Knowledge

Author: Farai Masendeke

Category:

Date: 25 April 2019

La Regionale’s Transformation into a Fully-fledged Commercial Bank

 

La Regionale, a leading microfinance institution in Cameroon is the latest of a number of leading MFIs in the region to be planning to convert into a bank, and obtain a universal banking licence. Its current licence is as an MFI (2nd category) and it has been operating since 1993. The main objective of the conversion is to facilitate broader deposit products and therefore deposit mobilisation for the institution. The goal is principally to better serve the institution’s core customers with micro, SME and housing/education customers continuing to represent around 90% of the bank’s loan book, with larger SMEs and local corporates representing the balance by 2021. New products will also include supply chain financing, which will provide support for both larger clients and the MFI’s traditional MSE clients. The strategy also involves an upgrade to its IT systems commensurate with the new product mix and regulatory status. The institution may also consider expansion into other member states of Central African Economic and Monetary Community (CEMAC) region, for example the Republic of Congo, Chad, and Central African Republic, in addition to its current operations in Cameroon and Gabon.

La Regionale is also targeting a digital transformation of its product offering which will include partnering with MNOs for mobile money transfers and e-wallet services, an online banking platform and a mobile banking application with remittance and transfer integration with leading money transfer service providers – such as Western Union – who have a long tradition providing such financial inclusion driven services globally. While the institution is upgrading to a full banking licence, the digital financial services strategy will add value to La Regionale’s core MSE clients and enhance the efficiency of the institution.

The institution’s transformation strategy is financially inclusive whereby it commits to serve all customer segments across all economic sectors. The institution will continue to grow current accounts, savings accounts, certificates of deposit, and demand deposit accounts for individuals.

The transformation of MFIs into regulated commercial banks is a strategy that has been evolving for decades in Africa. This strategy has become appealing to MFIs due to its expected benefits, ability to mobilise customer deposits, access to private sources of capital, improvement in governance and transparency, with a goal to reach a significant scale and financial sustainability. Recent examples include: Botswana Building Society (BBS) ongoing demutualisation, Ghana Home Loans Bank, Sidian Bank Kenya (formerly K-Rep) and Equity Bank Kenya which is now in five other countries.

As of December 2018, La Regionale’s balance sheet stood at XAF 23.5 Bn (approx. EUR 35.9 M).

Verdant Capital is currently raising EUR 10 million of equity for La Regionale. This funding will be mainly used to meet the minimum regulatory capital requirements for a universal banking licence. La Regionale is also considering partnering with a technical assistance provider on the product development side.

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