KENYA – Automotive and engineering products dealer Car &General (C&G) has invested an additional US$353,736 in microlender Watu Credit Limited, raising its stake in the company to 29 percent in the year ended September 2020.
The Nairobi Securities Exchange (NSE) listed firm previously held a 26.5 percent interest in the lender.
The investment in Watu Credit has helped C&G to boost its sale of motorcycles and tuk-tuks, which are hugely popular modes of transport in Kenya.
The microlender funds acquisition of the two and three-wheeled autos including brands sold by C&G such as TVS and Piaggio.
“In the current year, the group acquired an additional 2,500 shares in Watu Credit Limited leading to the total ownership by the group in Watu Credit Limited to 29 percent,” C&G said in its latest annual report.
The company acquired the 26 percent stake in Watu Credit in 2017 for US$245,599 and the value of its stake in the microlender has grown to US$3.84 million in the year ended September on the back of the associate’s increased profitability.
C&G’s share of Watu Credit’s profit in the review period stood at US$2.27 million, a growth of 63.2 percent from US$1.39 million a year earlier.
The microfinance firm has a net profit margin of nearly 25 percent which indicates the lucrative earnings enjoyed by alternative lenders unconstrained by stricter regulations imposed on mainstream banks such as interest rates to charge on loans.
“In the current year, the group acquired an additional 2,500 shares in Watu Credit Limited leading to the total ownership by the group in Watu Credit Limited to 29 percent”
The alternative lenders, including those running digital platforms, can charge annual interest rates of more than 30 percent compared to the current average upper limit of 13 percent on bank loans.
Banks have to obtain an approval from the Central Bank of Kenya (CBK) before raising their lending rates, introducing an administrative hurdle following the scrapping of interest rate controls in November 2019.
Headquartered in Kenya’s coastal city of Mombasa, Watu Credit aims to become the leading African provider of a broad set of inclusive financial products, delivered through technology in a fast, efficient, and professional manner.
The company commenced its business operations in July 2015 with the clear vision to be the best provider of short- and medium-term loan products tailored to the exact needs of target customers and delivered through mobile technology.
The Company offers asset financing (motorcycles and three-wheelers) and group lending products (short-term and business loans) and currently is expanding with a network of 19 branches in Kenya, and expansion reach into Uganda and Nigeria.
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