Letshego gets aggressive with deposit taking
Isaac Pinielo | Friday May 8, 2015 15:06
Traditionally a consumer lending company, Letshego has now embarked on a mission to diversify into a deposit-taking financial institution.
Recently, the company announced it has entered into negotiations with a third party in Tanzania to become a 75 percent shareholder in a deposit-taking financial institution that specialises in micro finance.
In July last year, the group was granted a provisional licence by the Bank of Namibia for authorisation to establish a banking institution. The Namibian licence is the third one following two other deposit taking licences that were granted in Mozambique and Rwanda.
However, the company had also applied for a licence in Botswana but was rejected by the Central Bank. Commenting in the group’s latest annual report, Letshego Holdings managing director, Chris Low, stated that although the microlender is not planning to become a commercial bank, it is entering into deposit taking.
“We plan for deposit-taking to lead to further value-adding services delivered via the internet and mobile banking, as well as debit, credit and pre-paid transmission cards,” he said. Meanwhile, the group has reported strong results for the full year to December 2014.
Profits before tax leapt to P970 million, a 24 percent increase when compared to the previous year and the net advances book grew by 28 percent to P5.7 billion.
According to Low, the group’s five most established markets, being Botswana, Mozambique, Namibia, Tanzania and Uganda contributed significantly to the annualised increase in profit before tax. “This was a strong performance based on relatively stable margins, despite challenges in certain of our operations,” said the managing director.
Fee and commission income increased marginally from P134 million in the preceding year to P128 million for the period.
Low noted that investments made in the preceding year, coupled with tighter cost control across the group, resulted in costs increasing by only 4 percent.
Total group cost to income ratio was 29 percent compared to 33 percent the previous period.
The quality of the advances book remained within target levels, with an impairment charge on the net portfolio at two percent for the period as compared to 1.7 percent.
The managing director further indicated that Letshego has disposed of its 24 percent share in the microfinance business of Tujijenge Tanzania Limited, which had been part of Letshego’s acquisition of Micro Africa Limited.
He said this was assessed as a non-core business that diverts management focus in Tanzania for minimum reward.
Another exit decision this year was for South Sudan, which, due to continuing political instability, was driving up the risk of non-performing loans. “We anticipate that this business will have been disposed of by the second half of 2015,” said Low.