Credit as a catalyst for change in the financial services industry

Finclusion Group, a company reshaping Africa's financial landscape, is making significant strides in driving financial inclusion and wealth creation through innovative credit solutions. In a recent interview with CNBC Africa, Timothy Nuy, Co-Founder and Co-CEO of Finclusion Group, discussed the company's core philosophy that credit serves as a catalyst for change in the financial services industry. Nuy highlighted the theory of change that giving people access to installment loans empowers them to create intergenerational wealth by providing them with assets they previously did not have. The company's core business in Kenya and Tanzania focuses on offering loans for acquiring vehicles, particularly targeting small business owners and entrepreneurs, thereby introducing them to the financial ecosystem in these markets. The company has experienced impressive growth, with a 35% year-on-year expansion in Tanzania and a 20% increase in Kenya. Despite this growth, Finclusion Group remains cautious, mindful of the inherent risks associated with lending and the importance of managing these risks effectively. In addition to their core business, the company has invested in various ventures across the continent, including HappyPay in South Africa, EmTech in Kenya, and FinHome Loans in South Africa, aimed at providing buy-now-pay-later services, insurer tech solutions, and incremental housing financing, respectively. Nuy emphasized the importance of creating innovative financial solutions tailored to specific market needs and demographics, such as offering incremental housing financing in partnership with the National Housing Finance Corporation to address housing challenges faced by individuals earning over 3,500 rand but under 22,000 rand a family. However, Nuy also shared some of the frustrations the company has encountered while operating in multiple African countries. Licensing requirements vary from country to country, necessitating a full licensing process in each jurisdiction, unlike in Europe where a passport system allows for easier expansion. Managing different currencies and mitigating currency risk pose ongoing challenges, especially when dealing with international funders who often provide hard currency. Despite these obstacles, Nuy remains optimistic about the potential benefits of the Africa Continental Free Trade Area, which could facilitate easier trade and cross-border funding. He highlighted the need for improved visa and work permit regulations to enable talent mobility across the continent and enhance business operations. Looking ahead, Finclusion Group plans to focus on expanding its core business in Southern and Eastern Africa, with a keen interest in underpenetrated markets such as Mozambique, Zimbabwe, Malawi, and Zambia. By targeting these markets, the company aims to drive financial inclusion and profitability while providing much-needed financial services to underserved populations. Nuy expressed hopes of successfully entering one or two of these markets by 2025, further solidifying Finclusion Group's commitment to promoting financial inclusion and wealth creation across the African continent.