Centum Investment’s startup credit business issued over Sh200 million to civil servants in nearly one and a half years, highlighting the fight to lend to borrowers deemed less risky.
The diversified investments firm says in the latest annual report that the sum was issued by Jafari Credit, a non-deposit-taking microfinance company that it set up in mid-2021 but started operations last year.
Jafari offers long-term credit to civil servants, employed with both the National and County governments on the strength of their payslips.
“Jafari seeks to meet the growing demand for consumer loans and to significantly mitigate risks and has chosen to focus on the civil servants with recovery based on payroll checkoffs,” says Centum in the report.
The company says recent macroeconomic shocks have seen banks reduce their appetite for lending to small and medium-sized enterprises (SMEs) as well as individuals, adding that it sees this providing it with an opportunity to grow lending to civil servants to Sh1.24 billion by next year.
Jafari deepens Centum’s presence in the credit market given that it also owns a controlling stake in Sidian Bank which closed June with a Sh24.26 billion loan book.
Default rates on Jafari loans to civil servants have been less than one percent, according to Centum. This is in a market where the non-performing loans ratio in the banking sector has been averaging above 14 percent.
Centum adds to the list of players in the financial sector who are betting on civil servants. Banks, credit-only micro-financiers and Saccos have also been targeting civil servants.
Civil servants have a reputation for a good loan repayment record and reduced default risk owing to the high job security, making it easier for them to access check-off scheme loans.
Salary check-off loans are loans given to salaried individuals who are employed and use their salary as security for accessing loan facilities.
Micro-lenders such as Platinum Credit have been targeting civil servants such as teachers with digital loans that are disbursed within hours after applying.
Centum says the micro-lending business currently enjoys a monthly net yield of 3.7 percent on its book with less than one percent non-performing loans and promises to grow into a money-maker.
“As the business scales up, we believe that it has the potential to be a highly cash generative and profitable asset in the portfolio that will contribute to sizable cash returns to Centum in the short to medium term,” says Centum.
Centum has a diversified portfolio with exposure to financial services, education, publishing, agribusiness, automotive, airline catering, power, and the real estate sectors.
Jafari is part of Centum’s private equity portfolio which also includes Sidian Bank, Isuzu East Africa, Longhorn Publishers, NAS Servair, Zohari Leasing, Nabo Capital, Greenblade Growers, Tribus TSG, Tier Data, Akiira Geothermal, Centum Real Estate Limited and Two Rivers International Finance and Innovation Centre.
