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Companies

Top 7 facts about the new Interswitch Block Chain Service (Supply Chain Financing Module)

The demand for blockchain-based services is on the increase globally, while the technology powering these services is growing at a rapid pace. The potential applications for blockchain technology are almost without limit

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Interswitch

The demand for blockchain-based services is on the increase globally, while the technology powering these services is growing at a rapid pace. The potential applications for blockchain technology are almost without limit. However, in Nigeria, there are still lots of misconceptions, doubts, and fears surrounding this technology.

A blockchain is a secure, shared distributed ledger. The deployment of blockchain technology ranges from digital wallets, identity management, cross-border trades, to remittances and supply chain finance.

Recently, foremost integrated digital payment and commerce company, Interswitch Group, in partnership with Microsoft Corporation, announced the launch of its innovative blockchain-based supply chain financing module. The Interswitch Blockchain Service (Supply Chain Financing Module) is built and hosted using Microsoft’s Azure blockchain technology which provides a proven security, compliance and scalable cloud platform that accelerates and supports the next generation of blockchain applications.

On this week’s edition of Product Review, we feature Top 7 Facts about this revolutionary new service, one of only four of its kind worldwide:

What Problem the Interswitch Blockchain Service Is Designed To Solve

This innovative platform was conceived to create a framework that allows for the speedy execution of contracts requiring bank guarantees, in a secure and transparent manner, for SMEs.

Prior to the launch of the Interswitch Blockchain Service, small businesses seeking financing to execute supply contracts, would usually spend an average of three months to secure bank guarantee and even get turned down eventually due to the lack of available verifiable funding history.

To solve this problem, the new platform digitizes the process between corporates and banks in providing trade financing to entrepreneurs and business owners in the supply chain sector. The service allows only the intended parties access to a supply chain transaction process with the different stages involved – from the bank guarantee request to approval, up to tracking the repayment by the customer.

The service also helps in streamlining the internal processes within the corporates and banks, which amount to the lag time responsible for the delay in processing these financial instruments. The platform will provide visibility for the different stages of a transaction to the repayment by the customer, reflecting the customer’s credibility by showing history and

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performance of the business. This means that a credible customer will have easy access to financing based on his credibility.

The Unique Value Proposition Of The Platform

  • The blockchain supply chain financing platform is different from existing corporate financing infrastructure in the following ways:
  • The service using blockchain technology provides visibility and a distributed data infrastructure among all parties involved in the transaction.
  • It effectively distributes data amongst the participating entities, while providing increased security, owing to its immutable attribute, which makes data hacking very difficult.
  • For transactions among different entities that need to share data, it provides some level of trust among entities that would normally not trust one another. The service ensures that the parties in a transaction have the same version of the truth.
  • Although blockchain technology is useful in solving problems of transparency and trust between entities, this provides a more secure infrastructure for storing data and is well suited to solve problems of ownership, as the owner of any asset can be traced and authenticated.

The Relationship Between Blockchain and Cryptocurrency

People often confuse these two terms. Cryptocurrencies are digital currencies that make use of blockchain technology to record transactions and are used to pay for digital goods and services, while blockchain is the underlying technology that enables recording of the transactions among different connected entities.

A good analogy is likening the blockchain technology to the Internet. While blockchain is the Internet whose technology enables functions such as Whatsapp, email, browsing etc, cryptocurrency will be seen as the Whatsapp functionality. What this then means is that blockchain is the overarching technology that enables these functions, while cryptocurrency is just one of the functions enabled by blockchain. So the Interswitch Blockchain Service is not a form of cryptocurrency!

How Business Owners And MSMEs Can Use The Platform

The small or medium sized business owner can access the technology through his/her bank (account officer). However, the small business owner is required to have an email address to which notifications and progress of operations updates are sent. Although this is not a mandatory requirement, it allows for easily monitoring by for the small businesses involved.

Benefits to Business Owners and MSMEs

  • As against waiting for two or three months processing period, the business owners can now have quicker access to finance from participating banks such as United Bank for Africa Plc (UBA), Guaranty Trust Bank Plc (GTB) and Zenith Bank Plc, because of the streamlined process.
  • They can also enjoy increased sales cycles from participating corporations such as the Dangote Group.
  • It also builds one’s credit rating, as the history is visible to all other partner banks which might also jostle to provide the supplier with the financing required because they can see the supplier as a more credible customer. Hence, one enjoys a better service and possibly lower fees, because the supplier can negotiate the best rates based on the number of banks willing to provide him/her with the finance.

How This Service Benefits The Nigerian Economy

This new service will allow more entrepreneurs to have access to finance, hence allowing them to scale their businesses. The cumulative effect of this can lead to more jobs, thereby driving economic growth for the country.

The Commendable Partnership Between Interswitch and Microsoft

The Interswitch Group, founded in 2002, is an Africa-focused integrated digital payments and commerce company that facilitates the electronic circulation of money, as well as the exchange of value between individuals and organizations on a timely and consistent basis.

On the other hand, Microsoft is an American multinational technology company with headquarters in Redmond, Washington, where it develops, manufactures, licenses, supports and sells computer software, consumer electronics, personal computers, and related services.

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Both companies share the same goal of providing infrastructure and technology to make life easier for their customers.

According to Interswitch, it intends to build a PAN African Payment network using blockchain technology to solve some of the cross-border trade and peer-to-peer money transfer challenges across Africa.

The Microsoft Azure platform provides a very secure platform and as a testimony to this, all banks and major corporates are already using Microsoft Azure today.

With this partnership, Interswitch will leverage the technologies provided by Microsoft to empower all its customers across Africa.

Fikayo has a degree in computer science with economics from Obafemi Awolowo University. ITIL v3 in IT service management. An alumnus of Daystar Leadership Academy. Prior to joining Nairametrics had stinct in Project management, Telecommunications among others. Also training in Consulting and Investment banking from Edubridge Academy. He has very keen interest in Politics, Agri-business, private equity and global economics. He loves travelling and watching football. You can contact him via [email protected]

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Companies

First Bank’s board replacement won’t affect profitability – Fitch

CBN’s remedial actions will not have a material effect on the group’s asset quality, profitability and capitalisation.

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Fitch Ratings has affirmed that the recent First Bank board replacement will not affect the bank’s profitability and asset quality, as it rates the bank at B- with a negative outlook.

This was disclosed by the rating firm via a statement seen by Nairametrics.

According to the rating firm, the development reflects its view that the impact of the Central Bank of Nigeria’s replacement of FBNH and FBN Ltd boards, the identification of corporate governance failings and the imposition of corrective measures are tolerable at the rating level.

What Fitch is saying

It stated, “We have assessed the near-term financial impact of these actions on FBNH and FBN and believe this is tolerable at the rating level, even though the final outcome is uncertain. In our view, any remedial actions imposed by the CBN, including a potential reclassification of related-party exposures as impaired, will not have a material effect on the group’s asset quality, profitability and capitalisation.

However, this does not consider any possible additional actions by the CBN, especially if FBN fails to implement the regulator’s corrective measures or if there were any further uncovering of corporate governance irregularities.

The Outlook remains Negative, reflecting FBNH’s pre-existing asset quality and capitalisation weaknesses as well as the group’s corporate governance weaknesses highlighted by the CBN. These could put pressure on the ratings.”

What drives First Bank’s rating

FBNH is the non-operating holding company that owns FBN. FBNH’s ratings are aligned with those of FBN (which represents around 90% of consolidated group assets) due to high capital and liquidity fungibility within the group, and low double leverage (at 95% at end-1H20) at the holding company level.

It added that FBNH’s IDR is driven by its intrinsic creditworthiness, as defined by its ‘b-‘ Viability Rating (VR). The rating, according to Fitch, considers the group’s exposure to Nigeria’s volatile operating environment and also factors in vulnerability in its capital position in the context of moderate earnings generation and asset-quality pressures, where headroom above the minimum regulatory capital requirements is also moderate. Capitalisation is a factor of high importance to VR.

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“The new boards appointed to FBNH and FBN comprise individuals with sufficient experience and expertise. However, we view such major change as hugely disruptive. There are no changes in FBNH and FBN’s executive management team.

“We believe the governance shortcomings cited by the CBN reflect poorly on FBNH’s reputation and on the group’s governance and control practices. As a result, we have revised down our assessment of FBNH’s Management and Strategy score to ‘b-‘ from ‘b’.

“We also assigned a negative outlook to this factor, which reflects the uncertainty surrounding additional remedial actions that the CBN may impose due to these related party exposures as well as the potential for further uncovering of governance irregularities. It also captures the lack of track record of the new board and its ability to restore confidence in FBNH and FBN,” it added.

Asset quality remains a rating weakness. FBNH reported an improved impaired loan ratio of 7.9% at end-1Q21 (end-2020: 7.7%). However, FBNH’s reported reserve coverage of 54.5% at end-1Q21 (end-2020: 48%) remains significantly weaker than domestic peers’.

“Our assessment indicates that if the related-party loan highlighted by the CBN were classified as impaired, the ratio would be unlikely to be above 10% (excluding any new impaired loan generation from ordinary business),” Fitch added.

What you should know

On 29 April 2021, the CBN removed the non-executive directors on the boards of FBNH and FBN and replaced them with new individuals appointed by the apex bank, according to Nairametrics.

The CBN gave a series of reasons for its action including the unjustified and unapproved change of the bank’s MD/CEO by the former board, corporate governance failings pertaining to long-standing insider loans that were affecting the bank’s capitalisation and failure to comply with regulatory directives.

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Appointments

Airtel Nigeria announces appointment of Surendran as new Chief Executive Officer

Airtel Nigeria, has announced the appointment of Mr C. Surendran as the new MD/CEO with effect from August 1, 2021.

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Like MTN, is Airtel Nigeria considering listing?

Telecommunications giant, Airtel Nigeria, has announced the appointment of Mr C. Surendran as the new Managing Director and Chief Executive Officer with effect from August 1, 2021.

Surendran would be replacing the outgoing Managing Director and Chief Executive of Airtel Nigeria, Olusegun Ogunsanya, who has been elevated to the position of Chief Executive Officer of Airtel Africa Plc with effect from October 1, 2021.

According to a report from the News Agency of Nigeria, this disclosure is contained in a statement issued by Airtel on Wednesday, May 5, 2021, in Lagos.

READ: Airtel Africa signs new $500 million loan with Bank of America, HSBC, others

The statement says that Surendran would also be appointed to the Executive Committee (ExCo) as Regional Operating Director, reporting to the CEO of Airtel Africa plc, and onto the Board of Airtel Networks (Nigeria) Limited.

Airtel in its statement said, “Surendran has been with Bharti Airtel since 2003 and has contributed immensely in various roles across customer experience, sales and business operations.

He was the Chief Executive Officer of Karnataka, which is the largest circle in Airtel India, with over one billion dollars in revenue.

Surendran delivered an exceptional performance with significant movement in Revenue Market Share (RMS) over the last few years, currently at 54 percent. He has over 30 years of business experience, including 15 years at Xerox.’’

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Airtel said that Surendran would transition into his new role from June 1, 2021, and spend the time onboarding into the business until July 31, 2021.

READ: Meet the latest billionaires on the Nigerian Stock Exchange

In case you missed it

It can be recalled that a few days ago, Airtel Africa Plc, a leading provider of telecommunications and mobile money services in Nigeria and 13 other countries, announced the appointment of Mr Olusegun Ogunsanya as the new Chief Executive Officer, following the notice of retirement given by the current Managing Director/Chief Executive Officer, Raghunath Mandava, to the Board.

In the notification sent by Airtel Africa to the Nigerian Exchange, Ogunsanya is expected to join the board of Airtel Africa with effect from October 1, 2021.

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