When Partech Africa disclosed in March 2019 in its report that at least 33% of total funding raised by African tech start-ups in 2018 was in the fintech sector, a lot of critics wondered where the funds are meant for.
No doubt, part of the fund must have been invested in their operations including infrastructure development. But some of the financial technology (fintech) startup firms have used their funds to disrupt the lending industry as they are determined to ease the burden of lack of access to fund experienced by several millions of Nigerians.
The good news is that a lot of them offer cheap, affordable loans, which come quite fast as they are disbursed a few minutes after application, without collateral.
Some of them are Carbon (former Paylater), Paystack, Okash, Kudi, TeamApt, OneFi, Lidya, Kwikmoney, Page and Renmoney, among others.
These firms have broken the norm, putting the commercial banks on their toes as they offer loans at interest rates as low as between 5% and 12% monthly, depending on the risk involved. Some of them offer loans on USSD platforms.
Nairametrics looks at these fintechs’ loan products and their interest rates, to help depositors make informed decisions while taking the facilities across the nation, at cheaper rates than most banks.
Carbon, one of Nigeria’s foremost digital financial services companies, launched a digital platform, Carbon for Business, last month to provide startups, small and medium-sized enterprises (SMEs) with credits and technology required to build and scale their businesses.
What it means: The company’s clients can now access uncollateralised credit, secure online payments, reliable funds transfer and fast know your customer (KYC) compliance obligations. Businesses can take advantage of Carbon’s infrastructure to achieve business objectives and strategic goals, boost their value offerings and get to market faster.
- Offers adequate security for its users.
- It has Carbon IV, which is an identity verification system that enables businesses perform KYC and anti-money laundering services on prospective staff or other parties.
- It is integrated with all major identity databases including passport, Bank Verification Number (BVN), driver’s license and voter’s card.
- It offers Optimus, an affordable and reliable funds transfer platform that provides low-cost transfers.
- For qualified businesses, it provides an overdraft facility that allows customers short-term funding needed to make critical payments during short-term cash shortages.
- Businesses will be able to accept online payments from Visa, Verve and MasterCard in over 40 currencies.
- All transactions are PCI DSS compliant, 3D Secure enabled, and processed through an SSL encrypted channel.
- Users can access up to ₦20 million uncollateralized flexible repayment loans.
Kwikmoney is a product offered by Mines, a global technology company which has developed a digital platform that enables institutions in emerging markets to offer credit products to their customers with ease and minimal risk.
It offers loans on the USSD platform in partnership with banks like GTBank, Fidelity Bank, and technology companies. Kwikmoney is one of the most effective and convenient ways of getting quick and instant loans in Nigeria.
- Documentation – None
- Interest – From 5%
- Tenure – 14 – 30 days
- Borrow, repay before end of loan tenure, earn increased loan offers, lower interest rates.
Renmoney’s existing and potential customers can get loans up to N4 million that can be repaid within a period of nine months without tendering collateral or a guarantor, or post-dated cheque leaflets.
To access loans from Renmoney, there are certain conditions to meet. They are:
- Applicants are expected to be between the ages of 22-59.
- Have a steady source of income with a functional current or savings bank account and a valid means of identification.
- Provide verification of monthly income and a report of previous loans from a credit bureau.
- Interest rate of between 4% and 4.5% per month. For instance, a N70,000 loan would be worth N83,690 in a 4-month repayment plan.
- BVN, Bank statement, Valid ID card, Employment letter.
- Loan tenure: 3 to 12 months.
- Repayment channels: Quickteller, cheque, POS, Cash and Online transfers.
Page Financials is an innovative retail financial institution offering various quick personal and salary advance loans to meet the financial requests of customers.
Here, it requires six steps to request a loan and the first one is inputting your BVN details. For its loan, Page Financials at a competitive interest rate. that is not all. Page Financials also has a sister company, Pledge Salary Advance Virtual Wallet, which also offer loans.
The initiative is a financial product that bridges unexpected expenses and short-term financial needs. It is acceptable on all POS and ATMs in Nigeria. Interested patron can access funds via our mobile app as the virtual wallet is convenient and solves all quick financial needs.
- The interest is charged daily based on what you use – you won’t be charged for not using the wallet
- We do not require utility bill, just office ID, any Govt issued ID and passport photograph
- Repayment channel is Remita and Direct Debit
- There’s no loan tenure (You pay monthly when you use the wallet & gets credited again – Pay As You Use)
In its case, Opera acquired the service from OPay in December 2018 for $9.5 million, but the service is still being promoted in Nigeria on the OPay app.
“OKash’s business (in Kenya, Nigeria, and everywhere) which relies heavily on mobile processors as Opay is also helping OKash disburse and collect loans at cheap interest rates.
Aella credit is an app-only easy and quick loan platform. It is designed to help employees access funds between N1,500 and N700,000 at interest rates between 4% and 29% monthly.
Aella credit is available in Ghana, Nigeria and the Philippines.
- Requirements: BVN
- Platform: Mobile App
- Interest rate: 4 – 29%
- Loan tenure: 1 to 2 months
- Repayment channels: Direct debit
The Wisdom behind Jaiz Bank
Not only have these business magnates from the northern part of the country created something of an oligarchy, they also obtained the backing of Saudi Arabia’s Islamic Development Bank.
The idea of taking out loans without interest rates as the future of banking might still sound as foreign as flying cars to many, but it is already in motion.
Currently, there are over 300 Islamic banks in over 51 countries, including the United States. In Nigeria, Jaiz bank stands at the forefront of this revolution. The bank was created out of the former Jaiz International Plc, which was set up in 2003/2004 as a Special Purpose Vehicle (SPV) to establish Nigeria’s first full-fledged Non-Interest Bank.
Jaiz and its unconventional Banking methods
With Islamic banking, there are two main peculiarities and none of them confer a bias on only members of the religion. The first is the sharing of profit and loss, and the other is the prohibition of the collection of interest as stipulated in Islamic law – otherwise regarded as “riba.”
Both concepts feed off each other in that to augment the lack of interest gains, equity participation is employed. In other words, the borrowing business will pay back the loan without interest and also give the bank a share of its profits.
Jaiz bank is the first non-interest (Islamic) bank operating in Nigeria. Being that Islamic banking is grounded in Sharia or Islamic principles and morals, the financial institution does not support businesses that could impact the society negatively.
So even as it finances business, and shares their risks and profits accordingly, it does not partner with businesses involved in betting, alcohol, and so on. Needless to say, their methods have served them well.
From being founded in 2003, to 2011 when it received a license from the CBN to operate as a regional bank, to its official commencement as Jaiz Bank Plc in 2012, the institution has expanded its services exponentially.
Today, the company is owned by over 26,000 shareholders who are spread over Nigeria’s six geopolitical zones and its balance sheet has grown from N12 billion in 2012 to about N62 billion, with asset financing of over N30 billion. The bank operates 27 branches and has a full service range of offerings.
The force behind
Behind the bank’s recorded success is a strong shareholder base, spread across one foreign shareholder, 108 Institutional, 220 Corporate, 26,157 Individuals, 156 Joint, 6 States and 106 Local Government shareholders.
However, seven major shareholders control a total of about 65% of the total share capital of the bank. They include: Dantata Aminu Alhassan having 5.24%, Altani Investment Limited with 7.47%, Dangote Industries Ltd wit 8.48%, Islamic Development Bank (IDB) with 8.50%, Indimi Muhammad with 9.28%, Dantata Inv’t & Sec. Ltd with 12.49%, and, former minister, Mutallab Umaru Abdul with the highest stake of 13.50%.
Not only have these business magnates from the northern part of the country created something of an oligarchy, they also obtained the backing of Saudi Arabia’s Islamic Development Bank.
Whether or not the oligopoly poses a threat to the corporate governance and decision-making power of the rest of the bank’s shareholders is a question that can only be answered based on the happenings that arise.
The Managing Director of the bank, Hassan Usman, had however noted that “fundamental to the vision and mission of Jaiz Bank is to create wealth for MSMEs.” He also assured all that the bank is set to ensure maximum benefits is attained by all stakeholders.
Performance and Investment Outlook
The company has done well in building up funding to keep its operations afloat especially given its style of banking. Just last year, it had secured a N3 billion financing facility from the Bank of Industry (BOI) to boost and develop their operations and give zero-interest loans to Micro, Small and Medium Enterprises (MSMEs) within the country.
The company’s performance has also been noteworthy. In 2019, the company declared a profit after tax of N1.79 billion which was a 114% growth as compared to the N834.36 million recorded at the end of 2018.
The company is on a growth trajectory; currently, with its low share price of N0.66 on a 52 week average of 0.34 and 0.82, it is a convenient buy.
With a price-to-earnings ratio of 9.27, it shows good signs of growth. Its model might just be the thing to spur economic growth as its result-based gains will not just increase the income of the bank but also aid the growth of small businesses within the nation.
Nigerians now seeing CBN Intervention funds as audio money
Despite the rhetoric, majority of Nigerians are still wary of the so called N1 trillion intervention fund.
When the COVID-19 pandemic came with all her fangs, world leaders swung into action with the creation of intervention funds and palliatives to ease the burden of the average citizen.
In Nigeria, asides the palliatives of foodstuff given by state and federal governments alike, drums were rolled when the Central Bank of Nigeria disclosed its support for critical sectors of the economy.
The apex bank first initiated a fund of N50 billion soft loan to small businesses. The N50 billion Targeted Credit Facility (TCF) was to serve as a stimulus package to support households and micro, small and medium enterprises (MSMEs) whose economic activities have been significantly disrupted by the COVID-19 pandemic.
The financial institution for the scheme is NIRSAL Microfinance Bank (NMFB) and the interest rate under the intervention was fixed at 5% per annum (all-inclusive) up to February 28, 2021, and thereafter, the interest on the facility shall revert to 9% per annum (all-inclusive) as from March 1, 2021.
Next, it increased its intervention by another N100 billion in loans to support health authorities to ensure laboratories, researchers, and innovators work with global scientists to patent and produce vaccines and test kits in Nigeria so as to prepare for possible crisis ahead.
Finally, it increased its intervention in boosting local manufacturing and import substitution by another N1 trillion across all critical sectors of the economy.
Despite the rhetoric, majority of Nigerians are still wary of the so called N1 trillion intervention fund. The CBN is yet to issue any policy guideline for its implementation and failed to provide further details in its monetary policy committee meeting held last week. This has led many to start to view these promises as “audio money” a social media term for financial promises that are never fulfilled.
The journey thus far
The Nigeria Incentive-based Risk Sharing System for Agricultural Lending (NIRSAL) Microfinance bank, on behalf of the Central Bank of Nigeria (CBN), has started the disbursement of the N50 billion Targeted Credit Facility (TCF) to the beneficiaries. As at April, it noted that it had received over 80,000 applications for the facility, out of which 40,000 of them were households.
As expected with such funding, the sentiments have been both positive and negative. While some have said they have gotten the funds, others have complained incessantly about the various challenges encountered in the process of obtaining or applying for the loans. Pockets of tweets revealed the general struggles of obtaining the loans. Several applicants have complained about not being able to open accounts or access the facilities and others have complained about making inquiries without responses.
Bola Murtala explained to Nairametrics that “I applied online around the 30th of April, filled out the forms, and submitted. After I got a reply in my email that my application has been received, but then I haven’t heard back from them since then. I wouldn’t know what’s going on but I have seen people who say they got an approval. How far it is true, I wouldn’t know.”
Another applicant, Okey Adinde, said “I applied and received a message telling me that I will be contacted if there was any other document required and if I didn’t send that document after 72 hours after the mail, my application will be declined. Since then, I have not heard from them.”
One Twitter user also complained about being asked to tender collaterals even though the loans do not require any.
Clearly, the program is not without its own hiccups. During an interview with Channels TV, the Managing Director of NIRSAL Microfinance Bank Plc, Abubakar Kure, explained that the nationwide lockdown and restrictions had a major challenge to the smooth processing of the facility. Yet, on the company’s website, it claims to have disbursed over N25 billion and going.
However, there are positive comments too:
Fidelis Ayebae, the chief executive officer of Fidson Healthcare Plc. explained that his company had received N2.5 billion from the central bank’s coronavirus intervention fund. Dollar scarcity and a weakening naira had heightened the inflation on inputs of many pharmaceutical firms in the country.
“You now have a situation where nobody is holding letters of credit, no manufacturer is getting anything from their suppliers abroad because even the ones that we owe, we are not able to pay,” said Ayebae, who also heads the 180-member pharmaceutical group of Nigeria’s manufacturers association.
In truth, sentiments on the program is still burdened with the same lack of faith and trust in systemic leadership and Nigerians have had their fair share of disappointments. Even as the CBN and NIRSAL have set off on a good note by augmenting businesses and individuals in key areas to withstand the impact of the pandemic, the need for transparency cannot be overemphasized.
By employing tighter systems, particularly in the area of customer relations, while also clearly disclosing its activities, the system will assuage the fears of Nigerians whose faiths have been battered by deceptive leadership amongst others.
It is only then that they’ll know for sure that the days of audio money are over and that its leaders can be trusted.
Analysis: Total Nigeria needs a financial overhaul
Total Nigeria’s Q1’20 results are a testament that some might have it worse than others as it recorded a revenue drop of 9.3% to N70.2 billion
The Oil Industry has had a particularly tough year, owing primarily to the novel pandemic. The International Energy Agency (IEA) predicts that the global oil demand is expected to further decline this year as Covid-19 spreads around the world, constraining travel as well as other economic activities.
Organizations like Total depending on international trade will be forced to scale down operations until restrictions ease off. However, Total Nigeria’s Q1’20 results are a testament that some might have it worse than others.
The period recorded a revenue drop of 9.3% to N70.2 billion in the first quarter of this year compared to Q1 2019. Total earns its revenue from three main sectors namely: Networks, General Trade, and Aviation. Revenue from Aviation fell by 39.5%. The decline in Networks is attributed to the reduced demand as a result of the enforced lockdown and restriction on travel across the nation.
Yet, it is clear that the company had its own challenges pre-COVID-19. In the quarter, it attained a loss after tax of N163 million which was 65.6% better than the loss after tax of the comparative quarter; it is overwhelmed by a myriad of distinct issues.
First off, its revenue has experienced a steady fall over the years; reasons for this is tied largely to its lack of importation of petroleum products.
It is also burdened by inefficiencies in its operations evident in its high operational and direct expenses, as well as its high debt over the past years. The company has carried on huge loans and borrowings in its books: N40.6 billion in 2019 and only a marginal reduction of N2.2 billion in the current year.
Even higher are its expenses after an 8.38% reduction in the just-released results, it arrived at N69.7 billion for Q1 2020. Amongst its high operational expenses is the high and increasing technical fees it pays to its parent company. From N251 million in the first quarter of last year, it incurred around N700m in the year under review. It also has cash flow issues with about N22b in negative cash and cash equivalents. In its 2019 report, it revealed that the year had been tough with its cost of doing business rising exponentially as evident in its interest expense, 395% higher than the previous year as a result of repayment for products and a high level of borrowing.
The company, in its last full year annual report, noted that to make significant savings to both operational and capital expenditure costs, a series of initiatives relating to cost efficiency, process optimization, and significant reduction of working capital requirement and finance costs, were put in place and are in motion for this year.
As Dr. Fatih Birol, IEA’s Executive Director put it “The coronavirus crisis is affecting a wide range of energy markets – including coal, gas, and renewables – but its impact on oil markets is particularly severe because it is stopping people and goods from moving around, dealing a heavy blow to demand transport fuels.”
However, Total’s position goes beyond the impact of the pandemic. Its rebound rests on its ability to carry on with cost control and lower debt commitments, together with the speed of the containment of the virus. That said, the company might need to raise capital soon while also coming up with formidable strategies to strengthen its business model.