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Johannesburg - African Bank Investments (Abil) [JSE:ABL], the lender with a focus on
low-income earners, said on Friday it hopes to tap international bond markets
in the next 12 months and to issue local bonds twice per year to fund its
business.
The bank, which also finances customers through its
Ellerines furniture stores, has a $1bn bond programme at the London Stock
Exchange. It had its debut international issue in June for $300m.
Abil also plans two local issues
annually under a R17bn programme.
"We're sitting on R17bn capacity and as and when we need
funding, as we have said, twice a year we will go and issue," said Abil chief financial officer Nithia
Nalliah.
“We will do the same globally. At least once a year we will
go out and issue. The size of that will depend on how the global market is at
that point in time.”
Abil will also issue fixed-coupon preference shares every
three to six months. The bank sold shares worth R250m in July, the first
tranche of a R1.2bn programme.
Abil intends to dish out 25% more loans annually until 2014.
The loan book stands at R30bn, all of it to individuals, Nalliah said.
The bank, which does not take deposits and gives only
unsecured loans, charges fixed interest rates varying between 8% to 33%. It has
a bad debt ratio of over 10% of total capital, compared with the country’s four
big retail lenders which typically have a bad debt ratio of 0.4% to 0.5%,
Nalliah said.
With some 450 branches across South Africa, Abil hopes to
double outlets in the next 18-24 months by partitioning its Ellerines furniture
stores or setting up "kiosks" in the shops.
Ellerines has 1 000 stores in South Africa and outlets in
Zambia, Zimbabwe, Botswana and Namibia.
Growing loan book
Abil now has over R5bn of advances sitting on credit cards.
About 90% of customers who receive the cards had never owned one, Nalliah said.
Abil was formed just before South Africa broke with
apartheid and mainly targeted the disadvantaged black population that was locked
out of borrowing because most did not have assets to secure lending.
With attractive offerings such as the payment break product
- which allows low risk borrowers a few months before they start repaying loans
- Abil has grown its base with clients, such as mineworkers, to about 2 million
customers.
The vast majority of them do not have conventional mortgages
or vehicle financing.
Nalliah said the bank has no immediate plans to venture out of South Africa as local demand was still insatiable.
"The informally employed people, that’s a huge sector of the economy in South Africa and that’s going to grow given that government can’t create jobs at the required pace in the public and formal sector," Nalliah said.
"We haven’t gotten anywhere near the levels we would like to
in that market."
The lender, whose financial year begins in October, said
earlier this month credit disbursements for the first nine month rose 53%.
Similar growth is, however, unlikely as lending was coming
off a very low base and economic prospects are still dim.
"It's unreasonable to expect the same high growth every year
as one needs to take account of what is happening in the economy," Nalliah
said.
