There must be dozens of conferences every year on the topic of inclusive finance. And there are some large, well-resourced banks in Southern Africa. Yet it is Botswana-based start-up Letshego Holdings that’s setting the pace. The business started in 1998 as Micro Provident Botswana. It had a much more conservative model than that of the typical SA microlender. Its loans were technically unsecured, but there was limited risk as they were deducted from salaries and mostly from civil servants.
Letshego CE Chris Low says the company has no plans to operate in SA, which is a shame as it could shake up the rather lame, unimaginative microlending carried out by our banks. Letshego is certainly big enough to make an impact in its chosen markets. It has a staff of 2,600, about 300,000 borrowers and a market cap of more than US$600m (about R8bn, or the size of Alexander Forbes). Letshego now operates in most Southern African countries, including Mozambique, Namibia, Swaziland and Lesotho. It could be poised for a pincer attack on complacent SA banks.
We could certainly use Letshego’s "Let’s Go Blue" box in many of our rural areas and informal settlements. The box is used for agency banking, making life even simpler than it would be using portable branches. The box has a smartphone or tablet that can be powered by solar power, along with a portable battery, combining the twin virtues of affordability and environmental responsibility.
The box allows new customers to open a basic transactional deposit account in remote areas. In due course this will be extended to deposit taking and withdrawals, as well as person-to-person and person-to-business transfers. It will also allow for features such as printing receipts and statements, and provide financial education aids.
Mozambique needs these boxes even more than we do. No less than 69% of the rural population and 43% of the urban population in that country are excluded from financial services. Many that count as included have to travel 250km to the nearest bank. Low says the Letshego of the future will offer simple, appropriate and inclusive solutions, as well as flexible and convenient access.
Yet only now are the Botswana banks, which were asleep at the wheel for so long, attempting to compete with Letshego in the microloan market. Letshego is an even more focused group than Capitec: payroll lending still accounts for 92% of its loan book. It does not even take deposits in Botswana, though it has banking licences elsewhere, notably in Namibia and Mozambique.
In East Africa, the business is more diversified, as it acquired businesses such as Advans Bank Tanzania, which did not have the stamp of the Letshego cookie cutter. And it will bring some of these products into Southern and West Africa, including loans for water tanks, energy-efficient stoves and solar power.
The largest shareholder in Letshego is Sanlam, through its controlling stake in Botswana Life. This will prove to be to the benefit of both: Sanlam Emerging Markets was selected, to no-one’s surprise, to be life insurance supplier to Letshego across the continent. It was a three-way tender, with Hollard and Liberty losing out. And Letshego has picked up FBN Microfinance in Nigeria from Sanlam’s strategic partner, First Bank of Nigeria.
* I am still shocked by the murder last week of Martin Irish, one of Jo’burg’s most colourful stockbrokers. He came from an era when there was more balance in life, before multinationals turned brokerages into sweat shops where staff have to have lunch at their desks.