Fintech
Why fintech companies acquire microfinance banking licenses – CEO of Baobab
Baobab Microfinance Bank Acting Chief Executive Officer, Eric Ntumba, talks about how Nigeria can leverage technology to promote savings and financial inclusion, among other industry issues, in this interview with ANOZIE EGOLE
Candies do we increase aggregate savings in Nigeria by liberalizing the banking sector?
Yes, I believe so. Technology has always been a catalyst to speed up processes. A digital savings product can increase the speed and efficiency of saving, leading to an increase in the country’s overall savings if widely adopted.
Do you see fintechs replacing banking microfinance in Nigeria?
It depends on what you define as fintech. Many fintech companies eventually acquire a microfinance banking license to gain more options. Most fintechs present themselves primarily as payment platforms. However, once they obtain their microfinance banking license, they can also lend. Therefore, they become relevant competitors because they are equipped to carry out the same regulatory activities that we carry out. Whether we are a fintech depends on the definition, but fundamentally we are a financial institution that uses technology.
Can microfinance banks reduce the cost of saving to be encouraged?
Yes, by digitizing the savings process, we eliminate the cost of physical transactions, making saving more convenient and cost-effective. While some costs such as Internet access remain, we plan to introduce a USSD format for people without smartphones or Internet access, extending the reach of our product to people who use feature phones.
With the current economic difficulties, do you think people can still save?
Yes, one way to fight inflation is to ensure that money earns interest between income and expenditure. Jollof+ allows all this, making savings relevant even in difficult economic times. While some people may find it difficult to save, earning interest could help ease the effects of inflation.
What inspired Baobab to launch the Jollof+ app?
The app was designed to provide greater convenience to our customers, allowing them to save from the comfort of their home, business or office. The initiative is part of Baobab’s transformation efforts, as we believe that banking should no longer be a place you go to whenever you need it. The goal is to enable our customers to become their own bankers, managing their savings and investments independently. Additionally, digitalization allows us to extend our reach far beyond the structural limitations of physical branches, helping us reach more people, tap into new segments and better serve our existing customers. This is the key rationale behind the launch of Jollof+.
Can you elaborate on this topic?
Yes, the main driver of the application is to push for convenient savings. Saving is intrinsically an effort; choose to defer an expense. Therefore, adding additional effort, such as traveling to a branch, can complicate this process. By eliminating these peripheral barriers, such as transportation to the branch during opening hours, we make it easier to save. Customers can fund their Jollof+ portfolio and choose the best investment or savings option that suits their needs. This convenience increases the likelihood of greater savings volumes.
Can you explain the options available on the app?
Each option on the app has specific features and benefits. Since JollofLock is primarily designed for long-term savings, this fixed deposit product offers upfront interest for a predefined period. You can top up the initial amount during the period. The baby playpen was designed to save for children’s future needs. You can start saving even before the baby is born and save for as many children as you want. The Ajo can be used for individual or collective savings, suitable for individuals or groups with specific savings goals, while the Jollof flex ensures that the balance in your Jollof wallet also earns interest, providing flexibility before deciding on a specific investment option or savings.
Are microfinance banks ready for a trillion-dollar economy?
It depends on how readiness is defined. Microfinance banks play their legitimate role at different levels. We at Baobab are financially solid and supported by a strong shareholder structure that enables us to make the investments necessary to make relevant contributions to the national effort.
Do users need a Baobab account to use Jollof+?
No, non-Baobab customers can also use Jollof+. The account can be funded using a debit card from any bank.
Is there a need for recapitalization in the microfinance sector?
The regulator sets the capitalization thresholds. Only the regulator can evaluate and issue guidelines. For now, we comply with current requirements and are prepared to address any future changes if and when they arise.
Has the increase in MPR and interest rates affected your loan repayment ability?
The quality of our portfolio has not deteriorated, with a portfolio at risk of less than 3%, better than the industry average. Our goal is to ensure that our clients continue to manage their debts effectively.
The main challenge is to overcome the limit of financial inclusion. Many people remain unserved or underserved. We need to be relevant to them through our product offerings and outreach. Digital solutions, including USSD, can help overcome barriers and increase the industry’s reach.
How competitive is your interest rate?
We believe we are transparently offering the best interest rate – up to 21.60% net on the Jollof+ app.
What message do you have for your customers?
We can’t wait for people to enjoy Jollof+. It offers convenience, targeted savings options and good saving habits, especially for tech-savvy young people. The interest earned can help fight inflation, making Jollof+ a valuable financial management tool for everyone.