Development Finance Institutions (DFIs) do not get the best press. When the markets are in good shape, they tend to be taken for granted and their efforts are reported in the shadow of hedge funds and Wall Street investment banks. When those markets tank under the pressure of shocks such as COVID-19, they come into their own because they do not cut and run. Being policy vehicles of governments in advanced economies, their mandate is to maintain their programmes and presence wherever possible.
This was one of our observations after listening on Wednesday (29 July) to a webinar on ‘Development Finance Institutions: Regenerating Resilient Finance post-COVID’. It was one of a very useful series put together by a prominent London-based business platform for the continent.
Franziska Hollman, Director for Africa at Germany’s DEG, said that her company provided grants for 25 consultancies at a total cost of €7m to support their clients in the early days of COVID-19 and carried out 200 quick assessments for the same on restructuring needs in the face of COVID, if any. The DFIs have become active in what the industry terms “non-technical support”.
At the outset, there were some challenges for regional DFIs. Micheal Awori, chief operating officer at TDB (Trade and Development Bank, formerly the PTA Bank), noted that some global correspondent banks pulled back from financing Africa trade. His company had to make alternative arrangements to plug the gap.
Mohan Vivekanandan, a senior executive at the Development Bank of Southern Africa (DBSA), recalled how he had been told in March that a large increase in non-payments and a tightening of liquidity in the rand market were coming. The bank was able to tap liquidity available at KfW, the German state-owned development bank and parent company of DEG, and its French counterpart. We should note that the DBSA is not a small operation since it disburses about US$1bn annually for long-term infrastructure projects in southern Africa, of which about 40 per cent is outside South Africa itself.
The cause of digital, and IT generally, has been advanced by COVID-19. Awori said that trade finance, which he described as “very paper-heavy”, had been slowed because of the many restrictions imposed by governments. In his view, regulators needed to be prodded to allow a greater digital input into trade finance. He noted that TDB had been the first bank in Africa to use blockchain to execute trade finance in 2019 and that its use had greatly increased due to COVID-19.
Sanjeev Gupta, executive director at the Lagos-based Africa Finance Corporation (AFC), lamented the dearth of domestic savings in most African markets and the resulting dependence on global capital. As an example, he cited the corporation’s recent highly successful Eurobond issue, which raised US$700m in June with a coupon of 3.125%. The issue was three times oversubscribed, demonstrating appetite for emerging-market issues with a strong rating (A) if not a fat return.
Gupta highlighted a broader issue highlighted by COVID-19, namely the folly of depending on a single supply chain. Devotees of smartphones will have heard that the launch of a new Apple product has been delayed as a result of such dependence. There are numerous other examples of this short-sightedness on the part of multinationals. Africa could benefit from new, more diverse supply chains. The industrial parks of Ethiopia and Rwanda would be strong contenders, but we could cite many strong alternatives such as Vietnam, Bangladesh and the Philippines. We are not convinced that most African governments have built adequate infrastructure and are flexible and rapid enough in their decision-taking to see much of this new action.
Gregory Kronsten is Head Macroeconomic and Fixed Income Research, FBNQuest
CBN issues framework for QR payments
CBN has issued a framework that would guide Quick response (QR) code payments in Nigeria.
The Central Bank of Nigeria has issued the framework that would guide Quick Response (QR) Code Payments in Nigeria.
This is a proactive move by the Apex bank towards ensuring the safety and stability of the Nigerian Financial System, as well as promoting the use and adoption of electronic payments and foster innovation in the payments system.
Quick Response (QR) Codes are matrix barcodes representing information presented as square grids, made up of black squares against a contrasting background that can be scanned by an imaging device, processed and transmitted by appropriate technology.
The codes are used to present, capture and transmit payments information across payments infrastructure and further enable the mobile channel to facilitate payments and present another avenue for promoting electronic payments for micro and small enterprises.
What you should know
- Quick Response (QR) codes are two-dimensional bar codes. QR code payments allow merchants to receive payments from customers simply by scanning generated QR codes using a smartphone camera. The QR code payments carry the purchase transaction information to the mobile device of the buyer/customer.
- Making payments via QR codes is very secure. It is because the QR code is nothing but just a tool that is used to exchange information. Any data which is transferred via QR codes is encrypted, thus making the payment secure.
- The Participants in QR Code Payment in Nigeria include Merchants, Customers, Issuers (Banks, MMOs and Other Financial Institutions), Acquirers (Banks, MMOs and Other Financial Institutions) and Payments Service Providers.
- QR payments are increasingly becoming a popular means of payments in Nigeria, and some industry players would see the framework as a perfect way of regulating the sector.
- QR codes are capable of storing lots of data. But no matter how much they contain, when scanned, the QR code should allow the user to access information instantly. It can be used for payments, sharing contacts and Wi-Fi passwords and lots more.
- The popular and common argument is that since POS machines are expensive, cheaper options such as QR scanners should be pushed forward to local traders.
CBN unveils framework for regulatory sandbox operations
CBN has issued a regulatory Sandbox framework towards engaging with the operators in the Fintech space.
The Central Bank of Nigeria has taken proactive steps towards ensuring more flexible ways of engaging with operators in the payment solutions/fintech space, in a bid to tacitly regulate how operators churn out their new products and services.
To this end, CBN has introduced Regulatory Sandbox which is a formal process for firms to carry out live tests of new, innovative products, services, delivery channels, or business models in a controlled environment, with regulatory oversight, subject to appropriate conditions and safeguards.
It is expected that the CBN would stay abreast of innovations while promoting a safe, reliable and efficient Payments System to foster innovation, without compromising the delivery of its mandate.
What you should know
- A regulatory sandbox is a framework set up by a regulator that allows FinTech start-ups and other innovators to conduct live experiments in a controlled environment under a regulator’s supervision. It encourages innovation that can improve the design and delivery of payment services.
- No doubt, regulations around Fintech are still emerging and developing, there is still a high entry barrier for new entrants and it is expected that Sandboxes would present them with a safe testing environment and ease regulatory onboarding.
- Sandbox is quite suited for new products, services or solutions that are either not contemplated under the prevailing laws and regulations, or do not precisely align with existing regulations.
- Sandbox is intended to promote effective competition, embrace new technology, encourage financial inclusion and improve customer experience, with a view to engendering public confidence in the financial system.
- The framework provides guidance on the establishment, the applicable rules and operations of a Regulatory Sandbox for the Nigerian Payments System, as well as providing standards for the operations of a Regulatory Sandbox, prescribes the processes and procedures for analysing, collecting, updating, integrating, and storing consumer data and information.
Standard Chartered Nigeria Plc crashes ‘personal loans’ interest rate to 1% monthly
The Bank crashed its interest rate to one of the lowest in Nigeria’s lending space.
Standard Chartered Nigeria Plc, has crashed its interest rate for ‘personal overdraft’ from 1.25% to 1% per month, according to information seen by Nairametrics.
Nairametrics understands that this review makes the rate, one of the lowest in Nigeria’s lending space, especially when compared to other players in the industry.
This is a strategic move by the bank as it makes major inroads into Nigeria’s competitive but lucrative retail end of lending. The retail end which includes divisions such as personal loans, payday loans is highly competitive with Fintechs, and other banks all jostling for the same market.
Despite efforts by some of the banks to restructure their loan books due to the adverse effect of the pandemic, banking sector credit to the private sector improved to N19 trillion in the third quarter of 2020 representing a 15.6% increase from 2019.
Notably, according to a CBN survey on credit conditions as reported by Nairametrics, supply of secured and unsecured credits to households is expected to increase in the first quarter of 2021, having recorded an increase in the previous quarter (Q4 2020).
Meanwhile, a cursory review of lending data on the websites of some sampled financial institutions, revealed that some financial institutions retained or downwardly reviewed their monthly interest rate on payday loans. For example, GT Bank Quick credit crashed its rate from 1.75% to 1.33%.
Furthermore, UBA Click credit maintained its 1.58% charge, Zenith Bank term loan remained at 2.16%, Renmoney retained its 2.98% interest rate, and a host of others.
What you should know:
- According to Standard Chartered, Personal Overdraft facility provided by Standard Chartered Plc is a revolving facility targeted at salaried customers with 12 months tenor and usually based on 50% of the net monthly salary of customers.
- A minimum salary qualification of N50,000 is specified.