Payroll microlenders brace for civil service job cuts
Mbongeni Mguni | Friday March 26, 2021 14:20
In his budget speech last month, Finance and Economic Development minister, Thapelo Matsheka said the government would review the size of public service in the upcoming fiscal year that starts on April 1, as a way of curbing the ‘unsustainable’ level of wage payouts. Already, an exercise is underway to abolish 50% of vacant civil service positions before April 1, as part of broader public sector reforms.
For the country’s microlenders, the impending initiatives come as a body blow, as many of the larger, established operators are dependent on deduction at source arrangements with the public service.
FirstCred, formerly Get Bucks, where civil service payroll customers including parastatals, make up about 84% of the loan book, CEO Dudu Garekwe said diversification of products to the market would be the way out of the impending squeeze.
“Although civil service clients will always remain at the core of our customer base, we will diversify through additional product offerings appealing to a wider audience,” she told BusinessWeek.
“We are currently working on an exciting range of products that will appeal to a broader range of customers.
“There are huge opportunities in bringing financial access to the underserved and unbanked, not only in Botswana but across the sub-continent.”
Charlotte Onneile Mathula, ExpressCredit Botswana’s new CEO, told BusinessWeek that civil service deductions accounted for 70% of the microlender’s book. “However, we understand the need to diversify our portfolio by extending our products to different customer segments,” she said.
“We have successfully signed several partnerships agreements with companies that enable us to provide access to finance at competitive terms with loan amounts up to P60,000.
“In addition, we have a two-year open market loan (up to P25,000) that is mainly meant to financially assist customers who work for private companies and need funds to cover any sort of emergency or a personal need.”
She said ExpressCredit Botswana was on a transformative journey with an ambition to not only provide access to finance but to develop relevant solutions that meet customers’ financial needs.
Letshego, the country’s largest microlender with P2.6 billion on its loan book, expects the government’s downsizing efforts to take a few years during which the group will accelerate its efforts to diversify.
Group CEO, Andrew Okai recently told analysts and media that Letshego would focus on adding non-credit solutions to its bouquet of products, while also building non-core revenue.
Across the 11 countries where Letshego operates, the group’s total loan book of P10.9 billion is dominated by deduction at source at about 88%, with much of this attributable to civil servants.