Letter from the Chairman
GROWTH, PROFIT AND RETURNS
Over the last five years, we have experienced a period of rapid transformation from our roots as a Botswana consumer finance company established in 1998, with a single product, into a pan-African broader-based financial institution.
We have achieved geographic and product diversification with subsidiaries across ten countries in Southern, East and West Africa – Botswana, Kenya, Lesotho, Mozambique, Namibia, Nigeria, Rwanda, Swaziland, Tanzania and Uganda.
Whilst the business environment has remained competitive, we have continued to grow our market share via geographic expansion and acquisitions into new markets, and diversification with a broader product and services offering.
We are transforming into a full service financial services provider that offers working capital, low income housing, agriculture support, education and health loans, micro insurance services and savings capabilities to micro and small enterprises, Government and low income earning private sector employees.
The payroll deduction at source model continues to drive our regional portfolio representing 89% of the total loan book, whilst we continue to diversify our product and service offerings. Two important strategic acquisitions in Nigeria and Tanzania in 2015 have provided us with exciting opportunities to expand in these markets and increase our deposit taking licences to four.
This year’s results continue to show good underlying growth in an environment of depreciating exchange rates against the Botswana Pula (BWP) for most of the markets that we operate in. After accounting for a foreign exchange loss for the year of BWP75.6 million, profit before tax was BWP1 billion. This marked a 5% increase over the prior period, with Letshego exceeding the BWP1 billion profit mark for the first time. Loans and advances to customers grew by 14%.
We continue to seek opportunities for further diversification of the business where there are financial inclusion imperatives and a need for productive lending.
We remain committed to extending our footprint into rural locations where access to financial services remains limited in many of our markets, whilst continuing to grow and extend the market reach of our lending business.
I am proud to report that our efforts and commitment to financial inclusion were recognised with an invitation to join the Alliance for Financial Inclusion (AFI) as a private sector partner in December 2015. Letshego is one of only five global companies, including BBVA, GSMA, Mastercard and Visa Inc., as well as the first Africa-focused private partner, to have been awarded this privilege.
AFI is a global network of financial policymakers from over 100 developing and emerging countries, covering the majority of Letshego’s footprint – the AFI partnership status is important for the Group’s sustainability objectives, and will enable accelerated dialogue with regulators sharing a common focus on creating policies conducive to financial inclusion.
IMPLEMENTATION OF STRATEGY
I am pleased to report that we are already starting to witness positive impacts due to the management team’s successful implementation of the first phases of the new Five Year Strategy, as approved by the Board.
The development of a clear vision and strategy with measurable outcomes has resulted in an integrated Group focus, understanding and effort that has delivered good results within a relatively short period.
The new strategy has begun to lay the path for Letshego’s diversification and has established a solid foundation on which to safely and effectively implement our expansion, thereby ensuring our sustainability in the long term.
Our strategy has four key imperatives, namely, diversification, embracing financial inclusion, delivering simple, appropriate and affordable solutions and providing ‘access, anytime, anywhere’.
We recognise that with diversification comes opportunities and risks and that the implementation of this broader, transformational strategy has, and will continue to require investment in order to build our capabilities and mitigate risks.
Letshego is making good progress in this regard as our capability requirements become clearer. We are focused on enhancing our customers’ experience by improving branch standards through customer service training. Recently Letshego has implemented a brand refresh that is successfully creating brand uniformity across the Group.
We are working to tighten our risk management processes in order to improve our governance standards, funding, liquidity and balance sheet leverage. Also, we are in the process of implementing an enhanced Enterprise Risk Management (ERM) system. Obviously, our staff members are vital to the successful implementation of our strategy, and we continue to engage with them in order to develop their talents and skills as well as to manage their performance. Also, we are developing a future capability model across the Group.
We will continue to invest in information technology systems, the critical evaluation of available resources, and a thorough understanding of regulatory requirements in each country.
Letshego is committed to stakeholder engagement and continues to work closely with stakeholders in relation to local Strategic Social Investment (SSI) initiatives, investor relations, our financial inclusion agenda, and media as well as public relations activities.
Improving Life
Whilst we understand the need to achieve returns for our shareholders, our business model is based on sustainability principles. We provide capital to those who have traditionally had no access to capital in order to address financial exclusion.
These funds are typically used for essential services such as education, housing, business growth, and health; access to capital is therefore often life-changing for our customers.
We address social, environmental, ethical lending, and customer concerns in close cooperation with our stakeholders, and we are committed to being a responsible lender. Moreover, we put aside up to 1% of our post-tax profit annually towards programmes in the health and education sectors as well as livelihood development, where resources are much-needed and can be effectively used for public benefit.
The Future
Africa is the second fastest growing region in the world with a GDP growth rate in excess of 5% over the last decade. We expect this growth trend to continue, and with expansion comes an increased demand for capital. 77% of Africans do not have an account at a formal financial institution, although there is large variation in account ownership across African countries. The servicing of this large ‘unbanked’ or under-served segment of the population provides Letshego with significant opportunities for the future.
The Group will continue to seek new markets and opportunities for expansion and to deliver simple, appropriate and affordable products and services as determined by our customers’ wants and needs.
We are looking to achieve good performance and growth in the advances book and profitability during the 2016 financial year, considering prevailing economic conditions and forecast opportunities for growth.
Deposit-taking and micro finance businesses will continue to grow and will make an important contribution to our responsible financial inclusion agenda, while we continue to grow our payroll deduction at source model.
Mobile solutions and the provision of financial products and services to MSEs, groups, and low income earners offer considerable growth opportunities, and we will continue to extend our offerings in this regard.
We intend to continue exploring opportunities in government, health, education, housing, and agriculture.
Board of Directors and Corporate Governance
The Board of Directors and management are pleased to welcome Dr. Gloria Somolekae to the Letshego Holdings Limited Board, as a new independent Non-Executive Director (NED), effective as of 8 January 2016. Dr. Somolekae’s addition to the team will further strengthen the calibre of oversight and governance at our growing Africa financial services Group. This brings the total number of Directors to ten, of which six are independent NEDs.
We continue to make progress towards full compliance with the King III Code on Corporate Governance and Global Reporting Initiative (GRI) Sustainability Reporting Guidelines.
Gratitude
My personal thanks go to my fellow Board members for their unwavering and loyal support and the skilled guidance that they provide to the Group as a whole. Also, I would like to congratulate the entire management team across Africa for the way in which they have led the Group in these challenging yet exciting times. Special mention must be made of the enormous contribution of our dedicated members of staff as, without them, none of the Group’s achievements would have been possible.
Finally, our thanks go to our customers, regulators, investors, and other stakeholders. We look forward to continuing and strengthening these relationships into the future, as we improve life.
J.A. Burbridge
Chairman, 26 April 2016
