The banking game has changed and Cassava’s Eco-Cash has disrupted the sector given that it now has more account holders than any of the traditional banks. Further, Brick & Mortar branches are disappearing and no longer make much sense given that consumers have adopted online platforms. This of course has been a global trend and it’s a no brainer that banks that have been left out in this technology wave are headed for “extinction”. That said, Fintechs like Cassava and GetBucks are promising more than just the convenience to transact or get a small loan. They are holding the “Financial Inclusion” card and they are clearly winning in this game!
It should be stated that the major problem being experienced by most communities in Sub Saharan Africa (SSA) relates to limited access to financial services (banking and investment products). One of the main reasons for the large unbanked population in Africa is geographical inaccessibility and poor infrastructure, with many of the unbanked living in remote rural areas. This, combined with the high cost of banking services and a lack of financial education and understanding, creates very high barriers to banking for poor rural populations. According to Finscope, unbanked adults in the SADC (Southern Africa Development Community) region are estimated at 60%.
In Zimbabwe, many people still remain excluded from the financial sector and this has created high levels of poverty. The majority (about 60%) of the people in Zimbabwe dwell in the rural areas. These rural dwellers are excluded from the financial mainstream and do not have good access to financial resources. According to a study by Finscope, a mere 30% of adults are banked. Women are also largely excluded from formal financial services while they form the greater part (51.9%) of the population of Zimbabwe. Financial inclusion ensures access to appropriate financial products and services needed by all sections of the society at an affordable cost in a fair and transparent manner. Banks in Zimbabwe are now trying to play catch up, but it appears that Fintechs like Cassava and GetBucks that have been on the fore-front of promoting access to financial services are better placed to reap the technology dividend.
GetBucks recently issued an abridged circular to shareholders regarding a proposed transaction that will involve raising $5,007,681 by way of a renounceable right issue of 69,551,126 ordinary shares of a nominal value of $0.0001 each at a subscription price of $0.072 per share in the ratio of 6.36 new ordinary shares for every 100 ordinary shares. We view the transaction as value-accretive given that the rationale is to enable GetBucks to grow its loan offerings to productive sectors of the economy (agriculture and mining). The rights offer price of $0.072 per share is attractive given that it is at a 37% discount to the current trading price of $0.115.
According the Zimbabwe Association of Microfinance Institutions (ZAMFI), the top five challenges in the microfinance sector include (i) the high cost of funding, (ii) shortage of cash & foreign currency, (iii) a general rise in cost of operations, (iv) limited product development and (v) the perceived high-country risk. We expect the additional equity capital injection to boost the bank’s business underwriting abilities. GetBucks has also been making use of technology as a strategy of differentiating itself. We recommend investors to VOTE IN FAVOUR of the transaction. Overall, we believe in technology and remain long term bulls on Cassava and GetBucks!
Author – Batanai Matsika
Head of Research – Morgan & Co
+263 78 358 4745