On September 18, AIG Investments (AIG), the asset management division of American International Group Inc., announced that its Global Emerging Markets Fund II LP will invest equity in the Blue Intercontinental Micro Finance Bank (BIMFB), a microfinance institution (MFI) that promotes financial services and products within Nigerian retail markets. The exact terms of the investment were not disclosed.
The equity boost comes on the heels of BIMFB’s establishment in March of this year, when Blue Financial Services (Blue), a South African finance company, and the Intercontinental Bank Plc, a Nigerian financial institution, came together to provide an initial capitalization of NGN 3 billion (USD 25.9 million). MicroCapital reported this deal in March. Blue holds the majority share (55 percent) of BIMFB, while Intercontinental Bank, the largest asset-holding bank in Nigeria, owns a 35 percent stake and AIG owns a tenth of it, according to the Banking Times. No other information is available because BIMFB does not report to The Mix Market, the microfinance information clearinghouse.
Nigeria suffers from an under-supply of individual banking services: one bank outlet on average serves 57,000 people, and 32,700 people live in cities with only one bank branch. According to Erastus Akingbola, the CEO of Intercontinental Bank, BIMFB intends to heighten microfinance banking activity by providing greater accessibility to low cost credits for more people when and where other banks fail to do so. Dave van Niekerk, the CEO of Blue Financial Services, echoed this sentiment when noted that Nigeria’s more than twenty-five banks write less than ten percent of their loans to individuals, who must often seek financing from NGOs, MFIs, credit unions and other players in the informal financial sector. According to Akingbola, BIMFB seeks to fill this gap between what small and medium-scale enterprises (SME) demand and what existing microfinance banks can supply.
AIG Investments, the asset management arm of American International Group, Inc., is a group of international companies that came together in 1996 to provide investment advice and to market asset management products and services to clients around the world. Currently, AIG Investments manages nearly USD 768 billion in assets and employs more than 2,100 employees in forty-six offices around the world as of June 30, 2008. Parent-company American International Group, Inc. (NYSE: AIG), a New York-based insurance company, holds the distinction of receiving this past week the largest government bailout of a private company in U.S. history after a liquidity crisis triggered by the downgrade of its credit rating. As of September 19, its return on assets was -0.83 percent, and its return on equity was -16.85 percent. Total debt-equity ratio was 2.411.
Founded in 2001 in Pretoria, Blue Financial Services is an MFI focused on southern Africa that trades on the Johannesburg Stock Exchange under ticker symbol BFSJ. For the fiscal year ending February 29, 2008, company assets (p. 136) totaled R 820.2 million (USD 109.6 million). On page 74, Blue states that its loan book increased by 133 percent to R 481.9 million (USD 64.4 million) from R 207 million (USD 27.7 million) in 2007. As of September 19, its return on assets was 7.34 percent, and its return on equity was 11.71 percent. Total debt-equity ratio was 3.65 percent.
Intercontinental Bank Plc started in 1989 as a merchant bank then converted to a commercial bank in 1999. It trades under the ticker symbols INTERCONT or INBK on the Nigerian Stock Exchange. As of February, 2008, the bank’s total assets numbered N 1.3 trillion (USD 11.5 billion) of which N 441.4 billion (USD 3.8 billion) were listed as “loans and advances to customers.” As of September 19, the return on equity was 16.96 percent and the return on assets was 3.24 percent. Total debt-equity ratio was 590 percent.
Additional Information:
AIG Investments (AIG)
American International Group, Inc.
The Banking Times: “Blue expands into Nigeria with multi-partner venture”
Blue Financial Services (Blue)
Blue Financial Services: Annual Report 2008
Business Day Online: “Intercontinental, SA firm form N3bn microfinance bank”
Forbes: “AIG asset management arm invests in Nigerian Bank”
Intercontinental Bank Plc: Balance Sheet as of February 2008
MarketWatch: “AIG Investments Invests in Blue Intercontinental Micro Finance Bank”
MicroCapital.org article, 3/13/2008: “South African Microfinance Institution (MFI) Blue Financial Services and Nigeria’s Intercontinental Bank to Launch $25.9m Microfinance Bank”
The New York Times: “Adding to the government’s books”
Sun News Online: “Intercontinental floats microfinance bank”
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