When the idea of a Non-interest banking was first broached in Nigeria in the late 90s, it was greeted with suspicion. This was probably because its more popular name ‘Islamic banking’ had non-muslim Nigerians thinking it was a ploy to eventually Islamize the country.
Two decades and several sensitization campaigns later, Nigeria’s first non-interest bank has moved from being a regional bank to a national bank, with several branches and customers.
Nairametrics company profile this week looks at this trail-blazing bank; how it has survived its first decade, while operating a system that is completely different from that of other banks in the country, yet still holds its own in the industry.
The JAIZ movement in Nigeria dates far back to 2001, when Justice Imam Muhammad Taqi Usmani and Sanusi Lamido Sanusi, both guest speakers at a seminar hosted in Sheraton Hotel Abuja, advised the different groups clamoring for a non-interest bank in Nigeria to come together under one group, if their aim was to be achieved.
In response to this advice, the Halal group and the JAIZ group united, combining influence and resources to drive for the establishment of a Nigerian non-interest bank.
Jaiz International was set up in 2003, and after almost 8 years of trying to meet the guidelines, and capital requirements of the Apex bank (amid the Soludo-led recapitalization exercise which shook the industry) and other factors, the bank received a regional license from CBN on a historic date.
JAIZ International Plc was established on 11th of November 2011, and began the long walk to the actualization of their dreams.
On 6 January 2012, operations commenced at the branches in Abuja, Kaduna and Kano. Hassan Usman, is now Managing Director of the bank, while Alhaji Dr Umaru Abdul Mutallab, heads the Board of Directors, with Alhaji Dr Umaru Kwairanga, and Alhaji Dr Muhammadu Indimi as members.
Other members include Abdulfattah O. Amoo; Alh. (Dr.) Aminu Alhassan Dantata; Alh. (Dr.) Musbahu Bashir; Alh. Mukhtar Danladi Hanga; Alhaji Mamun Maude; H.R.H. Engr. Bello Muhammad Sanni; Mahe Abubakar Mahmud; Mall. Falalu Bello; Mall. Hassan Usman; Mr. Seedy Njie; Nafiu Baba-Ahmed; and Prof. Tajudeen Adepemi Adebiyi.
In 2013, when the bank started expanding to other urban centers, it was permitted to increase shareholding capital to $92.3 million (NGN14.3 billion), and subsequently applied for a national banking license which it received in 2016. At the end of FY 2019, it had 38 branches with over a thousand employees.
Stockholding was and is still shared among Nigerian and foreign individuals, and institutional investors, while the number of issued shares as at December 2019 was 29.46 billion.
Banking with a human face
Non-interest banking is touted to be a more ethical form of banking, with less emphasis on profit, and more on societal and individual development.
Like other banks, Jaiz Bank Plc provides banking products and services like savings, current, salary, and kids savings accounts, but with slightly different terms. The bank also provides online banking, leasing, cards, bonds and guarantees, and several other investment products tailored to its principles. Customers’ deposits are used for business operations, with the understanding that the profit will be shared between the bank and customers. While sharing profit with customers, in the event of a loss, the bank tries to weather it out, since the customers’ deposits are already insured with the NDIC.
In offering its credit facilities, the bank tends to adopt a religious perspective, looking beyond an individual’s ability to repay the loan. The impact of such a business or project on the society is a priority consideration, and could be the sole reason for refusing a loan. In this regard, business ideas which go against morality or societal growth, are not given loans.
The bank also offers its loans in a manner that creates a partnership between the bank and the borrower, towards improving the society. A profit for the company is a profit for the bank, while a loss for the company is also a loss for the bank, even though steps are taken to recover the capital.
How many people will be employed by the business? How will it impact the environment and the economy? These are some of the questions considered before a loan is either granted or refused. This is why bankers in the space like to refer to it as “banking with a face” or ethical banking.
(READ MORE: Jaiz Bank Plc appoints new directors)
No matter how profitable a venture is, if any part of its operations is considered detrimental to societal welfare, it will be declined. If, for any reason, a customer is to be penalized for default, the proceeds cannot be listed as part of profits for the bank, but is ploughed into the society as charity.
Audited financials from the company shows that the company is fast growing to make up for the early years of little or no profit.
The FY 2019 audited reports show that the company declared dividends of 3 kobo per share, an improvement on previous years’ performances, where no dividend was declared. Total assets grew 54% YOY, from N108.4 billion in 2019 to N167 billion in 2019, while deposits rose 50% to N127 billion, from the N85 billion recorded in 2018.
Gross earnings grew from N8.7 billion to N14.7 billion, and Cost to Income ratio improved from 87.28% in 2018 to 80.21% in 2019, with return on assets and equity rising to 1.26% and 13.57% respectively.
Profit before tax shot up 135% from 898 million in 2018 to N2.1 billion in 2019, and earning per share grew to 8.29 kobo from 2.83 kobo in 2018.
The recently reported Q2 2020 unaudited reports show that in spite of the COVID-19 challenges in the country, the bank had a fair outing in the second quarter of the year, with a clear improvement across all indicators in comparison to Q2 2019.
JAIZ Bank Plc is fast-growing, achieving much in good time, although Nigerians are yet to fully understand this system of banking. There is also the supervision of the Advisory Committee of Experts (ACE), which ensures that banking operations are done in line with the dictates of Sharia law.
The bank includes non-Islamic employees in its workforce, a point to back the claims that it is not religiously inclined, though more needs to be done in its board composition to fully corroborate this, and show the public that it is a bank that accommodates all religions.
MainOne Cable: A decade-old journey to bridging the digital divide in West Africa
In just a decade, MainOne has grown in leaps and bounds from its little beginnings to becoming recognized as one of Africa’s biggest cable companies.
MainOne Cable Company Nigeria Limited recently celebrated 10 years in the business of bridging the digital divide in West Africa.
As the provider of the first privately owned, open access 7,000-kilometer undersea high capacity cable submarine connection in West Africa, MainOne continues to attract the interest of individuals, corporate bodies and government institutions across the continent.
However, MainOne was among six telecom operators recently mandated by the Nigerian Communications Commission (NCC) to submit their yearly financial statements, within 7 months after the end of their financial year.
The company, though celebrated, is not without its challenges, which its financial statements would make clearer. However as we await the submission of the statement, Nairametrics looks into MainOne in this week’s Company Profile to understand what makes it tick.
How it started
Funke Opeke returned to Nigeria in 2008, where she was faced with ridiculously poor internet connectivity, so she decided to do something about it.
She started Mainstreet Technologies, the developers of MainOne Cable in the same year, to serve as a service and network solutions provider, not only in Nigeria but in West Africa.
What is now recognized as one of Africa’s biggest cable companies started with all of Opeke’s savings as start-up capital. She encountered stiff challenges related to raising more capital to take care of the foundational works, feasibility studies, business plans, and technical plans. However, the company was able to pull through.
On April 28, 2008, Main Street Technologies awarded a turnkey supply contract for the MainOne Cable System to Tyco Telecommunications. After completing and commissioning the project, MainOne went live on July 22, 2010.
The company has since grown in leaps and bounds from its little beginnings. Its connections extend from Portugal to West Africa, with Cable Landings Stations along the route in Accra (Ghana) and later to other countries in Africa like Dakar (Senegal), Abidjan (Côte d’Ivoire), and Lagos (Nigeria).
The Phase1 cable system spans 6,900 kilometres. Additional connectivity extending to Angola and South Africa occurred in the Phase2 of the project.
In 2015, the company started operations of MDXi, said to be Nigeria’s largest Tier III Data Center, and extended a submarine cable from Lagos to Cameroon.
Operations and unprecedented glitch
MainOne is in the business of providing telecommunication services and offers wholesale broadband services through a system of cable networks and fiber optic infrastructures.
With its services acclaimed to come at fair charges, MainOne Cable has in its clientele, telecommunication operators and providers, governments, large enterprises, and schools across 10 West African countries.
The company claims that its decision to provide its services at rates that are less than the current international bandwidth prices in the region is to encourage local content development via skills transfer of critical networking technologies and job creation, with the location of the network operational center (NOC) in Nigeria.
Main Street Technologies is also backed by influential investors such as the Africa Finance Corporation, the Pan-African Infrastructure Development Fund (PAIDF), and a couple of Nigerian banks.
In 2018, the company recorded a 74-minute glitch during a network upgrade that caused some Google global traffic to be misrouted through China. This temporary disruption attracted immediate reactions from critics, but the company assured that stringent processes had been put in place to prevent a repeat of such outage in the future. To its credit, there has been no other record of such.
In an interview with Nairametrics in 2017, Opeke stated that the company was yet to attain profitability, but was making strategic investments that would pay off in the future. However, with the last publicly available statement being that of 2014, there is no way to ascertain what level of progress has been made in the last 6 years.
The 2014 financial statement was audited by KPMG Professional Services at the time when Babatunde Dada was still CFO. The report showed progressive growth in the company’s fortunes from 2011 to 2014. However, all of the company’s expenses went up, despite the various cost optimization programs implemented.
Profit before tax grew from N146.8 million in 2013 to N189.6 million in 2014, while total revenue grew from N1.1 billion in 2013 to N1.7 billion in 2014.
In 2020, the COVID-19 pandemic and other incidents also took their toll on the company’s finances. During the company’s 10 years celebration recently, Opeke pointed out that the cost of the company’s services had become slightly expensive due to power challenges and the currency volatility in the country.
However, she said that the company was working towards deploying smarter policies to further realise its vision. She also noted that the company was in the process of winding down its foreign debt obligations and increasing exposure to Naira loans, to shield itself from the impact of the fluctuating exchange rates, since its customers paid for services in naira.
A decade after its establishment, Opeke still runs MainOne Cable as the Chief Executive Officer, while Anil Verma serves as the Chief Technical Officer.
Solanke Abimbola, Chief Finance Officer; Tinuola Ipadeola, Head of Corporate Services and Development; Gbenga Adegbiji, Chief Operations Officer MDXi; Abayomi Adebanjo, General Counsel; and Olawale Fayose, Company Secretary.
Heading the Board of Directors is Fola Adeola as Chairman, while Dapo Oshinusi, Taiwo Okeowo, Bennedikter Molokwu, Innocent Ike, Souleymane Keita, Banji Fehintola, Sipho Makhubela, George Olaka, Sandeep Fakun, and Praveen Beeharry, are all Directors.
With this calibre of talents and seasoned professionals on its management team, the mystery shrouding its financials becomes worrisome.
The over $400 million infrastructural investments in West Africa have made noticeable impacts across the economy and earned MainOne a number of recognitions and awards.
In 2019, MainOne was awarded the Datacloud Africa Award for Excellence in Data Center (Africa) and Africa Cloud Service Provider of the Year, Nigeria Business Leadership Award for Connectivity and Data Centre Service Provider of the Year, and BoICT Award for Best Tier III Data Centre in Nigeria – MDXi.
Others are NTITA Telecoms Wholesale Provider of the Year (2017), Lagos Chamber of Commerce and Industry Award for Excellence in Broadband Infrastructure (2016), Frost & Sullivan Best Practices winner for the Nigerian Data Center Customer Value Leaderships Award (2014), Ghana Telecoms Awards: Telecom Wholesale Carrier of the Year (2013), and Nigerian Telecoms Awards: Broadband Company of the Year (2011), African Telecom Hall of fame – Best Telecoms project of the year (2010), amongst others.
Besides acting in line with the new NCC policy, the Management of MainOne will have to do something about making the financial reports available to the public. Not only will this satisfy stakeholders’ curiosity, but it will also keep interested and potential investors abreast with the progress made so far and help them determine where assistance is required.
Kuda Bank: Changing the face of banking for the millennial
Kuda Bank’s model saves conventional banks the heavy cost of running network branches, further translating into free banking services for customers.
The now-frequent presence of agitated customers in long queues in the banking hall emphasizes the need for a wholly digital bank.
Kuda Bank is the first institution that comes close to meeting this need, where customers can carry out all their banking transactions without having to visit a physical branch.
Kuda Bank, founded by Babs Ogundeyi and Mustapha Musty, started out in 2016 as Kudimoney (“the bank of the free”), online-only savings, and lending platform, and had gone through a couple of funding rounds before transitioning into Nigeria’s first actual digital-only bank without a physical location.
Speaking after Kudimoney got its full banking license from the Central Bank of Nigeria and transitioned into Kuda Bank, Babs Ogundeyi said: “We’re excited to usher in a new era in consumer banking and serve the many Africans, who we believe are frustrated with traditional banks Starting with Nigeria, we’ll launch a new kind of bank with a continued focus on improving our members’ financial lives rather than trying to burden them with hidden fees and excessive charges”
This move made it clear that Kuda bank is not just another savings app or mobile wallet but an actual bank. The bank’s deposits are insured by the Nigerian deposit insurance corporation (NDIC).
A model for the Gen Z
Kuda bank is modeled for the Millennial and the Gen ‘z’ internet-savvy population, providing them the same banking services irrespective of location, but without the time and stress that comes with conventional banking.
It is an all-round improvement of the banking services. For instance, users can open a Kuda account by simply downloading the app and signing up, after which they get a free debit card delivered at no cost nationwide within two weeks.
With these, one can easily save the time of queuing in the bank and resolve complaints from a mobile device without having to visit any bank.
To make it easy for users to resolve transaction issues that may occur while using the app, Kuda provides the 30-digit session ID for every transaction.
This isn’t an industry standard and normally, you have to call your bank to request this reference number when things go wrong.
Anticipating user needs and providing convenient solutions, in Kuda’s thinking, should define the age of digital banking.
Kuda Bank also has an automatic savings option where users can save automatically and earn up t0 15% annual interest.
The bank charges, card, and account maintenance fees which have become a nightmare to Account holders, do not apply to the Bank.
As part of the launch promotion, the bank offered 25 free interbank transfers monthly for all customers who opened a Kuda account before January 1, 2020 while extra transfers to other banks cost N10 each.
Kuda has a wide branch network where customers can make deposits for free, thanks to its partnership with three of Nigeria’s biggest banks.
Debit cards are also issued by access bank, pursuant to a license from Visa International & Verve.
Speaking at the bank’s first town hall meeting at Radisson Blu Hotel, Ikeja, CEO, and founder Babs Ogundeyi explained that the model saves the bank heavy cost of running network branches, and this further translates into free banking services for customers.
(READ MORE: Protecting your money from fraudsters)
The bank also offers a high level of security to protect customers’ personal information from unauthorized use, and allows them to freeze debit cards from the app when it goes missing.
Other security features include; a validation mechanism for every user, a circuit-breaking mechanism that flags down transactions higher than the usual range. This way, if a customer that usually does ₦50, 000 transfers, suddenly attempt an N500, 000 transfer, it will be flagged to alert the customer of a potential mistake, or of a fraudulent transaction.
Partnerships and collaborations
Besides its partnerships with Access Bank, Guaranty Trust Bank, and Zenith Bank, Kuda Bank recently became the first Nigerian bank to be added as part of the Binance P2P payment options, making it possible for people carrying out Peer trading of cryptocurrency on Binance to make and receive payments with their Kuda Account.
Its ‘Spend and Save’ feature is similar to what is found on other Fintech apps, and it automates the removal of 2% of every expense made from the user’s balance as savings for a rainy-day fund.
Like other competing Fintech, Kuda Bank also has to do a KYC feature that verifies user information using the Bank Verification Number (BVN).
But the absence of a physical branch means that Kuda bank services cannot be used by a first-time account holder.
There is the hope that the bank would address this issue with a BVN feature that gives it independence from other banks, but the technology with which this is to be achieved is not yet certain. It may also consider providing loans.
More players in the space means that in no time, the competition will be based on customer-friendly rates and excellent services.
We wanted to help users pay themselves first – Piggyvest
In a chat with Nairametrics, Joshua Chibueze talked about the idea that sparked the birth of PiggyVest.
Imagine that you put all your money in one jar, and all your bills in another jar. Chances are that the jar of bills is the one that would never run dry.
Month after month, people spend a huge percentage of their income on living expenses from rent to food, transportation, utilities, and the likes. More often than not, they forget to set aside a little money for themselves. Simply put, they pay everyone else but themselves.
This was the concept around which Piggyvest (formerly Piggybank) was built. Speaking at the Nairametrics Business Half Hour show, Co-founder of Piggyvest, Joshua Chibueze, said that the purpose of Piggyvest was to help people create an automated system, where they could pay themselves first, by setting aside a fixed amount or percentage, before making other expenses.
Describing the Fintech, Joshua posed a number of questions, “Piggyvest is that place you keep money that is your own money. Beyond having multiple bank accounts, how do you pay yourself? You work month after month, and pay bills, but where do you pay yourself? Where do you keep money that belongs to you and only you? How do you plan towards those heavyweight bills.”
How a piggybank tweet birthed PiggyVest
On the last day of December 2015, a lady posted a tweet that went viral. The tweet detailed how she had saved N365,000 by faithfully setting aside N1000 in a wooden piggy bank every day of the year. According to her, she ensured to pay herself, by setting aside the sum before making any other expense.
As people continued to share the post and comment about how they might not have the discipline to accomplish it, Joshua and his team (Odunayo Eweniyi, Somto Ifezue, and others, who were working on PushCV at the time), decided to find a way to digitize the process, so salary earners and the self-employed could also set aside money for their personal projects and financial goals. They sampled thoughts from some of their PushCV clients and found it was a concept many would really be interested in.
Three weeks later, the first version of Piggybank had been launched, although it took till April 2016, before the fully tested version was ready for use.
“It was not all easy because we were trying to do something no one had done in Nigeria. The other companies doing something similar were outside the country, so all we had to rely on was the customer feedback.”
No member of the team had any banking experience, so building the app was a total reflection of customer feedback and user experience. Notwithstanding, they understood that people were concerned about the security of funds; hence, they gradually progressed to the use of bank-level security to ensure against hacking.
In subsequent years, the team added an extra layer of security with a two-factor authentication preventing transactions, unless the user could provide the password and the answer to the security question.
Other steps include; SMS verification instead of email verification, as e-mails are more susceptible to hacking than mobile numbers.
From 1,000 to over 1 million users
At the outset, the intention was to get to the first 1000 users. “We felt that if we could get to 1000 users, it would be worth it. We ran on our funds and did not make any money in the first year, because we were still trying to understand our users and find our feet,” he said.
After successfully helping users save 21 million in the first year and over 70 million in the second year; the company attracted investors, and by 2018 they had secured a $ 1.1million round in seed funding. This came as a plus, because the business had grown organically at the time, and was already profitable enough to sustain its operations.
Fintech versus Asset managers
Piggybank first partnered with a couple of Microfinance banks, before partnering with a Commercial bank. In 2018, they raised some $1.1million from investors and acquired a microfinance bank license, a money lenders license, and a cooperative license, allowing them to operate a Trustee agreement with an external asset manager.
There are products tailored for different reasons, so people trying to establish their savings culture could go for an option that allows them to save consistently, and withdraw once in a quarter. There are also options that could allow users to steadily build an investment culture, and others meant for people saving towards a project.
In April 2019, the company rebranded and became Piggyvest. It currently serves over a million users, helping them save and invest “billions of Naira every month that they would probably be tempted to badly spend.”
The more interesting part is that there are no fees for the services, but customers get to make some money, as Piggyvest splits the returns with customers; however, users may have to pay a 2.5% charge, when a customer withdraws his funds before the agreed date.
Breaking the trust challenge
Financial institutions in Nigeria generally have to deal with the challenge of trust deficit among the customers, but this is even more for fintechs like Piggyvest. According to Joshua, despite taking added measures to secure customers’ funds, any delayed transaction tends to breed some distrust among the users, and the company has to deal with this by providing information.
“This is the reason why we don’t do more of marketing but prefer to let people sell us with their testimonies. Customers tend to believe more the testimonials from other satisfied customers, and this how we have gotten over 1.5 million users and improved customer trust,” he explained.
When the economy went into lockdown, the business showed itself to be pandemic proof, as savings improved after the initial shock. The remote working policy was introduced, so that even in the aftermath of the lockdown, operations continued unhindered.
“We are a customer-centric brand, and the feedback from customers is our motivation. We are out to give them the best experience ever,” he concluded.