $21m, with more resources expected from other investors. "The partnership has allowed us to hit the market running, with the availability of much bigger financial resources and the world-class fingerprint identification IT system that will make it easy for the bank to ensure security, eliminate fraud and help build up credible customer profiles, " Van Niekerk said.
Blue would take advantage of ICB's 300 branches to open kiosks to market its products, including personal loans, insurance and mortgage finance.
At least 17 kiosks were opened in the past two weeks, with a staff of 34. The plan is to open 70 by February.
Intercontinental Bank CE Erastus Akingbola said the partnership would help Nigeria achieve its objective of stimulating economic growth and ensuring the stability and viability of small and medium-scale enterprises.
The partnership with Blue was promising, and the two partners were exploring a joint venture in Ghana, where ICB was already operating.
Nigeria has largely been a cash-based economy with an underserved and unbanked microfinance market.
Although there are 24 banks in Nigeria, it is estimated that less than 10% of lending is to individuals. The average bank density is one outlet for 32700 people in urban areas and one for 57000 people in rural areas.
Nigerian banks concentrate mainly on deposit taking and savings accounts. Customers are constrained by requirements to have existing products with a bank before qualifying for further offerings. About 60% of the economically active population is serviced by informal players such as nongovernmental organisations, micro finance institutions, moneylenders, friends and credit unions.
Blue's acquisition of Future Finance, establishment of operations in Lesotho, Malawi and Namibia, and its expansion of operations in Botswana and Zambia have helped fuel its performance. It said in May that it had lifted full-year profit 88%, with its loan book increasing 132% from R207m to R482m while earnings per share increased 37% on the previous year.
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