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.

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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.

READ: Effective financial planning after taking a pay cut in Nigeria

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.

The ‘Police is your friend’ is a cliché many are familiar with, but most do not know that this friendship extends to financial services. Incorporated as a community bank in 1993, with License No. FC 00200, the Nigerian Police Force (NPF) Microfinance bank has been providing banking services to the Nigerian banking public for almost three decades.  

However, it is one of those stocks that hardly make the headlines, except for landmark events. This friendly microfinance bank is the pick for Nairametrics corporate profile this week.  

READ: CBN releases new capital base, sanctions for Microfinance Banks in new draft guidelines

Incorporation  

NPF Microfinance Bank Plc (Formerly NPF Community Bank Ltd), was incorporated on 19th May, 1993, to provide services such as retail banking, loans and advances, and other allied services to both serving and retired officers and men of Nigeria Police Force, its ancillary institutions, and later on, the general banking public.  

The Bank mission says it is targeted at providing “banking and other permissible financial services to poor and low-income households and micro enterprises,” with emphasis on members of the NPF Community. 

It commenced operations on 20th August, 1993 with a single branch in Ikoyi, having obtained a CBN provisional license to operate as a community bank. The bank obtained its full license to operate as a Community Bank on 24th January 2002. Five years later, it converted from its Community Bank status to a Microfinance Bank, following a CBN directive which allowed it to open branches in all the states. It was registered as a Public Limited Company on 13 July, 2006, and received an approval-in-principle to operate as a Microfinance Bank on 10 May 2007. 

NPF microfinance bank obtained the final license on December 4, 2007, but its stocks did not get listed on the main board of the NSE, until December 2010, after 17 years of operations. 

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Its stock price is considered quite stable, trading within a narrow band, with its price-earnings ratio estimated to be about 9.45 times earnings, slightly higher than the 9.3 times earnings, which is the average PE ratio on the NSE. 

The bank’s authorized capital at inception was N500,000.00, made up of 500,000 ordinary shares of N1.00 each. This has grown over the years to its current level of N2 billion, made up of N4 billion ordinary shares of 50k each, of which 2,286,637,766 ordinary shares of 50k each, are issued and fully paid up. 

At a share price of N1.22, the current Market Cap is put at N2.789 billion.  

Branch network has increased to about 35 branches across several states in the country. In August 2019, the bank reaffirmed an earlier decision to embark on another public offer to raise funds for the purpose of incorporating Information Technology to meet customers’ needs and branch improvement, and to fund a three-year strategy from 2019 to 2021. 

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Management  

Mr. Akinwunmi M. Lawal has been Managing Director since June 2014, while the Board of Directors has been chaired by Azubuko Joel Udah (Esq.) since 2015. 

Mr. John Kwabe Tizhe and Mr. Francis C. Nelson are Executive Directors; while Mr. Usman Isa Baba, Mr Aminu Saleh Pai, Mr Jibrin G. Gane, Mr. Salihu Argungu Hashimu, Mr. Abdulrahman Satumari, Mr. Dasuki Danbappa Galadanchi, Mrs. Rakiya Edota Shehu, and Mr. Mohammed D. Saeed are Non-Executive Directors. 

Recent financials 

Although the NPF microfinance bank may not boast of a large customer base like most of the popular commercial and microfinance banks in the country, the bank has consistently shown favorable financials over the decades. The bank stocks is highly illiquid, but it has consistently and successfully paid dividends for the last 21 years, paying as much as N114.3 million in dividends for 2018.  

The audited results for FY 2018, shows a N300 million growth in gross earnings from N3.6 billion in 2017 to N3.9 billion in 2018, while there was a decline in profit. This decline is partly traceable to the 128.6% increase in marketing expenses from N63 million in 2017 to N144 million in 2018, while Directors’ remuneration rose 63%, from N65 million in 2017 to N106 million in 2018. 

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Profit before tax fell sharply from N819 million in 2017 to N287 million in 2018, and Profit after tax also dropped from N631 million in 2017 to N195 million in 2018.  For 2019, the Profit Before tax shot up to over N1 billion, while Profit after tax grew to N796.4 million.  

Within the 2018 financial year, customer deposit grew by 14.67% from N9.126 billion to N10.465 billion, while total asset increased from N15.952 billion in 2017 to N17.597 billion in 2018. In comparison, 2019 customer deposits grew further to N11.32 billion, and total assets increased further to N19.58 billion.  

The bank attributed the poor performance in 2018 to the adoption of the IFRS 9, which caused a rise in net impairments, a N700 million growth in operating expenses, as well as a N266.48 million fraud committed by one of its middle management staff in the Sokoto branch. Although N35 million was recovered of the sum, shareholders bore the brunt of the loss, as dividend per share dropped from 17 kobo in 2017 to 5 kobo in 2018.  

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Whatever steps the company took to prevent a repeat of frauds, it was not effective; because 2019 saw an increase in frauds committed by members of its staff. The bank recorded frauds amounting to N2.1 million in four separate incidences, and another N12.26 million ATM electronic fraud. Though some of the money was recovered, over N12 million remained unrecovered at the end of the financial year.   

Conclusion 

NPF microfinance bank has shown resilience over the years, and this is reflected in its consistent positive performance. However, it will have to work more on tightening lose ends to prevent cases of fraud and forgeries, which dips into its yearly profits and takes a chunk from shareholders dividends. 

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.

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History

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.

(READ MORE: Jaiz Bank reports 45.3% profit increase in H1 2020, involved in 21 litigations)

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.

READ MORE: Diamond Bank rebounds after hitting 5 year low

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.

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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.

Financials

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.

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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.

(READ MORE: CBN allows banks to pay winnings, salaries for 7 banned betting & gaming companies)

Conclusion

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.