Bayport Financial Services: The Leading Payroll Lender in Ghana by Nii Amankra Kwashie Tetteh

Interview with Nii Amankra Kwashie Tetteh, Managing Director of Bayport Financial Services

What is your assessment of the sector in Ghana? What are the latest trends? Is the market competitive?

The savings and loan sector is a step below the universal bank sector. It is very competitive. We currently have about 38 savings and loan companies and below that, you have all the many finance houses, microfinance companies, etc. But the savings and loan spaces became the place, at least prior to all the reforms and all the challenges we have had in the last two years, where Ghanaians come to for high investment returns and where most of SME Ghana comes to for support in driving their business on a day to day basis. It is quite competitive. In the past few years, the focus has been on how to deliver services more digitally, being more professional. Many of the companies are looking at partnerships to enrich their offerings. But the focus has always been largely SME geared. If you take most of the lending assets, you will find a very strong SME presence within the savings and loan sector. We flip that and are more in the payroll sector. That is the bulk of our business, but we also do some SME as well through specific products that we promote in the market. The savings and loan space is largely investments and lending assets. We are seeing a number of these businesses also begin to look at other products from money transfer services, insurance, we are also seeing quite a number of them coming up with a whole range of lending products more tailored to the Ghanaian businessman and woman. With the reforms, we have seen quite a lot of challenges because of the exposure to the SME space. But that continues to be a very vital area and speaks to many of the challenges that happen in that sector. It will continue to be a very important sector going forward because of that focus on the SME space. If you look at the savings and loan companies, they are a very vital bridge between main street banking and being at the forefront of that financial inclusion journey for the financial services in Ghana.

What do you bring to the market that differentiates your company?

Like any other company, we have very lofty ideals for what we want to see on our P&L balance sheet. But the way I synthesize that personally is that we currently have a little over 560 permanent employees and about 1,500 contractors. Every single day when I come to the office, at the top of my mind is how do I create a better tomorrow for these 560 families?

Bayport Savings and Loans has gone through a journey of evolution. We have been in Ghana for 15 years. We were the third business opened by the Bayport Management Ltd., which is a pan-African business. After Zambia and South Africa, Ghana was the third place they came. Bayport Management Ltd. has a footprint in seven other countries and in two South American countries. We will begin our tenth business shortly in South America. Bayport Management Ltd. is known across the market for focusing on lending in the spaces that are not traditionally the focus in many banking sectors. Typically, we are looking at payroll lending and focusing largely in the mass market space. If you look at the nature of our business, it is a credit-led financial solutions company. In Ghana, we started out first as Ghana Financial Services. We did a little bit of personal lending, and then got into the payroll space. Over the last 15 years we have become the leading payroll lender in the country to the government in particular. We have a market share of a little over 21% of that space of total deductions of government payroll and we are looking to grow in that space. In 2017, we merged with our sister company to become Bayport Savings and Loans. We are looking to consolidate our position as a leading payroll lender in that space but we are also very aware that Ghana’s economy is driven by the work that happens in the SME space. We have a few challenging products that we have developed over the years that we are looking at rolling out and have already rolled out. What is really unique about Bayport, not just in Ghana but across Africa, is the fact that we try to follow those local needs and look at those things that are particular to the people in that particular space and roll out products that match not just the need financially but also sentimentally and very often culturally. For example, we have an incredible auto insurance policy that allows Ghanaians for the first time to consider comprehensive insurance as something that they can do. Up until now, it has been a very expensive insurance offering so many Ghanaians do not go for comprehensive insurance if they can help it. Most people just stick with a third party. We realized that the expense was difficult so we created a product that allows you to pay your third-party insurance up front and then the rest that you need for comprehensive insurance spread out over ten months. It makes comprehensive auto insurance easier for most Ghanaians. We take something that is a need and then we take the cultural nuances within the country or the context and then flip the product to allow it to serve those needs in a manner that is convenient for the customers. That is the one unique thing about Bayport. We also have a product in our savings space called Target Save. Most Ghanaians are very driven by monthly incomes. What we say with this product is you have made up your mind to purchase a plot of land to start a second business or maybe to buy a small car or to plan for your education – what is the target you have in mind? Talk to us about it and then we can put you on a plan that helps you get there within the timeframe you want. We support the process and reward you along the way for being consistent and then give you a return on that savings. That is better than any other savings product on the market.

What is your rank as an SME?

In Ghana, that is actually one of the complicated things when it comes to SME categorization. When you go to the various banks, you will find that confusion there. It is a very long continuum of values. From as small as a turnover of 2,000 euros to almost 1 million euros would be categorized by many people as SME. But, in some banks, you actually find that it goes a little higher than 1 million euros as well as a little lower. So, it depends on which niche the bank specializes in. Within the savings and loan business it is actually much lower. We are looking at micro which is as low as 100 to 200 euros to 5,000 to 10,000 euros. But, within that number of different finance businesses that serve the microlending space and savings and loan space, you can have very high-ticket sizes of almost 1 million euros for bigger tasks. It is a very wide range.

Are you looking for partnerships? Do you already have partners?

We are looking for experiences that our customers have not had up until now that we feel we can deliver. For example, we have an insurance product that we want to do with partners and we have spoken with a number of insurers in the market and found the one person who understood what we are trying to create for Ghanaian motorists and we now have that partnership with Star Assurance. That is a product we have co-created and we do together. Also, in our insurance space, we are saying that we have this product that we want to put out, but what are you doing as brokers and in other spaces? Are we able to distribute our products with you in partnership? We are happy to do that. We also have arrangements with other fintech companies. We have a new product that works but we are not quite sure whether it will work with a typical bank. What you have is a willingness to try new things and also to deliver this within the rules and regulations of the sector. We have partnerships like that that have been cleared where we are growing the product that we are exploring. We also look at arrangements with the communities. For example, one of our CSR projects looks at teacher innovations. We are saying that the Ghanaian child has great potential, but unless we have teachers who also understand and can develop it, we would be losing quite a lot of that potential. So, we have a project where we have invested in helping support teachers that have great ideas to use in schools. One of the biggest challenges that we have is a lot of deaths on our roads where many breadwinners lose their lives because of careless driving. So, we are taking this lorry station by lorry station and we are working with the executives of a single lorry station and saying that over the next few months we would let all passengers vote on whether they are doing a good job driving. When you get on the bus, there is a posting saying that at the end of this trip if you feel this driver did a good job text “1” to this number or “2” to this number. It is actually done for free and you get rewarded for it by receiving a bit of airtime. Then we collect the votes and go to the lorry station and say we did this over the last two months and this is what your passengers say about you. You would be shocked how something as simple as that will turn around behavior. For the top three drivers we give them small prizes, but they are meaningful to them: things like tabletop fridges, a small cash purchase, money for school fees. But for them, what is exciting about it is that because the other drivers see these drivers driving a particular way, they also are more motivated to be a little more careful on the road because they know someone is watching them. We are constantly looking out for any type of partnership that allows us to improve on the lives of people in our communities, that allows us to give a lot more to our customers who we serve.

What current projects are you working on?

One of the things we are really proud of is something we rarely talk about. It is a scholarship program where we put 100 young people from high school through to university. This is from people amongst our customers who have borrowed from us. They are able to apply for support. It is not your typical scholarship program. It is a long-term commitment. It is a seven-year program because we start from high school right up to finishing university. Working at Bayport, about three of them have gone through something similar and work with us now. It is a very long-term commitment to these children. We have started to share some of their stories to encourage more people to participate in it. For these 100 families, it immediately provides stability with regards to their children. A perpetual struggle for most Ghanaian parents is trying to find the means to provide education for their children. They are able to find the best school that they really want to go to and commit themselves to study without carrying that burden of whether they are able to get through the next class. It is such a big challenge in Ghana that we are so proud to be able to do this for even 100 families. We continue to explore opportunities to do even more than this. Every time we have the opportunity to do something like this, we are really excited about it. Another thing that is big for us is also one of the challenges in the savings and loan space in that we borrow from mainstream banks and lend to a community that is considerably challenged within the mass market. This is a part of the market that actually deserves cheaper loans. But that is not the reality across the world. One of the reasons why it is important for us to be ethical, to have good corporate governance, is because we take the extra step to look for the cheapest source of funds. That means that we need to subject ourselves to a lot of scrutiny. We issue corporate papers so people can examine us and do the kind of scrutiny that most companies grow weary of because it is tough work. We put ourselves through that extra grind because it allows us to source funds a little cheaper than from mainstream banks. Every time we do that, we are able to come down a little lower on our prices. Over the last three years, because of this work we have been able to come down over 500 business points in terms of our lending. That is very significant for us and it is a very important part of our business because it allows us progressively to be able to source from the best sources. Within the savings and loan space, we are definitely one of the cheapest lenders. We can do a lot better and we want to do that. For us, the challenge is where we can find those cheapest sources of funds so we can create a little bit more even of a playing field for that space that is most challenged. We are also very excited about some of the projects we are running within our communities and we have done these things in the past not doing a lot of marketing around them because we wanted to test them and understand how they work. We have seen that we can create change without all of the noise. The Save a Life Campaign is especially important to me. It is one of the most humbling experiences that I have personally been involved in. We are looking to do anything new that allows us to make those changes in communities.

Are you looking for investors?

We are part of a pan-African business that is even larger than Africa. We are straddling two continents in some of the major markets. We are about to enter a third market in South America. We are constantly open to conversations about investment, but for us in Ghana, the real issue is getting reasonably funded, reasonably priced so that we can provide the kind of support that is necessary for real development to happen. We might make some money off of it, but the end user is the one who is most affected and that is not the kind of funding that is required now. We are constantly looking for those friendships and those partnerships. We have quite a number of those across the continent who have done business with us who enjoy that experience and continue to do business with us.

What is your vision for the company in the medium term, two to three years’ time? What would you like to have achieved by then?

Like any other company, we have very lofty ideals for what we want to see on our P&L balance sheet. But the way I synthesize that personally is that we currently have a little over 560 permanent employees and about 1,500 contractors. Every single day when I come to the office, at the top of my mind is how do I create a better tomorrow for these 560 families? These 560 families depend on Bayport for their livelihood. It is children going to school, parents who want to do more with their lives so that their children will be better, elderly parents who need care, children who need better healthcare, wives who are trying to start a second business, families who want to secure property for homes. For me, when I think about the future, especially in the medium term, I want to come to work in 2021 where every staff member is energized by the fact that their jobs here are not just secure but provide them a pathway for a meaningful existence in the future. If people latch onto that belief, I believe our shareholders will be smiling, the numbers will come through, and between 2017 and 2018 we have shown that that is possible. Our P&L shows a doubling of our PBT and we believe we can do similar this year. But those numbers are not the outcomes. When people believe that this is something that can progress their lives, all those other things will fall into place.

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