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A ONE - DAY In - House Workshop 15 th June 2015 Dr Abdalla Yakub; PhD; MBA (Cranfield) MD/CEO, KAJAURA International Consults (A Financial Management Company)

KAJAURA - CHANGING LIVES

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Page 1: KAJAURA - CHANGING LIVES

A ONE-DAY In-House Workshop 15 th June 2015

Dr Abdalla Yakub; PhD; MBA (Cranfield) MD/CEO, KAJAURA International Consults

(A Financial Management Company)

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Kajaura is a dynamic professional organization that works to create jobs and expand economic opportunities for people throughout Nigeria. We drive large-scale job creation initiatives, entrepreneurship, access to capital and markets, and investment opportunities for wealth creation. We work with a wide spectrum of Cooperative Organizations, NGOs, governments, international agencies and the private sector to engender financial inclusion, increase wealth creation and enhance access to finance in Nigeria and Africa. Vision Growing the financially excluded and/or underserved to wealth Mission To connect entrepreneurs to real opportunities for access to finance, investments, enterprise and civic engagement. We do this by mobilizing knowledge capital, investments, technology and networks, and by influencing mindsets and policies that are key to unlocking wider impact.

WHO WE ARE

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Micro, Small and Medium-Sized Enterprises (MSMEs) account for over 80% of the enterprises in Nigeria and the rest of Africa, and contribute a similarly high percentage of the Africa’s jobs. In comparison with larger firms, MSMEs provide greater benefits to society in terms of job creation, and as a result, poverty alleviation. Unfortunately, MSMEs are too often hindered by a lack of access to three important requirements to grow and prosper—financing, business development services, and access to trade and capital markets. To help catalyze job creating industries in Nigeria, Kajaura provides MSMEs with access to much-needed risk-sharing capital and business development services. To date, Kajaura is working with CBN on behalf of the Apex Associations.

KAJAURA & MSMES IN NIGERIA

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Kajaura employs a three-pillar framework to give MSMEs access to what they need to grow and thrive in today’s competitive global economy. 1. Access to Finance Businesses need investment capital to grow. However, due to their perceived risk, MSMEs face countless obstacles accessing capital from commercial banks. Lack of access to finance opportunities presents a serious problem for MSMEs in Nigeria. The Missing Middle To help bridge the finance gap, also referred to as the “missing middle”, Kajaura seeks to access MSME equity funds, with the goal of ensuring that MSMEs have adequate financing to support their businesses. For instance by working with Cooperatives, we have opened up access to the CBN N220BN intervention fund, which will spur the creation of sustainable, quality jobs. We are also exploring other low hanging fund windows from the World Bank, Africa Development Banks, BOI, BOA etc.

KAJAURA’S THREE PILLAR FRAMEWORK 1/3

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2. Access to Business Development Services (BDS) Access to capital alone is not enough for MSME success. Financing needs to be accompanied by Business Development Services (BDS) that provide companies with the knowledge and tools they need to compete. In Nigeria, Business Development Services are minimal, and in many areas virtually non-existent. Kajaura focuses to alleviate this gap by providing MSMEs with quality BDS. Technical Assistance Facility (TAF) Required Kajaura is also seeking to provide Mentoring and Advisory services to Small- and Medium-Sized Enterprises through a comprehensive system. We are actively seeking for a technical assistance facility (TAF).

KAJAURA’S THREE PILLAR FRAMEWORK 2/3

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3. Access to Markets Access to finance and BDS is essential, but without access to regional markets, the growth potential of MSMEs is constrained to their domestic markets. To help give MSMEs access to the wider markets they need for long-term growth and expansion, Kajaura is developing an innovative programs called ‘SME Business Link’ that will facilitate access to trade as well as junior capital markets. MSMEs Database By working with sector-focused clusters and primary societies of the Apex Associations, we seek to create business linkages among complementary MSMEs throughout Nigeria and Africa. These MSME Clusters and Primary Groups will allow MSMEs to benefit from mutual comparative advantages, and to gain access to new regional markets

Inclusive Business Models The second primary focus involves connecting low-income and underserved communities in rural and semi-urban areas (”Bottom of the Pyramid”) to the core business of large national and multinational corporations, thereby creating jobs for youth.

KAJAURA’S THREE PILLAR FRAMEWORK 3/3

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WHO ARE THE FINANCIALLY EXCLUDED/UNDERSERVED NIGERIANS ?

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Financially Excluded Those who are totally financially excluded (without any access to formal banking services)

Financially Underserved The financially underserved (those who have some sort of account, but no access to any form of electronic payment, such as a debit, credit or prepaid card).

DEFINITION

Who are they? 1.Their average age ranges from 22 years to 45 years in Nigeria. They are therefore economically active age group.

2.More than 50% are currently working.

3.79% to 91% have achieved secondary education or above. (These education levels indicate a stronger potential for financial inclusion).

4.Over half of these groups have lived in their environment all their life.

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THEIR CHARACTERISTICS 1/2

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Summary “Our government is not stable and it’s affecting everything. Our education quality is deteriorating and there are no employment opportunities even after graduating with a university degree.”

~ (Nigeria, 24 years old, Excluded)

5. They have strong reliance on their social network in times of need

6. Strong anxiety over job security and general future prospects ––

because of political instability

7. Frequent power outages which occur at irregular times is a way of life and has implications in adoption levels of technology.

8. For various reasons the conventional forms of banking and financial inclusion are not working for these groups.

SO....WHO ARE THESE PEOPLE?

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THEIR CHARACTERISTICS 2/2

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The MSME Stakeholders Commonwealth has a combined estimated membership of more than 60million. The Commonwealth is composed of: a) Cooperative Federation of Nigeria (CFN) b) All Farmers Associations of Nigeria (AFAN) c) National Association of Micro Finance Banks (NAMB) d) Association of Small Scale & Medium Enterprises (NASME) e) National Association of Small Scale Industrialists (NASSI) f) National Association of Nigerians Students (NANS) g) Association of Market Women and Men (AMWM)

THE MICRO, SMALL, AND MEDIUM ENTERPRISES (MSME) STAKEHOLDERS COMMONWEALTH

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Individual MSMEs through Primary Societies or Clusters70% of the Population

THE BOTTOM OF THE PYRAMID (BOP)

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1. Income Channels 1. salary is the most common payment type received. Some even receive their salaries through the banks. But do the Banks treat them with respect? 2. The also rely on friends and family for money

2. Expenses Channels 1. Majority of expenses are for items such as clothes, transportation, food and telecom 2. Given their current lack of access, these expenses are paid predominantly in cash.

3. Savings Habit 1.Money is saved either in the form of cash at home or through some social saving schemes.

(For those with families, the savings were primarily for their children) 2.A common safekeeping area is in their cupboards, where it is often not noticeable to others. 3.Saving through ‘Arisan’ or ‘Adashe’ (a form of rotating savings)

4. Borrowing Habit 1.Borrowing is seen as a last resort 2.Mental accounting is the most common way of tracking expenses – no much formal accounting

HOW DO THEY MANAGE MONEY?

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1. Safety Concerns

A point of entry into financial inclusion is by addressing safety concerns with cash. These concerns are of three types:

1. Perceived safety in keeping cash at home 2. Fear of losing cash/being robbed 3. Fear of overspending if carrying cash

2. Concerns about Opening Bank Accounts

I do not need a bank account because: 1. I do not have enough money 2. The inconveniences are too much:

i. Standing in line to be served takes too long ii. Processes such as registration and ordinary bank transactions are complex and

intimidating iii.The Banks are not transparent when it comes to bank fees

3. Concerns about ATM Cards I do not need or use ATM Card because:

1. There is high possibility of forgetting the pin code and in turn “money is stuck.” 2. The older people believe that there is a possibility that ATM will “eat your card.” 3. The process of withdrawing money from the ATM machine is complicated and one

mistake on his part would cause him to lose his money.

THEIR FINANCIAL CONCERNS

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REALITY CHECK: THE GAP IS REAL & IS GROWING

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1 Oil Benchmark Down Affects our capacity to fund development projects

2 Foreign Reserve Down Affects our capacity to fund development projects, borrow from international market and loss of influence

3 Naira Value Down Beneficiaries: Foreign Investors in Services industry such as Banking and Finance, Agriculture, Construction, Tourism etc Losers: Manufacturing industries – very high cost of importation of hardware

4 Inflation Up Will affect cost of goods and standard of living

4 Youth Unemployment Up Socio-political instability, loss of productive generation

5 Poverty Ratio Up Socio-political instability, loss of productive generation

6 Insecurity Social instability

REALITY CHECKS

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IT IS FINANCIAL INCLUSION – NOT EASY ACCESS TO FINANCE ONLY

NATIONAL FINANCIAL INCLUSION STRATEGY

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In pursuing the stated targets, efforts will be concentrated in the following areas:

• Agent banking – Agent banking is the delivery of banking services outside traditional

bank branches through touchpoints such as existing retail stores and petrol stations or via technology such as 'Point of Sale' (POS) devices and mobile phones.

• Mobile banking / mobile payments – Access to financial services through mobile

phones that are either directly linked to a bank account or the use of mobile wallets as intermediary virtual money accounts.

• Linkage models – Enhancement of financial and business cooperation between

traditional financial institutions (Deposit Money Banks or Development Finance Institutions), government and microfinance banks/institutions for providing wholesale funding for on-lending transactions.

• Client empowerment – More people are brought into the formal financial system

through coordinated national financial literacy initiatives complemented by consumer protection programmes and policies

CBN’S STRATEGIES FOR ACHIEVING THE FINANCIAL INCLUSION

TARGETS

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KAJAURA’S BUSINESS MODEL

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• Kajaura Agent Banking Services (KABS) – We have a considerable size of live data. Working with our partner technology providers and microfinance banks, KABS will be deployed on a pilot basis in few weeks.

• Kajaura’s Mobile banking / mobile payments – Kajaura Access to Finance Services

(KAFS) are working with Apex Associations to ensure accessed funds and other financial services are directly linked to a bank account or the use of mobile wallets as intermediary virtual money accounts with beneficiaries.

• Client empowerment – More people are brought into the formal financial system

through coordinated services of Kajaura Business Development Services (KBDS) and Kajaura Access to Markets (KAM).

Short Term Goals 15– 20% (9 – 12million MSMEs) Financial Inclusion in 12 months

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