On November 30, Microcred operates its rebranding and officially becomes Baobab on the highly competitive microfinance market in Burkina Faso.
This new identity, decided in October, should gradually be extended to all the subsidiaries, confirms the French group’s appetite for a sector whose turnover in West Africa is estimated at more than 1,262.2 billion CFA francs (1.9 billion euros).
But it is above all part of a broader offensive. “We want to transform into a digital bank in the next three years,” says Nicolas Dehoorne, Managing Director of Microcred Burkina (more than 15 billion CFA francs in assets in 2017).
A wide range of products
From now on, its range of products “goes beyond credit and savings to microentrepreneurs, with a much wider range of customers”, explains Marion Ivars, commercial director of the group.
Arrived in the Land of honest men in 2016, Microcred quickly rose to the forefront of a sector largely dominated by the Réseau des caisses populaires du Burkina (70% market share), followed by the Alliance of credit and savings for production (ACEP) and by First Microfinance Agency (PAMF).
Since 2014, the group has launched its network of agents to attack Senegal, Madagascar and, more recently, Côte d’Ivoire. They are now a thousand traders under contract. With more than 750,000 customers in ten markets, the company founded in 2005 is experiencing rapid growth in Africa.
“In 2017, we granted nearly €850 million in loans to support the development of small and very small businesses in Africa and China. Our loan portfolio amounts to more than 551 million euros, and we have also seen an increase in customer deposits, to almost 195 million euros,” says Marion Ivars.
The digitization of offers is now essential
Thanks to control of bad debts with a portfolio at risk at thirty days (PAR 30) established at 2.2% at the end of December 2017, combined with an excellent performance in the sector, Baobab is banking on the diversification of its products and on innovation to break into new market segments.
Because the digitization of offers is now essential, “21% of loans having been granted through the mobile phone in 2017”, specifies Marion Ivars. According to industry estimates, the smartphone and tablet market will double in sub-Saharan Africa over the next five years, from 400 million to 800 million users.
The group’s objective is of course to capture this growth, especially since 40% of African banking customers surveyed prefer to use digital channels for transactions. “Mobile Internet continues to grow rapidly in Africa. According to the GSMA firm, smartphone penetration will increase from 20% in 2015 to almost 60% in 2020. Today, in the capitals, it is already over 80%,” recalls Marion Ivars. Still, the French group prefers to focus on financing SMEs rather than individuals. “To bring added value, we specialize in financing micro-enterprises, a segment not covered by commercial banks,” explains Nicolas Dehoorne.
The potential of the West African microfinance market (more than CFAF 1,200 billion in assets, according to the Central Bank) is such that it arouses the greed of major international groups. Among them, Cofina, which is prospecting the Burkinabè microfinance market, up to now the real preserve of the Caisses Populaires Network.
With 1,000 employees, the Ivorian group claims 100,000 customers. In 2017, it reached CFAF 96 billion in balance sheet total, slightly less than the stated objective of CFAF 100 billion, for outstanding loans of CFAF 71 billion, against CFAF 64 billion in deposits. With 78 points of sale, the Ivorian group values all of its operations at more than 200 billion CFA francs.
Still others, such as Atlantic Microfinance for Africa (Amifa), holding company of the Moroccan group Banque centrale populaire (BCP), which opened its fourth subsidiary in Senegal devoted to microfinance on the continent, are also knocking on the door of the country.
Rise in competition
But this sector, where local actors traditionally evolve in cooperative or mutualist form, is also coveted by other competitors. To adapt to the new market situation, six West African microcredit networks, including the Réseau des caisses populaires in Burkina, Kafo Jiginew and Nyèsigiso in Mali and even Pamecas in Senegal, launched in July 2018 the activities of the Financière West Africa (Finao).
Not acting as a retail bank, Finao, based in Dakar, started with 4.5 million customers and 800 points of sale. In 2016, the savings collected by these six institutions stood at 400 billion CFA francs, against some 300 billion CFA francs in loans granted. The surplus resources thus released, ie 100 billion CFA francs, were made available to Finao for direct intermediation for the benefit of its founders and microfinance institutions in the sub-region.
A connoisseur of microfinance in West Africa, Alpha Ouédraogo welcomes the arrival of these new players. “The market is such that neither the banks nor the decentralized financial systems (name of the sector by the BCEAO) can meet the financing needs of the populations. There is therefore room for several actors, but the current evolution will impose alliances”, specifies the former boss of the Network of popular credit unions of Burkina and the Confederation of financial institutions in West Africa (CIF- AO).
However, warning that the sector cannot become a “mining deposit”, a kind of cash cow for capital companies to the detriment of its social function, he regrets that “most investors in microfinance demand returns on investment from the ‘order of 20% to 30%’. Engaged in a real market battle, Baobab confirms to reap gains of around 30% on equity for its most profitable African subsidiaries.
One out of two SMEs does not have access to credit
In Africa, around 480 million people are excluded from the banking system. 71% of the adult population in sub-Saharan Africa does not have an account with a formal financial institution (traditional banks, MFIs, cooperatives). Across the continent, 53% of microenterprises and SMEs (35 million) have little or no access to credit services.
While much of the global banking market has seen sluggish growth in recent years, the African banking sector has experienced significant expansion and is expected to maintain this positive trend in the near future. Now estimated at around $86 billion, it is expected to increase to $129 billion by 2022.