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Bayport, whose shares trade on the Mauritius stock exchange, offers payroll-based loans primarily to local and national government employees. “We are very rapidly moving down the digital route” and the process will be completed in all markets in the next 18 months, Newson says in Johannesburg.
- Operations in Tanzania are already fully digital, while the process is being rolled out in Mozambique and Botswana, he says.
- Fully digital mid- and back-office operations will improve efficiency and reduce turnaround times, he adds.
Newson, a former CEO of Standard Bank Africa, was appointed as Bayport CEO in January. The company’s shareholders include Kinnevik, Helios Investment Partners and the South African government’s employee pension fund.
Bayport is a shareholder in seven African country operations: South Africa, Botswana, Tanzania, Uganda, Ghana, Zambia and Mozambique. It also holds stakes in Latin American operations in Colombia and Mexico.
- The process of digitisation is likely to lead to some job losses, though this may be reduced by attrition, Newson says.
- There may also be “slightly less” self-employed sales agents, he adds.
- The impact on employment will vary across countries as some regulators still require handwritten signatures on loan agreements.
On the payroll
Covid-19 means the company has had to concentrate on capital and liquidity preservation, and it did not need to approach its investors for new funding, Newson says. Costs were reduced in operations and at headquarters. The company does not plan to pull out of any of its markets, but has no immediate new market-entry plans. We are “not in a world of massive organic expansion,” Newson says.
- Bayport’s digital strategy predates Covid-19 and the pandemic has served as a “confirmation” of the business model, he says.
The company sells bonds in the financial markets where it operates. In 2019, it sold a $260m senior unsecured social bond, due in November 2022, which trades on Sweden’s Nasdaq bourse. Newson says the company will seek to refinance the bond.
- No date has been set for the refinancing and conversations with investors are ongoing, Newson says.
- The amount sought is likely to be “similar” to the existing bond, he adds.
The company’s borrowers are often teachers, nurses and police officers who use the loans for education fees, home improvements or for emergencies. “We are not a pay-day lender” and interest rates charged are lower than for pay-day loans, Newson says, without giving a typical interest-rate figure.
Bayport also carries out some private-sector payroll lending for manufacturing and mining employees in South Africa and Zambia. Newson expects that the proportion of private-sector borrowers will gradually increase in the future.
The strategy of concentrating on low-risk employees reduces credit losses, Newson says. Concentrating on borrowers with stable, formal jobs logically also weakens the company’s claims to be improving financial inclusion.
- Borrowers are mostly men: the company’s 2020 impact report says 68% of African customers are men, and the average age of all African customers is 41.
- “Impact, like beauty, is to a large extent in the eye of the beholder,” the report says.
Investors should judge Bayport on its profitability rather than as a vehicle to widen financial inclusion.
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