Centum Investment’s startup credit venture, Jafari Credit, disbursed over Sh200 million to civil servants in the span of around 18 months. This underscores the endeavor to provide loans to individuals considered less risky.
According to Centum’s latest annual report, Jafari Credit, a non-deposit-taking microfinance company established by the diversified investments firm in mid-2021, began its operations last year.
The company offers extended credit options to civil servants, both at the National and County government levels, based on their salary statements.
Centum’s report states, “Jafari aims to meet the increasing demand for consumer loans while actively managing risks, focusing primarily on civil servants with repayments facilitated through payroll deductions.”
The company believes that recent macroeconomic disruptions have caused traditional banks to reduce their lending to small and medium-sized enterprises (SMEs) and individuals. Consequently, Centum sees an opportunity to expand its lending to civil servants, targeting a total of Sh1.24 billion by the next year.
With its ownership of a controlling stake in Sidian Bank, which concluded June with a loan book worth Sh24.26 billion, Jafari Credit solidifies Centum’s presence in the credit market.
Default rates on Jafari loans to civil servants have been less than one percent, according to Centum. This is in a market where the non-performing loans ratio in the banking sector has been averaging above 14 percent.
Centum adds to the list of players in the financial sector who are betting on civil servants. Banks, credit-only micro-financiers and Saccos have also been targeting civil servants.
Civil servants have a reputation for a good loan repayment record and reduced default risk owing to the high job security, making it easier for them to access check-off scheme loans.
Salary check-off loans are loans given to salaried individuals who are employed and use their salary as security for accessing loan facilities.
Micro-lenders such as Platinum Credit have been targeting civil servants such as teachers with digital loans that are disbursed within hours after applying.
Centum says the micro-lending business currently enjoys a monthly net yield of 3.7 percent on its book with less than one percent non-performing loans and promises to grow into a money-maker.
“As the business scales up, we believe that it has the potential to be a highly cash generative and profitable asset in the portfolio that will contribute to sizable cash returns to Centum in the short to medium term,” says Centum.
Centum has a diversified portfolio with exposure to financial services, education, publishing, agribusiness, automotive, airline catering, power, and the real estate sectors.
Jafari is part of Centum’s private equity portfolio which also includes Sidian Bank, Isuzu East Africa, Longhorn Publishers, NAS Servair, Zohari Leasing, Nabo Capital, Greenblade Growers, Tribus TSG, Tier Data, Akiira Geothermal, Centum Real Estate Limited and Two Rivers International Finance and Innovation Centre.
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