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Funding the contrary finance sector

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The non-bank traditional bank (NBFIs) sector, known as the contrary finance sector, is basically determined by the institutional market for funding in many markets world wide. By regulation, NBFIs for most markets are prohibited from gathering deposits, or restricted from transactional banking services which are extremely important to attract deposits. Banks are also mostly hesitant to give loan to NBFIs, with the potential long-term competitive threat. For instance, Capitec of Africa and Equity Bank of Kenya, each of which at the moment are a lot fully-fledged banks, their very own roots as NBFIs. ?

In Africa, the deepest and broadest market in Africa, NBFIs are actually largely focused on borrowing on the domestic market. This may not be without its risks, given for instance the significant reversal in domestic investor sentiment for the sector following the collapse of African Bank in August 2014. African Bank’s largest peer, Capitec was less affected, given its successful deposit mobilising strategy. While no NBFI went under because of a drying from funding following African Bank’s collapse, anecdotally, many CFOs and Treasurers inside the sector reported a scrambling for alternative funding, higher costs, as well as an enforced slow-down in asset growth. Foreign NBFIs with JSE-listed bonds, for instance Trustco and Letshego, were also impacted.?

In 2015 and 2016, Namibian financial services group Trustco turned its funding activities to the global institutional market, and completed several successful transactions, culminating in November 2016 with R450m financing package arranged by Verdant Capital. Trustco also acquired Fides Bank, now Trustco Bank, bringing a deposit-taking entity into the group.? This really is another type of NBFIs transitioning as time passes to turn into a bank. The Namibian dollar continues to be pegged one-to-one towards the south African Rand since Namibia’s independence in 1990 thus Namibia’s financial market is often seen as an adjunct for their bigger neighbour.?

Trustco, using a route trodden by many people similar institutions in Africa, was successful in tapping a trader audience of specialist Financial Inclusion funds. These funds, mainly located in North America and Western Europe, target investments in emerging/developing markets financial institutions, especially those using a financial inclusion agenda.? This will mean NBFIs, or perhaps in fact banks using a broader focus than most commercial banks, by way of example SME-lending or bottom on the pyramid lending. The Financial Inclusion investor community grew out from the microfinance around the world one more Decade

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