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AFTER A SHORT-LIVED VENTURE of less than a year into the predominantly Muslim island of Zanzibar in Tanzania in 2007, microlender Blue Financial Services closed its solitary branch and headed back to the mainland, where the Muslim community makes up less than 20% while the island is 92% Muslim.
That was due to the lack of clients, as Muslin Sharia law doesn't allow lending and borrowing. But Blue has now established operations in Nigeria and intends to use that country as a launch pad into the rest of the Sharia law dominated West Africa region. "We went into Zanzibar without taking into consideration the cultural differen-ces between the island and the mainland," says Morné Reinders, Blue investor relations' manager. He says the Zanzibar experience won't be repeated in Nigeria.
The yet-to-be formed Blue Intercontinental Micro Finance Bank (BIMFB) will use the branch infrastructure of Nigeria-listed Intercontinental Bank (ICB) to roll out its services to the bank's approximately 2m clients. ICB has 280 branches throughout the country. Blue will own 55% of the BIMFB shares, with ICB holding 35% and AIG Capital Partners (AIG) 10%. AIG holds shares in both ICB and Blue and has played a significant role in bringing the parties together in Nigeria.
Nigeria's 150m people are almost equally divided between the extreme Sharia north and Christian south. "We're comfortable the non-Sharia market is big enough for us to be very successful. There's enough demand for Blue's services in Nigeria," says Reinders. "In addition to the large population legally allowed to borrow, we're studying Sharia law to determine what's acceptable and what isn't in order for us to expand our products to the rest of the population. We don't think that Sharia prevents us from entering Muslim countries. We just need to develop products that are permitted under the religion."
As soon as it's able to deal under Sharia law, says Reinders, Blue will expand into the rest of region. That would expose it to a potential 240m clients who haven't had the opportunity "to borrow from a well-regarded financial institution". Says Reinders: "We're fortunate to have been invited by other governments in the region to establish our products in their countries." After one such invitation, Blue has already held exploratory negotiations with another country known to Finweek.
The microlending industry is under-developed in the region as a whole and there's a huge opportunity for success. In addition to the US$21m start-up capital, AIG has made available another $60m in revolving capital for future expansion. If BIMFB cannot get funding cheaper elsewhere, it will use this money to establish its own branches where ICB isn't present.
The parties are so confident that they're talking about listing the new company on the Nigerian stock exchange in four years' time.
