Silicon Valley Africa Optimum Concepts Ltd (“SVAfrica“) has obtained a partnership agreement with the Office of The Senior Special Assistant (SSA) to Nigeria’s President on Community Engagement (South-East), Hon. Barr. Mrs. Chioma Nweze, to seek investment funding from early investors in order to establish the South East Community Development Microfinance Bank (“SECOD MFB”). With you as the new investment partner(s), SVAfrica now has a significant opportunity to develop and expand SECOD MFB rapidly in Nigeria, where our cutting-edge solution offerings would benefit both un-banked, underbanked & banked consumers, merchants, agents, and card-user communities underserviced by existing propositions. By so doing, SECOD MFB will create a new market of customers previously unable to enjoy financial services due to the absence of a cutting-edge digital banking and payment solutions that can allow large numbers of users across this platform where they can utilize their cards and mobile App for better financial transactions. SVAfrica requires NGN1Billion capital investment to obtain license from the Central Bank of Nigeria for SECOD MFB, acquire digital banking & payment technology infrastructure and Working Capital and Balance Sheet Funding. Consequently, SECOD MFB will be owned 10% by such early investors.
Senior Special Assistant to the president on community engagement (South East), Hon. Barr. Mrs. Chioma Nweze
BACKGROUND
The Harvard Business Review, in an article entitled ‘A Nigerian Model for Stakeholder Capitalism’, states that “The Igbo Apprenticeship System (IAS) has been recognized as the largest business incubator in the world as thousands of ventures are developed and established yearly through it”. Unfortunately, millions of such small businesses established across Africa lack the necessary credit finance from the formal financial institutions to make the necessary quantum leap needed to grow their businesses beyond the physical input of their founders.
In view of the above, this bank would be launched initially as a retail micro financial institution to provide low-interest loans and equity investments, to catalyze youth and women entrepreneurship in the area of agriculture, sustainable mining, green energy, sustainable transportation, blue economy, healthcare services, education and skill acquisition, financial services, ICT, entertainment, hospitality and telecoms. Overtime, the bank would infuse corporate, business and commercial banking into its operations in order to take care of high value finance demands within the region.
The N1Billion Round One Funding is required to deliver this base case, and early investors will cash out in the next round of investment.
MARKET STRATEGY
SVAfrica’s go-to-market strategy for SECOD MFB is simple: We intend to deploy the use of mobile/internet banking Apps and virtual/contactless cards at point of sale (“POS”), QR code readers and other web/mobile based propositions that have rapidly expanded into variations such as in-App payments, NFC contactless cards, QR codes, biometrics, mPoS, digital wallets and blockchain, and will be made available across the markets, where payment acceptance services are not operated on cutting-edge technology, and where society still relies heavily on cash-based transactions.
The SECOD MFB’s proposition is to change the way Africans Bank. Also, we shall build a Network of Agents around the markets to collect cash & card-based payments to offer Agent Banking services to the last mile customers there. In addition, SECOD MFB shall leverage the initial customer-base to profile, identify and market potential Merchants and onboard them to begin to open savings, loans, deposits, salaries, pensions, gratuity, insurance, business, corporate investments and other types of accounts in their own business premises.
INVESTMENT CASE
In view of the above, SVAfrica requires a capital investment of NGN1Billion to finance the procurement of a license from the Central Bank of Nigeria; acquisition of digital banking technology infrastructure and to provide working capital necessary to carry it through to a break-even point anticipated some thirty-six months after the capital investment.
The Volume Opportunity
With some 160 million active mobile phone numbers in Nigeria (linked to NIN), 22 million bank issued cards and about 100 million average monthly mobile phone data users, there’s a good potential demand for digital banking products, especially, since after the cash crunch.
This planned solution appears to us to be very well timed for new market entry move. This indicates volumes soft target of around 100,000 transactions per day at N10 each within a 3year period, totalling, 100,000 x 365 x 3 x 10 = N1.95b equivalent to US$0.73m (@N1,500 /$1).
FINANCIALS
The SECOD MFB model is based on the following elements:
- SECOD MFB shall deploy its terminals free of charge to merchants and agents.
- Merchants and Agents shall be carefully vetted before being remotely onboarded to ensure they have the capacity to utilise the digital terminals.
- In Nigeria, Merchants pay a 1.5% of the gross transaction values and N10 transaction fees.
- For additional services such as mobile top ups, SECOD MFB will get a wholesale commission from GSM operators, utility and billing companies, and pass on a portion of that to the Agents based on their sell-through activity.
- Overheads are largely fixed, and additional variable costs attached to growth in volume of merchants and terminals is relatively low, resulting in a steep net income curve.
Use of Funds & Proceeds:
All technical, human resource, regulatory & compliance requirements needed to enable deployment as soon as SVAfrica receives an investment of N1Billion, to cover:
- The procurement of a Microfinance Banking license from CBN: N10 million
- Deposit of paid-up capital requirement for the MFB license category: N200 million
- Balance sheet funding for the suspense account for transaction settlement: N490 million
- Working capital needed for the provision of office, equipment and salaries: N200 million
- Deployment of core banking application, systems, servers, network, POS devices: N100 million
- Total: N1Billion
Equity Contribution:
An investment capital of N1Billion representing 10% equity in SECOD MFB will yield at least N1.95b gross or US$0.73m (@N1,500 /$1) at the end of 3years.
CONCLUSION
We call on you to make this worthy investment today and sign the attached Memorandum of Understanding (MoU), to obtain guaranteed ROI and cash out in the next round of investment, needed for expansion into other parts of the country.