06 April , 2006
Taking the Letshego micro-lending model to Africa through Botswana IFSC

Micro Provident Botswana Limited has been converted into a Botswana IFSC accredited company in order to enable it to expand its business enterprise to other African countries. The accredited holding company under the Botswana IFSC will roll out the Micro Provident Botswana business model in other parts of Africa.

Micro Provident, whose trading name is Letshego, provides short-term finance to low and middle-income people working in the formal employment sector in Botswana. The company is establishing retail financial services companies, as subsidiaries, that will offer a range of financial services products to employees of government, parastatals and the private sector in a number of African countries.

Formed in 1998, Micro Provident has been very successful, growing its loan book from P20.9 million in October 1999 to about P326 million (about 38 000 loans) in the 2005 financial year – an increase of 53 per cent over the previous year. The company was listed on the Botswana Stock Exchange in September 2002. As reported in its 2005 Annual Report, the company did well last year and posted impressive results, with earnings per share of 63.5 thebe, which is a 50.3% increase; dividends per share of 16.0 thebe, a 52.4% increase; and net revenue of P140.7 million, a 32.8% increase.

As the Chairman of Letshego, Mr C.M. Lekaukau, has said, “a strategic decision was taken to invest in resources to carefully explore and implement the group’s regional expansion plans and to simultaneously investigate its restructuring to maximize those benefits that may be available in terms of the International Financial Services Centre status.”

Now the shareholders have taken the business outside the country and gone regional. The current listed company drives the expansion programme from its base in Botswana, under the IFSC. Target markets were identified in Swaziland, Zambia, Malawi, Tanzania and Uganda, and total earnings of about US$ 120 million are projected within the first three years of operations.  Operations have already started in Swaziland, Uganda, Tanzania and the company will soon be recruiting for the Zambia office.

“Gratifying and exciting” is how Micro Provident Botswana MD Jan Claassen describes the Botswana IFSC accreditation. “This has greatly enhanced our efforts to break into regional markets, which is good for the company and for the country. It enables us to create more job opportunities here, in line with the goals of Vision 2016, and to increase revenue flows to the Botswana Government.”

He said it was significant that Micro Provident Botswana, a Botswana-based financial institution, has achieved IFSC accreditation, and the company would be a net exporter of financial services and skills.

Botswana IFSC CEO, Mr Alan Boshwaen, said: “The Letshego model has been tried and tested in Botswana and is successful. We are happy that the company has identified the benefits offered by IFSC as appropriate to base its regional expansion programme. This is a good example to local companies that expansion using the IFSC is possible and makes business sense. Additionally, Letshego is a listed company in Botswana and has Batswana shareholders, therefore with this IFSC status it offers a great opportunity for Batswana shareholders as they will directly benefit from its regional expansion activities and bigger market footprint.”

The main shareholders of Micro Provident Botswana Limited are:

• PAIP-PCAP-FMO-Letshego Limited, which comprises Pan-African Investment Partners (PAIP), Pan-Commonwealth African Partners (PCAP) and Nederlandse Financierings Maatschappij voor Ontwikkelingslanden NV (FMO),
• the International Finance Corporation (the private sector investment arm of the World Bank),
• Botswana Life Insurance Limited (the wholly owned life assurance business of Botswana Insurance Holdings Limited) and
• Micro Provident Limited, an Isle of Man registered company established by the founder of Letshego, Shaun Cairns.

PAIP and PCAP are private equity funds managed by Kingdom Zephyr Africa Management Company (KZAMC), a private equity fund manager with offices in Johannesburg, Accra, London, New York and Washington DC.  Prince Alwaleed of Saudi Arabia, one of the richest investors in the world, who visited Botswana last year, has interest in the company through KZAMC private equity funds.

The restructuring of the business to enable it to pursue cross border opportunities will not affect the tax revenue accruable to the Botswana Government. Certain operating assets of Micro Provident Botswana will be transferred to a new company which will continue to service the domestic market and pay tax at the standard rate. As a listed entity, the project will also enable the participation of citizen investors.

Benefits to Botswana

The establishment of Micro Provident Botswana in the IFSC enables a home grown listed financial services company to extend its footprint in the region. Additionally, it will increase tax revenues – from dividends, management fees, treasury and other activities.

It will also create employment and expose citizen professionals to the complexities of developing a business across borders.

It will increase business opportunities for local banks, which are extending facilities of up to P140 million to Micro Provident Botswana.

By growing the investment profile of a listed company it will raise interest in the Botswana Stock Exchange and contribute to financial sector development.

Awareness of Botswana IFSC will widen as the company goes about raising funds in international markets.

NOTES FOR EDITORS:

For further information please contact Rachel Mothibatsela on 360 5000
For more information on Botswana IFSC please visit www.ifsc.co.bw