Virtual bank Wizzit, which provides low-cost cellphone banking to lower-income earners, has received major backing from the World Bank.
IFC, a member of the World Bank Group which provides finance to commercially viable businesses that promote development, has signed an agreement to take a 10% equity stake in Wizzit.
“This takes Wizzit to a different level in terms of credibility. Globally it puts us in a different place altogether,” says managing director and founder Brian Richardson. Richardson and Charles Rowlinson, chairperson of Wizzit, started the bank three years ago with their own capital.
Richardson says that there were concerns in some quarters about the viability of a self-funded entity. But the World Bank’s diligent process and stamp of approval has left no doubt about the soundness of the business model. In a recent report by CGAP, a consultative group to the World Bank, Wizzit’s model of low-cost cellphone banking was rated the best way to bring banking to lower-income earners across Africa.
Desmond Dodd, spokesperson for IFC’s African division, says the company views the deal as a long-term relationship. Wizzit’s model can be tested in South Africa and rolled out to the rest of Africa and other parts of the world where banking penetration is low.
“We will provide a finance and advisory service to Wizzit to develop a strategy to expand into the rest of Africa as well as South America and Europe,” says Dodd, adding that the investment sends a signal to the South African market that the IFC wants to do business with innovative and well-run companies that can test a product locally and expand it to the rest of the world to help other developing economies.
Apart from IFC, Oiko Credit and Africap have each taken a 10% stake in the bank. Oiko Credit is a church-based fund, which invests in companies in developing economies that provide access to finance and productive loans. Africap is an African investment fund that invests in banks and micro-finance institutions in Africa.
Given the focus of these shareholders, Richardson says Wizzit will start to move into the area of productive loans, aimed at providing financing to small businesses, which will provide sustainable growth. He says on the banking side it will focus on marketing initiatives.
Despite having no advertising or marketing budget, Wizzit has more than doubled its client base in the past year.
This has been done by employing 3 000 formerly unemployed people, known as Wizzkids, all of whom have good local knowledge and contacts in the neighbourhoods in which they operate to market its services directly to potential clients across the country. Richardson says it will be able to enter into more formal marketing initiatives now and expand on financial literacy.
He says one of the biggest hurdles for the bank has been creating confidence in its products among people who have only ever transacted in cash. He says it is an indictment on the country that about 40% of the population remain unbanked. This means millions of women wait in day-long queues each month to receive their child grant support, which could be paid into their bank accounts. Many people queue for days to purchase electricity, which could be bought through their cellphone far more easily.