As international economies continue to buck and roll in the wake of the global economic slump, members of the financial services industry, particularly banks, have tightened their lending criteria and are taking significant steps to drastically cut back on unnecessary risks and costs. The South African Reserve Bank’s Financial Stability Review shows that local banks are taking a significant knock due to an increase in bad debts and slower economic growth.
Considering the fact that more than 95% of Africa’s workforce is contained within the informal sector, the need for economic empowerment is key in eliminating the scourge of poverty which is currently holding Africa’s development hostage. Traditional financial services institutions tend to avoid the risks and high operational costs associated with providing lower income earners in Africa with basic banking and financial services. The unfortunate reality in Africa is that approximately 300 million of the 900 million people on the continent are unable to gain access to even the most basic investment vehicles and banking services.
Blue Financial Services (Blue) considers this huge number of under-banked and under-served people in Africa as its target market. Blue has made significant inroads in developing unique products and technology to deliver basic, yet essential financial services to this neglected group of people. Dave van Niekerk, CEO of Blue says, “By filling this gap left in the market and providing the financial means to save, access credit and even the ability to start a small business, Blue aims to improve the conditions of these communities and enhance their economic standing in the country.”
The effects of the international credit crisis also greatly affected the poorest communities in Africa. As liquidity left the market and funding dried up, most small, medium and micro-enterprises (SMMEs) were left destitute. They were unable to find financial support and continue to provide jobs in their communities.
The rural African landscape also presents geographical challenges in accessing traditional banking and financial assistance, with rural dwellers often travelling extensive distances to find financial assistance. Fortunately, technological advances have allowed Blue to bring this vital assistance to the people. Blue’s Branch in a Box is the perfect example of how technology and innovative thinking can help those in rural Africa access essential financial services.
The Blue Branch in a Box is fully equipped with a computer, a small printer, a webcam, fingerprint scanner and a BGAN Satellite Modem. The field consultants are able to connect directly into Blue’s centralised network and are trained to operate the equipment while adhering to the same principles and ethical lending practices that form the essence of responsible lending that the micro-financier works diligently to promote in Africa.
The Branch in a Box has already proved itself in the field in Swaziland, Zambia and South Africa and soon it will be used to connect clients in Nigeria. Earlier this year Blue also managed to acquire a broadcasting license from ICASA, which will allow the micro-financier to reach more people, drive down margins and improve the efficiency of their client interaction.
Providing development finance to lower income earners is a costly affair. The small size of the loans, the clients’ location and the high level of interaction required between the client and representatives drives these costs even higher. Micro-Finance Institutions (MFIs) require a lot more staff and administrative efforts per dollar lent than mainstream banks do. Making the mistake of comparing a traditional bank to a micro-financier can be very costly for investors.
MFIs, such as Blue, are focussed on empowering communities by providing development finance. Blue facilitates individual social and economic empowerment to the extent where the individual in question is able to gain access to traditional banking facilities. Clients also benefit from this relationship as they are able to build a stronger credit record and gain access to larger amounts of funding that may be utilised to improve their financial status and expand their enterprise.
Blue also believes that MFIs should play a more prominent role in providing their SMME clients with effective and comprehensive business training when granting a loan. By doing this, the MFI will provide the client with the knowledge to use the funds effectively and gain maximum expansion from their business. This will also turn bad debt into good debt, inevitably contributing to the success of the business and taking the economy one step closer to eradicating poverty.
A disproportionately small fraction of the populations across Africa is served by formal financial institutions. Thankfully, effective financial services are not limited to the traditional banking industry.
At Blue, we want to see our clients succeed and improve their economic situation by addressing the needs of the under banked in Africa. If all MFIs work towards providing flexible and effective financial solutions then we will soon be on our way to eradicating poverty and empowering the African economy.
For information about Blue Financial Services and their full product list:
Contact Morné Reinders
Email: blue@blue.co.za
www.blue.co.za
