Bosak Microfinance Bank is a Nigerian company serving those, who are in need. These services are helping to eradicate poverty and are a major driving force for economic development. Nigeria is a rapidly developing country and by investing in p2p loans through Grupeer will give an investor a great exposure to this frontier market.
People living in poverty, like everyone else, need a diverse range of financial services to run their businesses, build assets, smooth consumption, and to manage risks. Microfinance offers poor people access to basic financial services such as loans, savings, money transfer services, and micro-insurance. This is the essence of development finance- helping to raise the living standards of promising developing nations.
The practice of offering small, collateral-free loans to people who otherwise would not have access to capital, reduces poverty because it leads to higher employment and incomes.
Extreme poverty is defined as living below $1.9 a day and it has been declining globally. In 1990 almost 36% of the population worldwide has been living below the poverty line, however, this percentage has triumphantly decreased to 10% in 2015. This positive dynamic is spotted almost in every region, but not in Sub-Saharan Africa. In Nigeria, the number of poor increased from 51 million people in 1990 to 86 million in 2015.
The economic inequality is another major issue contributing to poverty- most unequal countries are located in Africa. The low income is not the only determinant of poverty in Africa. Being born poor is accompanied by lower perspectives in life, inaccessible educational system and lack of healthcare services, access to clean and safe water.
The Managing Director and the founders of Bosak Microfinance the Chief Executive Officer Kola Bello and Chairman Samuel Owoeye believe that financial services can be provided to the poor sustainably. After careful study of the Grameen model (Bangladeshi microfinance organization), at the end of 2009 after contributing own funds they opened a bank that would serve the most vulnerable Nigerian population. The name “Bosak” was extracted from initials of the founding promoters of the company. In Polish and Yiddish, it means “poor person” or “beggar”. This aligns with their goal of helping active poor persons conquer poverty with their products.
The bank’s target market is mainly the economically active poor women and in rare cases men, who are deprived, vulnerable and tend to engage in small economic activities which can be supported by small loans. There is a considerable gender gap in literacy rates- the ratio of female to male literacy in Nigeria is 0.62. Inequal literacy rates are further contributing to poverty among women. Microlending activities contribute substantially to the local economy by providing useful goods and services and improving the conditions in households, particularly those of children in terms of nutrition, health, education, and general welfare.
Currently, Bosak MFB offers five types of loans for its customers. They are:
1) Bosak Trade Loan (BTL)
2) Bosak Auto Technician Support Loan ( BATSL)
3) Bosak Education Loan (BEL)
4) Bosak Asset Finance Loan (BAFL)
5) Bosak Trade Support Loan (BTSL)
After almost 10 years of operation, Bosak can show some impressive results: the loan Portfolio of NGN1,421,526,336 (Euro3.6million) and 68% of returning clients. The typical customer is an 18-60-year-old female (98%) with primary or secondary education. Most of the customers are living in the rural and peri-urban area and are operating a trading business. The average loan is NGN35,000 (Euro88) and most frequently obtained in order to get working capital towards the purchase of stock towards trade.
BTL and BATSL loan products encourage group lending and what is more important, these products encourage compulsory savings along with the repayment of the loan facility granted. At the time of getting the first loan, borrowers need to maintain a minimum savings balance of 10% of the desired Loan amount. The customer acquisition process is different than with the majority of fintechs Grupeer previously cooperated with. Here, in rural Nigeria the access to the internet is minimal, so Bosak microfinance has an old-fashioned approach to acquire new customers. The loan officers are responsible for their own target geographical section and personally make visits there, talking to potential customers and educating them about the loans and how effectively to use the money to raise the living standards up. Loans are offered to a pre-selected group of people, so the application rejection rate is just 5%. The loan officers are then carefully working with the borrowers, making sure the loan repayments are done on time. This allows keeping competitive interest rates – 3% per month calculated on a straight-line basis. However, it raises challenges too, as it is hard to find low-priced sources of funding which is needed to help the organization to absorb its cost of operation and remain profitable to ensure sustainability. One of the ways they are working to overcome this challenge is by reaching out to development finance organizations, locally and internationally, to forge partnerships that can bring in cheaper funds to service the micro clients.
Bosak’s mission is to deliver the range of services that are going to satisfy the demand of clients in need, especially poor women in rural regions. Additionally, the organization is trying to offer excellent customer service that will allow it to become a leader in the Nigerian market. The Grupeer model is a perfect way for Bosak to attract working capital and for Grupeer’s investors to earn a premium return.