Sunday, May 26, 2024

Blue looking at new operating models as navigates troubled past

Blue Financial Services, the pan African micro lender, said talks are underway with key players to look at ways to keep the company afloat and navigate through the troubled past. It warned that if it does not make progress it might be forced to offload some of its assets.


The group, which has operations in Botswana, said changes to the operating model, may be required to ensure that through a proposed structure the Company and its various subsidiaries will continue providing lending products to its customers.


“Currently the Company is in ongoing discussions with stakeholders in order to ensure that all possible alternatives and options ÔÇô legal or otherwise – are considered and investigated to ensure that the most appropriate course of action is implemented with respect to the outstanding obligations of the Company and in best interest of the all stakeholders,” the company said in a quarterly update. 


“Changes to the Blue operating model may be required to ensure that through a proposed structure the Company and its various subsidiaries will continue providing lending products to its customers.”


Already, the group has started discussions with key stakeholders to establish support and anticipate it should be able to advise its shareholders shortly as to the outcome of these discussions.


The Blue Group has changing the operating model from a centralised model to a decentralised one as one of turnaround objectives alongside reducing the cost base and migrating to a more robust loan platform.


It also wants to create a track record of successful impairment management in respect of its lending products with new capital raised since December 2010 and raising funding once the aforementioned objectives had been achieved.


“Shareholders are reminded that in the event that new capital is not injected and / or the alternative structure as stated above is not supported, the Company will proceed to settle outstanding obligations through the disposal of assets and trading entities as previously stated.”


Blue has been having troubles with subsidiaries and has gone to the extent of exiting some of the markets it operates in. However, the company, through its subsidiaries, is currently trading and lending in Botswana, Ghana, Malawi, Namibia, Swaziland, Uganda and Zambia providing mainly unsecured payroll based loans, but also provides short term or payday loans to its customers.


The group has decided to dispose of BAS Zambia which operates a long term insurance license in Zambia. BAS Zambia was the only long term insurance license holder in the group and as such was not part of the Group’s core business.


In Lesotho, Blue had been involved in continuous legal proceedings regarding the reinstatement of government payroll deductions. 


Based on a variety of circumstances, a strategic decision was taken to discontinue all lending in Lesotho, to fully impair the entire Lesotho book and to only focus on collecting the outstanding book in Lesotho. The Company is currently considering whether legal action should be instituted against the government of Lesotho in respect of damages suffered.


In Nigeria, the company took the decision to derecognise its controlling equity stake in Blue Nigeria into its Group results and to instead reflect its shareholding as an investment. Equally, it restructured Blue Financial Services (South Africa) (Pty) Ltd (“Blue SA”) business model in order for Blue SA to focus on asset rehabilitation as the core of its business.


The group is also divesting its interest in Tanzania and Kenya, although it maintains that the East African Region offers viable opportunities and will continue to investigate and consider future business opportunities in the region (if and when funding becomes available and it is appropriate for Blue at that time).


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