Financial inclusion is more than just a buzzword for Baobab Nigeria; it's a guiding principle that has shaped the company's journey since inception.
Founded in Mexico in 2005 with a vision to assist those excluded from traditional banking systems, the company took its first steps in Nigeria with a branch in Kaduna.
It now serves over 200,000 users across 16 Nigerian states, including Kaduna, Lagos and Rivers. Its mission to drive financial inclusion remains a cornerstone of its strategy, with most of the states it covers outside the country’s major commercial centres.
Historically, Nigeria's financial system has been characterised by a significant gap in access to financial services, particularly for low-income individuals and small businesses.
Due to the high cost of service delivery, most commercial banks have traditionally focused on serving larger businesses and high-net-worth individuals, leaving a vast underserved market. In 2005, the Central Bank of Nigeria (CBN) released the Microfinance Policy Regulatory & Supervisory Framework For Nigeria to drive financial inclusion.
Consequently, microfinance institutions have stepped in to fill this gap, offering tailored financial products and services to meet the demographic's unique needs.
The sector has experienced significant growth and transformation since then and now counts more than 700 microfinance banks. As of 2022, total assets by microfinance banks in the country stood at ₦1.35 trillion.
Microfinance institutions have also been a critical component of the country's financial inclusion strategy, helping to bring financial services closer to underserved segments of the population.
From Microcred to Baobab
In a nod to the baobab tree found across Africa, it rebranded as Baobab in 2018, announcing the expansion of its services beyond providing credit to Nigerian entrepreneurs. Previously, it operated as Microcred Microfinance Bank. Like the baobab tree found across large parts of Africa, it aims to provide financial support to everyone regardless of their financial needs while deepening its commitment to Africa.
Don't miss out on Africa's financial revolution
Give it a try, you can unsubscribe anytime. Privacy Policy.
"We started off as a traditional brick-and-mortar microfinance bank, trying to reach the bottom of the pyramid and those that are not included in the financial services sector," Oladapo Ikupolati, Chief Business Officer at Baobab, says. "However, Baobab has transformed, and now we consider ourselves a traditional microfinance institution that has developed in line with changes in technology," he adds.
Its services have evolved with Nigeria's financial services sector, increasingly favouring digital channels for service delivery. At the heart of these changes is a focus on the customer.
"Our focal point has always been our clients. What do they really want, and how can we serve them better? Our customer preferences are always changing. We operate in an ecosystem. They see what is available somewhere else, and they bring us suggestions about how they want to be served. With this, we know we have to make adjustments to how we can reach our clients or how they can reach us."
Delivering digital financial services
While it maintains 38 branches across Nigeria, the decision to incorporate digital channels has ensured it meets customer needs 24/7 without the constraints of physical branches. It has also evolved its service offerings to cater to diverse needs.
Another instance that shows the role that customer feedback plays in its product development cycle is the decision to launch a point-of-sale (PoS) network in 2023. This came after customers, primarily SME owners, disclosed that they would love to reduce the time spent commuting to deposit or withdraw cash.
Acknowledging that its entry to the agency banking space is late compared to competitors such as Moniepoint, OPay, and PalmPay, Ikupolati notes that Baobab prioritises a fast response time for customer disputes, allowing it to build trust among customers.
“Yes, the market is saturated, but Lagos alone is a city of about 20 million people, and there are high-volume transactions going on every day. We still have a large population that is still unbanked, so the opportunity is still massive.”
From traditional current and savings accounts to specialised loans for micro, small, and medium enterprises (MSMEs), the bank designs its offerings to cater to users at various stages.
“Wherever you are, as long as you can bank in this country, we have a product for you.”
Individuals can choose from a range of account types, including savings and current accounts. Housing and business loans can be accessed within three days, with loans beginning at ₦50,000 and going as high as ₦50 million.
It also offers microloans – TAKA loans – that are below ₦150,000 and have a maximum term of one month. Ikupolati reveals that Baobab has issued over 350,000 loans and currently has a loan book of ₦40 billion.
Baobab has a non-performing loan ratio of 1.1%, and Ikupolati notes that its loan recovery strategy relies on an accurate understanding of a business’ needs. It ensures that only businesses that need and can repay loans get them. They are also assigned portfolio managers to ensure the loans are used effectively.
A savings account for everyone
A signature product that has begun to garner attention is Jollof+, a savings application launched to improve accessibility for clients.
Jollof+ provides four savings options designed to meet the varied needs and preferences of its customers.
JollofLock, a timed deposit option, allows users to lock away funds for medium-to-long-term goals, earning a whopping 21.6% interest rate per year. This interest, which is paid upfront, is among the highest in the country.
Drawing on the age-old practice of group savings in Nigeria, Ajo+, its target savings feature, empowers individuals and groups to work towards shared objectives, earning up to 16.5% interest per annum.
Babybox offers a maximum interest rate of 15.5% per annum and allows parents to save towards children's expenses such as education and healthcare.
Rounding out the offerings is JolloFlex, a flexible savings account that provides easy access to funds while still earning a steady 10% interest rate per year. This feature is perfect for everyday needs or unexpected expenses.
Regardless of what customer category a user may fall into, Jollof+’s goal is to have a feature that serves their needs.
In just two months, it has been downloaded over 10,000 times, with 40% of users actively transacting on the app. While Baobab works on improving its capabilities, Ikupolati is optimistic about its potential to not only increase the bank’s deposits but also improve the bank's allure to a different market segment.
Awards and recognition from industry leaders underscore Baobab's impact. In 2021 and 2022, at the BusinessDay Banks and Other Financial Institutions (BAFI) Awards, Baobab won the MSME Microfinance Bank of the Year for its commitment to empowering micro, small, and medium enterprises (MSMEs) in Nigeria. It was also the recipient of the Most Outstanding Micro Lending Service Brand of the Year award at the 2022 West African Brands Excellence Awards.
The journey to improving financial inclusion is not without its challenges. Establishing trust among potential clients in a market where scepticism about financial institutions persists is a hurdle that Baobab continues to navigate.
Looking ahead, Baobab has ambitious plans for the next few years, even as it views the country’s economic challenges as opportunities. Top on that list is improving its technology capabilities to stay ahead of the pack. Meanwhile, it is focused on increasing its physical footprint in the country.
“Nigeria is a very big country, and we think it is important that we’re in every part of the country leveraging our expertise and maximising the opportunities that exist nationwide.”
