Letshego enters Kenyan market

Brian Benza
Staff Writer | Monday September 26, 2011 00:00

 

Kenya becomes the 8th country in which  Letshego has set up shop. The company already operates in Botswana, Mozambique, Namibia, Swaziland, Tanzania, Uganda and Zambia.  In a statement availed to shareholders on Friday, the company said that in line with its Pan-African expansion plans of the group, they are in the process of having a 62.52 percent stake in the issued share capital of Micro Africa Limited (MAL), a private company incorporated in Kenya.

MAL's purchase price is P22.4 million ($3.3 million) and the company says the deal is solely being funded from existing resources. 'MAL is an established company that has been operating in Kenya since 2000 with subsidiaries in Rwanda, South Sudan and Uganda and has an associated company in Tanzania. 'MAL operations are the provision of secured and unsecured personal, SMME and group loans.'

Its management team has successfully introduced products involving the perfecting of security, over the counter cash handling for loan transactions and mobile banking technology.

'The effective date of the acquisition is expected to be 31 October 2011 but this is subject to all necessary formalities being concluded,' read the statement.  MAL has a loan book of $7.2 million, 21 branches and a customer base of over 17,000.

The statement issued by group chairman, Moses Lekaukau, said that MAL is not expected to contribute significantly to the Group's financial results for the year ending 31 January 2012 but is a welcome addition to the Group.  'MAL is expected to contribute to the Group profitability, geographical diversification of earnings, product offering and technology skills set over time,' said the statement.

News of the acquisition will be expected to calm shareholders' nerves following the selling pressure that has subdued the Letshego stock on the BSE recently, which saw the counter losing about a quarter of its value in three weeks. 

Letshego last week continued with its losing streak on the stock market as selling pressure mounted on the counter against the background of investors' apprehension over the company's future cash flows. The investors' panic follows reports that government would cease facilitating deduction of microlenders' loan repayments from source starting December 1 this year. Botswana operations contribute over 60 percent to the group's profitability.

With much of its business coming from loan arrangements with civil servants, Letshego on August 31, advised its shareholders about the government's decision to stop the 10-year old arrangement that has been its cash cow.However, Letshego's management - in another notice to shareholders on Friday - said that if they are no longer able to collect the normal monthly loan repayments via its agreement with the Central Register then they could collect loan repayments via electronic debit orders.

'All customers of Letshego Botswana have already signed mandate forms as part of the normal loan agreements.This is also a normal part of Letshego Botswana business for customers that have left the employ of an employer with whom Letshego has a salary deduction arrangement. This collection methodology is sustainable,' said the company.

The company also said they have already acquired a banking system as part of the process of transforming into a broader based financial institution. In addition to the micro finance-banking license that the company holds in Mozambique, they are also at different stages of two banking licence application processes.