Small loans power South African lender

Chester House in Nairobi gained prominence when politicians converted it into a focal point of political agitation for multipartyism in the 1990s.

Now, a leading South African micro-financier, Blue Financial Services, is turning it into a convergence point for those seeking quick, short-term loans.

The firm, which entered Kenya last year, has plans that include listing at the Nairobi Stock Exchange. It has stirred the financial market with low and competitive interest rates.

Its aggressive marketing, targeting the middle to lower income earners, has heightened competition for other financiers like Platinum, which had become the point of call for civil servants and teachers in need of emergency loans.

According to Blue country manager for Kenya Pieter le Grange, it plans to use low interest rates to tap into the huge lending potential in the country.

The firm’s interest rate is 1.45 per cent per month. “Every month we look at the market, and our competitors adjust the interest rates accordingly. We are the lowest in the market and plan to keep it that way,” he said.

Mr Le Grange claims top position in personal loans, and intends to grow its loan book rapidly as it entrenches its operations. The other products offered by the firm are emergency and education loans of up to Sh500,000 payable in three years. They also offer debt consolidation to make repayment easier.

“Unlike mainstream financial institutions that focus on middle and higher earning groups, Blue has identified its market as the many millions of modest earning, but salaried Africans that are the continent’s teachers, soldiers, nurses, policemen, civil servants and miners.”

The firm recently acquired Credit U, its competitor in South Africa at a cost of 280 million rand (Sh2 billion). It had in April acquired Nedfin Limited in Zambia for $9 million.

Blue has spread its branches to 12 African countries that include Botswana, Zambia, Malawi, Namibia, Lesotho, Uganda, Tanzania, Nigeria, Rwanda and Swaziland. It is cross-listed in several of these countries and has 300 branches with about 3,000 employees.

According to the firm’s half-year financial results as at August 31, 2008, it generated earnings of 56.2 million rand, a 168 per cent increase compared to same period in 2007. The loan book increased by 236 per cent to 876 million rand.

The firm recently secured $70 million loan facility from Overseas Private Investment Corporation. Its entry into Kenya has brought it up against commercial banks that have lately joined the fray in the scramble for the pie in the fast-expanding small and medium enterprise sector. Equity Bank, for instance, has grown on the back of the SMEs and small borrowers.

Blue anchors its products with support services while capitalising on quick approval of loans (within one hour) to hook up customers in the increasingly competitive financial market. According to the firm’s newsletter, the firm also plans to cross-list in other African countries like Namibia and Zambia.

Mr Le Grange said efforts to streamline micro-finance institutions are important to protect depositors while enhancing competition.

“We are here to make profits but want to cut to the bone for the benefit of our customers in Kenya. Competition makes things cheaper and better and that is why we are here,” Mr Le Grange said.

jwahome@nation.co.ke