Helen Nyambura-Mwaura

Botswana’s Letshego Holdings expects to deliver another double-digit percentage rise in loans for the fiscal year just ending, as it taps a booming market for unsecured loans to low-income African individuals and small businesses.

However, managing director Chris Low said pretax profit for the year ending January this year would be flat as the so-called microfinance lender bedded down acquisitions and faced a pick-up in competition.

“It’s a combination of a pressure on margins and a number of strategic investments in technology and our expansion plan,” he said on Friday.

Africa has experienced an explosion of unsecured lenders in the past decade trying to fill a niche among low-income workers and small businesses that had largely been ignored by commercial banks for lack of collateral or credit history.

The lenders typically charge high interest rates for the risk of writing the unsecured loans, and some have come unstuck as fast-growing economies have slowed.

Low, who declined to say what interest rates Letshego charged on its loans, pointed to the steps the firm took to reduce risk. For example, it has salary deduction codes – agreements to collect repayments directly from the employer – in all main markets.

Letshego, Botswana’s biggest listed company by market value, posted a 10 percent rise in loans to 3.3 billion pula (R3.9bn) in the year to January 31, 2013. Pretax profit rose 18 percent to 841 million pula.

The firm, which lends up to 200 000 pula to individuals, is arranging local currency credit lines across its 10 African operations to bolster lending power.

Low said it would begin a roadshow next week to raise a second tranche of a medium-term note facility at the JSE. The first was for R700m from a programme worth R2.5bn, according to the JSE.

Low declined to say how much it wanted to raise.

Letshego also has another 350 million pula note on the Botswana bourse.

The firm, with a market value of 5.2 billion pula, is taking a pause from an aggressive expansion strategy that saw it enter Lesotho last year and purchase Micro Africa, which gave it exposure in Kenya, Rwanda and South Sudan. Low said its strategy now was to grow its business providing salary advances to government workers and to diversify into taking deposits.

In two weeks, Letshego will start receiving deposits in Mozambique – its first market in this regard.

“We are only interested in operating in countries where we can operate with strong governance and clear ethics.” – Reuters