Alitheia, Goodwell exit Baobab Nigeria

Alitheia Capital and Goodwell Investments have announced their successful exit from Baobab Nigeria under their joint uMunthu Fund. The exit, a first after over a decade of investment in Baobab Nigeria, marks a significant milestone in the financial inclusion drive in Nigeria. Tokunboh Ishmael, Alitheia Capital's Co-Founder and Managing Director, sat down with CNBC Africa to discuss the reasons behind the exit and the potential for exits in 2025 under the uMunthu portfolio. According to Tokunboh Ishmael, the decision to exit the fund at this time was strategic. Investing in Baobab Nigeria over 12 years ago, the focus was on addressing the issue of financial exclusion and serving the underbanked population in Nigeria. The impact of the investment is evident in the tremendous growth of Baobab Nigeria, with its balance sheet expanding by over 10 times and the number of customers served by nearly 20 times. From a modest beginning in one state, Baobab Nigeria has now established a presence in almost 40 branches across the nation as a leading microfinance bank. The key objective of providing financial services to ordinary individuals and businesses without collateral has been a driving force behind the success of Baobab Nigeria. Contrary to the perception that microfinance loans are high-risk, Ishmael emphasized the importance of employing the right credit policies and controls to mitigate risks. The success story of Baobab Nigeria reflects the significant demand for financial services in Nigeria, with over 70% of the population being underbanked at the start of the investment journey. Ishmael highlighted that Baobab Nigeria has maintained a credit ratio loss of below 5%, showcasing the effectiveness of sound credit policies and governance in managing risks. Patient capital has played a crucial role in the long-term success of investments like Baobab Nigeria. Despite the challenges, Ishmael stressed the need for more patient capital in the microfinance sector to support the growth of small and medium enterprises, which are the backbone of economic development in Africa. While foreign capital has been instrumental in funding initiatives, there is a call for increased participation of domestic capital, particularly from pension funds and development finance institutions. Unlocking domestic capital requires a concerted effort involving public funding allocations, policy reforms to attract pension funds, and a shift towards a minimum investment approach. By harnessing the power of patient capital, there is an opportunity to drive impact and sustainable growth in the Nigerian economy. Moving forward, the focus remains on attracting the right mix of capital to address the financial inclusion gap and propel economic prosperity in Nigeria.