Wednesday, May 22, 2024

Letshego looks at funding opportunities to capitalise on diversification drive

Letshego Holdings Limited, the Botswana Stock Exchange listed consumer lender, has revealed its intention is to grow its revenues faster than costs, but admitted the biggest challenge is that it is on an expansion drive.

The group, which is among top 40 African listed companies outside South Africa, is currently undertaking a diversification project, investing in people, micro finance and looking at rolling out micro banking.

“This is where money is going,” Chief Financial Officer of Letshego Holdings Colm Patterson said.

“Operating expenses and staff costs increased by 17 percent reflecting the ongoing investment in people, technology and business development,” added the company in a statement accompanying the half year results for the period ended 31, July, 2014.

Cost to income ratio was flat at 28 percent same as on the prior year.

Letshego is executing a phased diversification strategy in a bid to transform the group into a more broad based financial services provider.

The move includes deposit taking activities in Mozambique during February with new products to be rolled out in the near future in a country still smarting from civil war.

The group will also commence deposit taking in Rwanda and it will be looking to have provisional license in Namibia become a fully fledged license after meeting certain conditions.
Letshego Managing Director Chris Low is bullish that regulators in Windhoek will come to inspect the facilities and grant a licence.

“We are engaged with the Central Bank to comply with the conditions of this provisional licence,” the company said.

The group currently has cash resources of over P383 million, which will be used for future growth.

Patterson said although Letshego collects at least P250 million across 10 countries it operates in, the group always looks at funding opportunities.

“The best is to re-invest that money and as the group grows, we need sources of funding,” he added.

Letshego has operations in Botswana, Kenya, Lesotho, Mozambique, Rwanda, South Sudan, Swaziland and Uganda, among other countries. The group will exit South Sudan where it was making around P7 million in losses while it is looking at selling 24 percent stake in Tujijenge Tanzania Limited.

Letshego continues to register a strong growth from Botswana, Mozambique and Namibia.
“However, strong growth in the markets (noted above), during and after the review period, requires new lines of credit to be introduced and a pipeline of new funding is at various stages of funding”.

Letshego has also being studying the market to see how it can finance the Micro and Small Enterprise (MSE) in a bid to expand financial inclusion.

Strangely, this is a sector which is normally occupied by not for profit organisations. Low hinted maybe they could partner with a Developmental Financial Institution (DFI) like Citizen Entrepreneurial Development Agency (CEDA), which provides funding at a lower cost.

“We are already doing MSE profitably,” said one Letshego official adding that they will not be doing it in all the markets they operate in.

The group might copy the example of its subsidiary ÔÇô Micro Africa Limited (MAL), the Kenyan outfit that was founded in 2000 and provides financial services to micro-entrepreneurs and low income individuals throughout Eastern and Central Africa. MAL has operations through subsidiaries in Rwanda, South Sudan and Uganda and an associated company in Tanzania.


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