Image source: Techcabal When Branch launched in Nigeria in 2017, it was a single product company with a money lending license to offer loans to individuals. Loans start from as low as ₦1,000 (~$2) and increase gradually up to ₦500,000 (~$1,200) as the borrower repays.
Four years, ₦40 billion (~$97 million) and three million loans later, the business is evolving.
The company which also operates in Kenya, Tanzania and India acquired a Nigerian microfinance bank license this year. In doing so, Branch has joined the growing number of Nigerian fintechs maturing into digital banks after some years in the lending app nursery. Carbon and Fairmoney are in this class too.
Branch’s mobile app (available only for Android) now includes a wallet that offers users unlimited money transfers and commission-free bill payments, in addition to instant loans (it is quite instant; I have tried it more than once between April and now) that are collateral-free.
But the Branch feature that catches the eye is the “Invest” tab. Clicking the button, users are invited to “Earn 20% per annum by investing with Branch.”
For example, a user who keeps ₦1 million in this product for a whole year receives ₦200,000 at the minimum. Returns are paid every Monday and if left in the Branch wallet, compound for the next payment.
20%?! How are they able to offer that?
You are not alone in asking. It was the first question Dayo Ademola, Branch Nigeria’s managing director, faced on CNBC in May. It was the main curiosity as well on a Zoom call with journalists earlier this month.
According to a June 18, 2021 Central Bank of Nigeria fact sheet , Heritage Bank offers 13.88% on fixed deposits, the highest of any Nigerian deposit money bank. But that’s an outlier; Access Bank’s 7.28% is about the average rate.
Zenith Bank’s 3.94%, though one of the lowest, is better than what Stanbic IBTC, Standard Chartered and First Bank all offer. So how is Branch, a startup, able to go so high on retail investments? Investor capital, low costs
To assure customers that their funds are safe, Ademola explained that Branch’s finance money license from the CBN permits them to offer fund management services and they “only invest customer funds in principal securities and low-risk securities.”She does not specify what these securities are. Low-risk securities could be government treasury bills. But since practically every other bank makes the same claim […]