Development investors commit $660m for African financial services providers
Arise is a company made up of the pooled stakes of three European development investors with a presence in sub-Saharan Africa. The investors are the state-owned Norwegian Investment Fund for Developing Countries (known as Norfund); Dutch financial services company Rabobank; and Dutch development bank FMO.
Beginning in 2017, Arise will start with US$660m in assets across 20 African countries, a number it hopes will grow to $1bn in five years. The company’s main goal is to manage minority stakes in African financial services providers, steering them towards serving SMEs, and the retail, rural and unbanked sectors.
Arise will provide technology and management assistance to the institutions. Kjell Roland, CEO at Norfund, says that Arise will also push banks to be both developmentally and economically viable.
Norfund has offices Nairobi, Johannesburg and Maputo. It’s no stranger to African investments. At year-end 2015, it had a portfolio of approximately $1.8bn, 53% of which was in sub-Saharan Africa.
Despite recent successes such as M-Pesa, the African banking and financial services sector is still in its nascent years. According to Roland, up to 70% of the population is unbanked in some countries. This presents an enormous commercial opportunity for banks to scale and push development. However, he also believes that this will present Arise with a unique problem: how to retain a high quality of service in the face of rapid growth.
“We are talking about banks that will hopefully be able to grow by 20% or 30% a year in their turnover for an extended period of time – maybe they have in the past, but [the problem] is making sure this high growth is handled without comprising on quality,” he says.
Roland adds that a big part of Arise’s strategy will be to learn from already-established African banks in terms of investment, operations and best practices.
He explains that the company’s long-term perspective means it aims to assist financial services providers in the fields of governance, management, marketing, innovation, compliance and risk management.
Upon entering the market, Arise will set up a management company that will hire local experts – as opposed to bringing in expats – to address the needs within the chosen financial services providers.
“This is not about setting up a fly-in, fly-out from Europe sort of place. We believe successful banks are close to their customers. And when they are, they are also better able to understand risks and clients than foreign experts and banks.”
Portuguese financial group Banco Montepio, could join the fund in the near future.