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South African Microfinance Institution (MFI) Blue Financial Services and Nigeria’s Intercontinental Bank to Launch $25.9m Microfinance Bank
Written by: David SatterthwaiteArticle Overview: Blue Financial Services (BFS), a South African microfinance institution (MFI), and Intercontinental Bank Plc, Nigeria’s largest commercial and retail bank by assets, are collaborating to launch a Nigerian microfinance bank capitalized at NGN 3 billion (USD 25.9 million), the largest such institution in the country.
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South African Microfinance Institution (MFI) Blue Financial Services and Nigeria’s Intercontinental Bank to Launch $25.9m Microfinance Bank
The announcement of the new bank is the result of two years of research by BFS, including the search for suitable partners in the venture. Individual banking in Nigeria has been largely limited to taking deposits for savings; lending to individuals is infrequent and is usually limited to those customers who use other banking products as well. In fact, only one-tenth of lending in Nigeria is made to individuals, said BFS CEO Dave van Niekerk, as quoted in the Banking Times. There is only one bank branch for every 32,700 Nigerians in the cities, and the ratio is 57,000-to-1 for those in rural areas. The new venture hopes to address this need by starting and growing aggressively.
The initial size of the bank is seen as advantageous for this growth strategy. If approved by regulators, it would begin operations in three months as the first microfinance bank in Nigeria to exceed NGN 1 billion in capitalization. As such, it would qualify as a “state microfinance bank” eligible to operate in every state of Nigeria immediately. The Blue-Intercontinental operation would use the existing 300 Intercontinental branches as a starting point, opening up separate microfinance branches at each location. Standalone branches would also be opened up across the country, and the long-term vision has Blue-Intercontinental expanding beyond Nigeria as a “world-class” institution, in the words of Intercontinental chief executive Erastus Akingbola.
BFS will hold a 55 percent share in the bank, while Intercontinental will maintain 35 percent, according to the Banking Times article. U.S.-based private-equity investor AIG Capital Partners is to hold the remaining ten percent. BFS plans to contribute collection and credit scoring methodologies and processes previously established in its other African operations to the venture.
Blue Financial Services, based in Pretoria, South Africa, and founded in 2001, is an MFI focused on southern Africa. It is traded on the Johannesburg Stock Exchange under ticker symbol BFSJ. For the year ended February 28, 2007, it had assets of USD 68.8 million (size of its loan book could not be determined). Its return on assets was 5.52 percent and its debt-equity ratio was 32.63 percent.
MicroCapital previously reported on the collaboration of BFS with the International Finance Corporation (IFC) in creating a pilot HIV/AIDS awareness program for southern Africa last September. Also reported was the company’s 472% improvement in year-to-year performance last May.
Intercontinental Bank started as a merchant bank in 1989 and became a commercial bank ten years later. In 2002, it made its initial public offering (IPO) on the Nigerian Stock Exchange. As of February 28, 2007, the bank had NGN 704.8 billion (USD 5.7 billion) in assets, of which NGN 262.5 billion (USD 2.1 billion) was listed as “loans and advances to customers.” Return on assets was 2.15 percent, and the debt-equity ratio was 348.15 percent.
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About the Author: David Satterthwaite RSS for David's articles - Visit David's website David brings 10 years of experience in microfinance management, social entrepreneurship, non-profit management/fund-raising and microfinance investment research. David is the Chairman and President of Prisma Microfinance, Inc., a retail “microbank” operating in Central America. He is also Chief Editor of MicroCapital.org, a news and information service for the microfinance community and its investors. Each month, MicroCapital.org publishes the MicroCapital Monitor, the leading industry newspaper. David writes and speaks frequently on microfinance. He has been a quest speaker at many events, including: Microcredit Summit 5+: Panel on Private Investment, Milken Institute Global Conference, United Nations Year of Microcredit Symposium for Wall Street, Chicago Conference on Microfinance, Harvard Social Enterprise Conference, Dartmouth’s Business Sustainability Conference, Wharton’s Conference on Social Entrepreneurship, Stanford’s Social Enterprise Club, Columbia’s Social Enterprise Program and the Net Impact Annual Conference. Through his work with Prisma and MicroCapital, he has been featured or quoted in The Wall Street Journal, the Boston Globe, “All Things Considered,” Reuters and SocialFunds.com. David has been recognized with the Compaq Computer Corporation Leadership Award, the City Year Inspiring Leader Award and the National Social Venture Business Plan Competition award for Best Social Impact Analysis. David has supported many non-profit and for-profit social enterprises in different capacities, including Access Technology Learning Center, Agora Partnerships, Bridges to Business, City Year, Fonkoze, Kiva and National Social Venture Competition. David holds a B.A. with Honors in Political Science from Haverford College. Click here to visit David's website Grameen Foundation partners with local Microfinance Institutions in Rwanda to Relaunch Village Phone Initiative IMAGE Project in South Africa Proposes Use of Microfinance in Struggle Against HIVAIDS Infection Ugandan Government to Set up Laws for Regulating its Microfinance Sector Nigerian Government Creates $426m Microcredit Development Fund Old Mutual OM Supports Expansion of Womens Development Bank WDB Microfinance into KwaZuluNatal South Africa with USD 710000 |
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