RenCap targets Nigerian middle class for consumer credit

Renaissance Capital, an investment bank focused on emerging markets, launched Renaissance Credit, a Nigerian microfinance bank, on Monday as part of an effort to access the country’s rapidly growing middle class.

“With its impressively expanding middle class, Nigeria is the natural location to launch Renaissance Credit in Africa,” Stephen Jennings, the founder and CEO of Renaissance Group, said, according to Business Day.

The bank, which will operate out of Ikoyi, plans to scale up and grow into various locations across Nigeria in the coming years. The lender also has plans to expand its product offerings to include point-of-sale loans at Nigerian retail locations and to partner with mobile money and mobile phone operators.

Renaissance is trying to replicate in Nigeria the success it has experienced in Russia, where it claims more than five million customers, 5,000 staff members and a $2 billion consumer loan portfolio, Business Day reports.

George Taylor, the chairman of Renaissance Credit, said that Nigeria’s economic position is similar to that of Russia’s 10 years ago. Nigeria’s middle class comprises 23 percent of the nation’s population and consumers hold relatively low consumer debt compared to other consumers in developed countries.

IMF reports that Nigeria has one of the 10 highest real income-per-capital growth rates in Sub-Saharan Africa, which may be an indicator that the population’s purchasing power is rapidly increasing.

“The Nigerian middle class is no different to any other in the world,” Segun Akintemi, the CEO of Renaissance Credit, said, according to Business Day. “People want access to loans and credit in order to realize their dreams.”

Analysts maintain, however, that the company may experience some issues replicating the success it had in Russia as a result of the nation’s unusual operating environment.

“It is a welcome idea, and I believe Nigeria is the right market for it, with an increasing middle class and a population growing at approximately [three] percent per annum,” Abiodun Keripe, an analyst at GTP Asset Management Ltd., said, Business Day reports. “Available data suggests consumer lending is still in its infant stage, compared to what is obtainable in the advanced economies. However, the cost of lending and the repayment tenure must be considered.”

Keripe said that Renaissance’s move to Nigeria could influence other Nigerian banks to strengthen their consumer lending divisions.

Kayode Akindele, a partner at the Lagos-based investment firm 46 Parallel, said, that Renaissance may not have an advantage to established Nigerian banks that are more familiar with the nation’s lending industry.

“To be honest, I think the top Nigerian banks will not be too worried at this juncture,” Akindele said, according to Business Day.