IFC evaluates investment in Nigeria’s mobile money market

Mergers, Acquisitions and Financial Results

The International Finance Corporation may invest in the Nigerian mobile money industry if it is satisfied with the result of the due diligence it is currently carrying out on the industry. Our correspondent gathered that the IFC was keen to play a major role in the country’s emerging mobile money ecosystem and was currently evaluating opportunities available therein.

Areas currently being evaluated by the IFC include technology acquisition, e-Float management and agency network, according to investigation. The Principal Associate, Mobile Money Africa, Emmanuel Okoegwale, who spoke with our correspondent about the development, said a number of international development organisations had also expressed interest in the country’s fledgling mobile money landscape.

Aside from the possibility of injecting funds into the mobile money ecosystem, Okoegwale noted that organisations such as the World Bank, Consultative Group to Assist the Poor, United States Agency for International Development and Mercy Corps were showing interest in the emerging investment profile in the mobile money space.

These organisations, according to him, are expected to play a major role in capacity building for mobile money operators in the country. According to CGAP, the majority of Nigerians lack access to formal financial services.

A recent Enhancing Financial Innovation and Access FinScope survey concluded that 74 per cent of adults in Nigeria (64 million people) had never been banked, and only 15 per cent of women currently had bank accounts.

To address the lack of financial access in the country, the Central Bank of Nigeria had granted licences to 16 firms and the development has been creating a buzz in the country.

A number of local and foreign investors have also seen the opportunities in the mobile money market and are strategically positioning themselves for it.

Okoegwale said, “At this stage, only some Nigerian-based organisations are looking at the investment opportunities in the mobile financial ecosystem deeply. Altheia Capital and Adlevocapital are in the forefront. The International Finance Corporation is keen and they are evaluating the opportunities covering all the segments like technology acquisition, e-Float management and agency network. Some local banks are also actively packaging e-Float credit products for the agents and that is ongoing.”

Goodwell West Africa, a microfinance investment vehicle co-managed by Goodwell Investments in partnership with Lagos-based Alitheia Capital, recently completed an investment deal in the Nigerian mobile money start-up, Paga.

The Chief Executive Officer, Paga, Tayo Oviosu, said, “Goodwell and Alitheia bring a great wealth of international and local experience, which will further strengthen our ability to achieve our vision as a company. We are strongly committed to bringing quality financial services to all Nigerians and truly believe that Paga will change the life of the average person for the better.”

Speaking on the investment, the Partner, Goodwell Investments, Mr. Els Boerhof, said, “Our fund was founded on the principal belief that improving access to affordable financial services for people at the ‘base of the pyramid’ contributes to sustainable development. This can best be achieved by developing and scaling up entrepreneurial institutions aimed at banking the un-banked.

“We believe that Paga will achieve a substantial social return as well as an attractive financial result. Providing the poor with savings and remittances via the mobile phone makes access to these financial services cheaper, as expensive bank branches are not needed and many people do have a mobile phone nowadays in Nigeria.”

The latest investment in Paga came on the heels of an investment from a renowned United States venture capitalist, Mr. Tim Draper.

Okoegwale, who commented on this, said that individual venture capitalists and angel investors were top potential for the Nigerian mobile money industry in terms injection of funds. He added that many of them were waiting for the final licensing before committing resources to the viable schemes.

He noted that some of the known players in the mobile finance landscape were in active talks to explore technology funding and acquisition scheme in Nigeria. Players like UTIBA of India, among others, according to Okoegwale, are rooting to help shape the mobile money scheme in the country.

When the CBN gave the 16 licence holders mobile money approval in principle to operate m-Money networks, it gave them four months to prove their capacity for the system. A number of the licence holders, according to findings, have been having funding challenges and this may have fuelled investors’ interest in the scheme, experts have argued.

In view of this, an expert who is in the know of happenings in the fledgling mobile money industry, said four institutional investors would be meeting some of the 16 mobile money licence holders in July, 2011.

The source, who did not want his name in print because he was not authorised to speak, said, “As regards funding, many Nigerians do not know about the opportunities in mobile money business as we speak but efforts are on going to bring some foreign investors to bridge the gap.

“Funding is still a major challenge as most potential venture and angel capitalists are still not favourably disposed to investing significant resources into these relatively unknown start ups for early stage funding.”

He added, “Efforts are on going to bring international investors to meet with the independent providers in the month of July to enable them to compete favourably in the emerging mobile financial landscape in Nigeria.”