COMPANY PROFILE
2013
Letshego
Transparency is the key to success
CompANY PROFILE
Transparency is the key to success Editorial: Lauren Grey Production: Chris Bolderstone
Spotting a niche in the market, financial services company Letshego began offering unsecured loans to individuals in 1998 – a service which, at that time, banks and other financial lenders did not offer. The company has since established a reputable brand and expanded its footprint across the continent, assuring anyone in financial trouble that help is at hand.
It is inevitable that we will all, at one point or another, consider taking out a loan to help with home improvements, school fees or even the purchase of a new vehicle. However, unlike traditional bank loans, we are no longer required to pledge an asset in order to secure our repayments; instead we can opt for an unsecured loan to assist with short-term financial issues. One company at the forefront of the unsecured loan market is Botswana-based Letshego, which since its inception, has expanded rapidly throughout the African continent and continued to build on its reputable brand. Letshego CFO, Colm Patterson says that the company grew organically after targeting a niche in the market, “Set up in 1998, Letshego set out to provide unsecured loans to individuals, because generally at that time the banks only focused on providing secure and
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corporate loans.” “The company listed on the Botswana Stock Exchange (BSE) in 2002, and from 2005 onwards we started our African expansion and we are now in 11 different countries across southern and eastern Africa.” As the leading financial services provider in Botswana, Letshego offers products and services within vehicle finance, funeral cover and executive finance, but the company’s core service is to provide unsecured loans to individuals, as Patterson explains. “Our core product is the unsecured loan to the individual; we give loans up to five years in duration, with the maximum loan size roughly at $35,000. It is consumer finance, we are giving individuals the opportunity to borrow on reasonably straight-forward terms, and our only credit risk is ‘will the individual remain in employment for the duration of the loan?’”
Letshego
UNIQUE BUSINESS MODEL Many people may associate soaring interest rates and hidden clauses with unsecured loans, but it is a principle of Letshego to ensure the repayment process is efficient, transparent and altogether stress-free! In order to achieve this goal, the company has a unique business model whereby they work closely with employers to ensure the client is able to pay back the loan in easy monthly instalments. “We use a business model known as ‘deduction at source’; what this means is we have an agreement with employers that in order to repay the loan, monthly instalments are deducted directly from an individual’s salary and paid directly back to us,” says Patterson. “The deduction at source business model is wellestablished in South Africa, and whilst Letshego was the first to do this in Botswana, we’re not the only company
with this arrangement. Other financial service providers now have the same arrangement with employers and government, so it is becoming very competitive.” Deduction at source is efficient and easy for all parties involved in the process, as it requires no chasing from the loan provider and no payments to be made by the customer. To ensure this process works efficiently, Patterson says that Letshego has a ‘robust approach’ when issuing loans, “Letshego has built a credible brand and a great reputation through its approach to lending; our internal processes are robust and aimed at ensuring that customers are assisted in a timely and efficient manner thereby avoiding overcommitment of customers.” In order to secure a loan, Letshego requires customers to provide proof of income, identity documents and a recent bank statement as part of its internal checks, but
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CompANY PROFILE Patterson says that although the company’s processes are thorough, it is also possible to acquire a loan the same day it is applied for. “Letshego’s processes are robust, but also, if you walk into one of our branches in the morning, there is a good chance you could have approval on a loan that same day. The fact that people know where they stand with Letshego is very important.” “The reason for people taking out loans vary, it isn’t your typical loan whereby the bank will ask you what you want to use the loan for, we generally don’t really ask, but we have noticed over the years that people use loans for school fees, improvements on properties, vehicles and starting up businesses, but people also use them for things like holidays, so it really is quite varied.” The deduction at source model not only works in favour of the customer, but also for Letshego because of its stable customer base and relationship with government, which has been established since the company’s very beginnings in Botswana. “The largest employer in Botswana is the government,
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which is where the majority of our customers work. We therefore started off with an agreement with government to provide loans to those employees that needed them.” “The motivation from the government’s perspective was that some of its employees would need a loan for one reason or another, and at that time the banks would not provide them, which would result in the employee asking the employer for a loan.” Letshego’s relationship with the government and its employees in Botswana grew steadily and became an exemplary model during the company’s expansion process into the African continent.
RISK ASSESSMENT Typically, unsecured loans are considered higher risk for both the lender and customer; for the lender because there are no pledged assets should the client not be able to pay back the loan, and for the client because it is much easier to fall behind on repayments. However, Letshego has processes in place to lessen these risks, as Patterson explains, “What’s very important is not
Letshego
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CompANY PROFILE
to over-debt individuals and there are processes in place to ensure this doesn’t happen, for example in Botswana individuals can only have one loan that goes through payroll deduction.” “There are also safeguards in place in terms of minimum take-home pay, which is set out by government. These principles are enforced by an independent central registry that plays a very important role.” Minimum take-home pay is set out by government to ensure that an individual takes home a specific amount each month, which in turn prevents loan companies from deducting payback charges which may leave the individual with no money whatsoever. As a principle, Letshego adhere very closely to these regulations and work within the industry to ensure other companies adopt the same approach, “We are actively involved in lobbying governments where these processes aren’t already in place, because we believe that it is in their interest as a responsible employer and our interest as a responsible lender to ensure individuals are protected.” Aside from protecting the individual from the risks associated with loans, Letshego has processes in place to ensure it minimises its own risks, for example on application of a loan a client must be able to prove that they are in work and how much they earn.
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“We are giving individuals the opportunity to borrow on reasonably straight-forward terms, and our only risk is ‘will the individual remain in employment for the duration of the loan?’ We therefore have processes in place to assess the likelihood of this.” Fortunately for Letshego, the majority of its customer base is employed by government, which is considered a very stable employment market, so with the combination of its business model and stable customer base the risks associated with unsecured loans are mitigated to a large extent.
FUTURE PLANS With a number of offices spread throughout southern and eastern Africa, Letshego definitely has a comfortable share of the market and going forward, Patterson says that the company’s continuing expansion is threefold. “Our existing businesses are at various stages, for example some are fairly mature whilst others are just starting up with major growth potential, so the first stage in our expansion plans is to continue to grow those existing businesses.” The company is also looking towards further expansion across the African continent to areas such as Zimbabwe, Malawi, Ghana and Nigeria, but possibly the most exciting
Letshego
stockbrokers Botswana is a leading securities house in Botswana. Established in 1989, the company was instrumental in the establishment of the Botswana stock Exchange and has been involved in every main board equity listing on the BsE since inception. stockbrokers Botswana has established strong and lasting relationships with domestic institutional and individual investors, and the largest active emerging market investors in the region.
sERVICEs stockbroking sBB is a registered member of the Botswana stock Exchange and operates primarily as agent. sBB acts as agent for both buyers and sellers and derives its income from commissions set by the Botswana stock Exchange. sBB has established relationships with a wide number of individual, institutional and corporate clients, both locally and internationally. sBB services both private and institutional clients. The retail private clientele has always been a strong focus of the company consistent with our history as pioneers of the BsE and our mission to assist all Batswana create wealth through the BsE.
Fixed Income Dealing We trade both listed and unlisted bonds, as well as corporate and government bonds, offering our clients a full range of potential investors and regulations of the Exchange.
sponsoring Broker This is corollary of, and derived from, our experience in the Botswana Capital markets and the listed securities particularly. This includes sponsoring brokership for existing corporate clients, new listings, rights issues, and capital raisings. Allied to this is the placement of equity, locally and international for listed and unlisted corporates.
Tel : +267 3957900 Fax : +267 3957901 E-mail : info@sbb.bw
www.stockbrokers-botswana.com OCT 13 PAGE 7
CompANY PROFILE
future goal is the introduction of a new range of services. “In certain areas we are looking to apply for commercial banking licenses which would allow us to broaden our product range and offer a wider variety of financial services. This is important because the market is becoming extremely competitive and we want to stay ahead of the competition by offering services that are relevant to our customers.” “In Botswana and Namibia we are the market leader in terms of deduction at source loans, in other areas we have managed to grow our business quite significantly, but the market is becoming very competitive. More and more organisations are targeting the market, and banks are also becoming very aggressive in this area also.” Luckily for Letshego, it already has a distinct advantage over the competition because of its established, credible brand and great reputation across many parts of Africa; expansion for the company should therefore be fairly organic.
ORGANIC GROWTH Letshego’s previous expansion has seen a combination of both acquisitions and greenfield start-ups, and Patterson says that although the majority has been greenfield projects, acquisitions are just as important. “For example, last year we did a start up in Lesotho but we also acquired a business in Kenya which has operations in Kenya, Rwanda and Uganda. So we look at both options, and whichever makes more sense, we go for” says Patterson. One of the company’s most recent acquisitions is Micro Africa Limited, the mother company of Rwanda Microfinance. The 100 per cent buyout saw Rwanda Microfinance rebrand to Letshego Rwanda Limited. The acquisition has positioned Letshego to serve individuals who previously had limited access to financial services, which Patterson says will help assist the company’s growth and pan-African footprint.
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“The fact that people know where they stand with Letshego is very important” PAGE 8 OCT 13
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