A progressive and entrepreunal financial services group………<br />Interfin Capital Africa<br />Interfin Banking Corporation <br /><ul><li>With 10 years experience as the country’s premium Merchant Bank, the bank has taken a huge step, diversifying into the commercial banking arena. By delivering efficient and effective solutions, coupled with a superior level of customer service;
With nine branches, the bank offers amongst other commercial banking products, technologically powered products such as Internet and SMS banking with real-time platform enabling customers to transfer funds, balance and statement enquiry, airtime top-up and bill payments</li></ul>Interfin Capital Africa (ICA) is corporate finance and advisory firm with offices in Harare, Zimbabwe and Johannesburg, South Africa. ICA is an entrepreneurial investment banking firm that advises clients in the public and private sector. ICA is a joint venture between Interfin Banking Corporation, a leading commercial bank in Zimbabwe and a select clique of investment banking professionals<br />Altfin Life Company<br />Altfin Insurance<br />Altfin Insurance Company came into being following the merger in January 2003 of Orion Insurance Company and Strategis Insurance Company creating a much stronger organisation with broader capabilities that gave clients access to virtually every conceivable short-term insurance product available on the Zimbabwean market. Constant and smart innovation, coupled with specialist underwriting skills in Personal lines Insurance, Bonds and Guarantees, Corporate Fire and All risks, Motor Insurance, Engineering, Personal Accident and Marine Insurance continue to ensure that the Altfin Insurance brand remains an industry leader Altfin has expertise in product development, analysis and pricing, it is headed by a resident actuary in Zimbabwe<br /><ul><li>Altfin Life Assurance Company is involved in the design and management of pension funds, group life assurance schemes, group funeral schemes and personal life assurance policies.
Altfin life is correctly positioned to execute and provide high quality and competitive life assurance, pensions and annuities designed to benefit its client's as well as creating and preserving wealth. </li></li></ul><li>Interfin Securities<br />Altfin Medical Aid Scheme<br /><ul><li>This is a new medical aid launched by Altfin Holdings with the aim of satisfying the health needs of Zimbabweans across the social divide taking advantage of its association with the diverse Interfin companies that guarantees strengths, expertise and solid foundation into the company.
Altfin offers cut-edge product that suits the need of its clients offering specific required products such as but not limited to, travel cover to both members and non-members travelling outside their country and student cover for those studying outside the country of their origin, thus it is the ultimate health insurer for families and organisations;
Interfin Securities is a member of the Zimbabwe Stock Exchange and a formidable player in the Zimbabwean financial services industry.
The company started trading in 1996 as Msasa Stockbrokers and is involved in stock market trading, investment advisory services, investment research and safe custodianship.
Interfin Securities fosters a strong compliance and risk management culture to protect the interests of clients who range from pension funds, institutions, corporate’s and individuals.</li></li></ul><li>5<br />In everything we do we believe in the power of commerce and enterprise to provide opportunities for the people of Zimbabwe<br />
6<br />Fueling enterprise and innovation requires a stable, modern, transparent, capitalized, <br />reliable banking sector<br />
7<br />Zimbabwe’s banking sector is currently enjoying an unprecedented period of stability. With increased confidence the stage is set for a period of remarkable growth, consolidation, and acquisition. Financial services are deepening and getting more sophisticated. <br />
Section 1Background to Zimbabwe’s banking sector<br />10<br />
A fairly sophisticated sector historically relative to the region...<br /><ul><li>At independence (1980) Zimbabwe had a very sophisticated banking and financial market, with commercial banks mostly foreign owned and a central bank inherited from the Central Bank of Rhodesia and Nyasaland at the winding up of the Federation. For the first few years of independence, the government did not interfere with the banking industry. However, after 1987 the government at the behest of multilateral lenders, embarked on an Economic and Structural Adjustment Programme (ESAP);</li></ul>Historically, Zimbabwe had fairly advanced products<br /><ul><li>Mortgages;
A reasonably good fixed income and money market with treasury bill and bond issues</li></ul>These disappeared during the hyperinflation era….<br /><ul><li>The Banking Act (Cap 24:01) came into effect in September 1999 as a result of the culmination of the RBZ desire to liberalize and deregulate the financial services sector to accommodate a broader local participation . Broadly stated, the Banking Act (Cap 24:01) regulates commercial banks, merchant banks and discount houses. Entry barriers were removed leading to increased competition;</li></ul>11<br />
...with legislation and a regulatory environment that is being constantly reviewed so as to deal with current challenges. <br /><ul><li>The rationale behind deregulation was to de-segment the financial sector as well as improve efficiencies. The Act was further revised and re-issued Chapter 24:20 in August 2000, as a result of increased competition and introduction of new products and services e.g. e-banking and in-store banking. The entrepreneurial activity resulted in the deepening and sophistication of the financial services sector
According to the 2010 Mid Year Monetary Policy Statement, the country has 26 banking institutions made up of 15 commercial banks, five merchant banks, four building societies, a savings bank and a micro-finance bank. As such Zimbabwe has a fragmented banking sector where only 5 banks control 90% of total deposits leaving the remaining scramble for very small and potentially unsustainable numbers</li></ul>12<br />
For the size of the existing and potential market, Zimbabwe has a very high number of banks….<br />14<br /><ul><li>Zimbabwe has a total of 24 Banking Institutions as summarized below:
16 out of these 24 institutions have met the minimum capital requirements as Gazzetted by the Reserve Bank of Zimbabwe.</li></li></ul><li>Banking products have during the economic downturn simplified somewhat…… <br /><ul><li>The Banking sector offers mainly traditional banking products and there is limited scope in the money market, limited technological products and limited products to cater for the low end of the market.
The main banking products can be summarised below:</li></ul>15<br />
With Zimbabwe also falling behind its regional peers in terms of its deposit and loan base<br /><ul><li>According to figures from the World Economic database as at 31 May 2010, the Banking sector in Zimbabwe is lagging behind the region in terms of Loans and Deposits.
However, Zimbabwe shows the highest growth in both Loans and deposits between 2008 and 2010. </li></ul> Figure 1: Regional Comparison of Loans and Deposits as at 31st May 2010<br />Source: World Economic Outlook Database April 2010, ABC Presentation Aug 2010 (Banks and Banking Survey 2010)<br /><ul><li>Whereas deposits in some countries in Southern Africa grew by between 6% and 18% between 2008 and 2010, Zimbabwe experienced growth of 485% though coming from a low base.
Zimbabwe Loans to Deposits ratio in line with comparable figures in neighbouring countries despite widely held notion that Zimbabwean Banks are too thrifty with lending. </li></ul>16<br />
LOANS AND ADVANCES<br /><ul><li>According to the Budget, Loans and advances increased from US$0.76 billion in January to US$1.42 billion by September 2010.
An average tenor of the lending of about 180 days: though an improvement from between 30 and 90 days in January 2010, this still does not meet long term borrowing requirements for capital expenditure which required in the country’s reconstruction.
Loans and advances reasonably diversified across economic sectors though manufacturing, Distribution and Agriculture have been the more important sectors.
Lines of credit have increased marginally from US$205 million in July 2010 to US$273 million in September 2010 according the Minister of Finance during hos budget presentation speech. Afreximbank remains the major financier with disbursements of US$156 million on facilities of US$299.6 million.
This increase in the lines of credit albeit marginal represent a growing confidence in the in the country’s recovery path.
The level of loans of advances falls short of the demand for capital in the economy which is constrained by the liquidity challenges and high costs of funding at between 13 – 20% . </li></ul>Distribution of Loans and Advances, September 2010<br />Market Shares by Loans and Advances<br />
LOANS TO DEPOSIT RATIOS<br />Market Share by Deposits <br />Summary<br /><ul><li>According to the recent Budget statement, Bank deposits have been growing by a monthly average of US$82 million from US$1.3 billion recorded in January 2010 to reach US$2.3 billion in September 2010, signifying improved confidence in the sector.
Deposits currently mainly short term and there is a shortage of instruments on the Money Market.
The increase in bank deposits, coupled with foreign short-term capital inflows, has strengthened the intermediation capacity of the financial sector and consequently, the loan-deposit ratio grew from 52.4% in January 2010, to 62.4% in September 2010.</li></li></ul><li>Payment systems are slowly improving in line with a modernisation of the country’s ICT infrastructure<br /><ul><li>A cumulative total of 1.3 million transactions valued at US$16.7 billion were processed through the Interbank Transfer / RTGS system from January to October 2010
The inter-bank cheque system recorded a total of 138 000 cheques amounting to US$34 million, processed through the Harare and Bulawayo Clearing Houses from January to October 2010. Given a population of 13.5 million people this figure is laughable but can be attributed to the regulations governing the use of cheques where the threshold for the maximum amount issued by individuals is US$500.
A cumulative total of 2 million card transactions valued at US$210 million were undertaken for the period January to September 2010. Of this amount, ATMs constituted 84%, while Point of Sale (POS) represented 16%.
Nonetheless, card values increased by 54% from US$30 million in August 2010 to US$46 million in September 2010, whilst volumes increased by 2% from 279 000 to 285 000, during the same period.
The market is not making use of plastic money and innovative solutions in this segment present an opportunity for players to increase their market share and capture untapped profits.
A cumulative 373 000 mobile and internet transactions valued at US$165 million were processed from January to September 2010. Therefore mobile and internet banking represent a largely untapped market.</li></ul>19<br />
Due to dollarisation, the RBZ’s current role is mainly confined to that of supervision...<br /><ul><li>US$7 million was advanced on 28 October 2010 to the Reserve Bank to enable the central bank to resume its lender of last resort function. This is far from an estimated historical US$1 billion reserve before 1997 which the Central Bank managed.
This amount, although small relative to the required resources, is expected to stimulate inter-bank activity and facilitate increased advances of credit by banks. Furthermore, the function should result in reduced cost of borrowing through risk reduction associated with this monetary policy tool.
Treasury has promised to extend additional resources for this function in line with its capacity and upon satisfactory utilization of this initial tranche.
The Reserve Bank also scrapped statutory reserve requirements giving banks more room to extend credit to various key sectors of the economy at more reasonable interest rates.
However, the minimum capitalization requirement continue to pose challenges to the smaller undercapitalized banks to the extent that mergers and /or acquisitions could be resorted to.</li></ul>20<br />
An immense opportunity exists in the financial sector.....<br /><ul><li>Africa’s banking sector has grown rapidly since the early 2000s as regional economies embraced market reforms and attracted higher foreign investment inflows. Donald Kaberuka, president of the African Development Bank (AfDB) commented that “In the aftermath of the global crisis, Africa no longer seems uniquely risky. The opportunities are huge.”
Total consolidated assets exceed US$1.1 trillion, and compare favourably with other emerging markets like India with US$1.2 trillion, Russia in excess of US$1 trillion. Africa is expected to grow even faster on the back of its arable land as demand for food continues to grow. As a country we are well poised to grow even faster against a well developed infrastructural system that has been tried and tested.
Although Zimbabwe’s Banking sector has been said to be overbanked in many circles with numerous Banking institutions, the sector remains attractive because of the gap in the market for an optimal and efficiently capitalized bank equipped with modern systems and first world products.
The High number of undercapitalized Banking institutions means that the sector presents a number of acquisition opportunities that strong institutions can profitably exploit both in the medium and long-term;
The country’s unbanked community present an opportunity for innovative banking products that could be tailor made to attract these said communities i.e. mobile banking, card transactions;
On the back of the unprecedented growth of the telecoms sector penetrating into remote areas, the banking sector is presented with opportunity to reach out and address the needs of its unbanked members of the community including rural communities where it has traditionally been difficulty to set up branches as it was either not cost effective or hindered by infrastructural and system challenges.
Whilst only about US$2 billion has found its way into the banking system an estimated US$5 billion is said to circulate within the economy primarily in the informal sectors of the economy. </li></ul>22<br />
...across all product areas<br />Corporate Banking/Lending Opportunities<br /><ul><li>Economy expected to grow by 8.1% in 2010 up from 5.7% in 2009. This growth has essentially been supressed growth on the back limited liquidity and non-existant balance of payments support.
Demand for medium to long term funding far exceeds the little to non –existent such funding within the economy, an opportunity exists therefore for a first mover in this space with above average returns. </li></ul>Investment Banking Opportunities <br /><ul><li>The challenges faced by industry during the hyperinflationary era meant that corporates had to restructure environmnet specific business models that were significantly adversley tested by the currency reforms in 2009.
The currency reforms have created opprtunities across all sectors for corporate restructurings, capital raisings and M & A trancations to create industry champions that will be able to compete effeciently within the region and beyond. </li></ul>Infrastructure Finance<br /><ul><li>Power is critical for sustainable growth with country only producing 1,200 MW from an installed capacity 1,950MW against supressed demand of 2,200MW. Power expansion projects estimated at US$2.4 billion
Water and sanitation programmes in the country’s local authorities estimated at US$1.5 billion
Opportunities also exist on the road netwoks were more than 44,671km of country’s road networks requires major rehabilitaion . The government has engaged private sector invetsors with DBSA having been mandated to carry out feasibility studies on the rehabilitation and upgrading of some of the roads. </li></ul>Agri-finance<br /><ul><li>World food prices started rising in 2007 and climbed to a record in June 2008. Surging prices of wheat, rice and corn sparked riots from Haiti to Ivory Coast. Going forward it is expected that owing to the depletion in world food reserves markets will have to focus on funding food security.
In this regard interest has grown in Africa and as can be seen on the FAO: Current and Potential Arable Land Use in Africagraph below showing the immense potential in Africa and more specifically in Southern Africa. </li>