Singapore’s family-run Tolaram Group made much of its US$1.8 billion (SUS$2.5 billion) fortune in cereals, noodles and infrastructure in Africa. Now, it’s planning to use its global reach and local relationships to move into digital banking there.
The group has a blueprint of sorts from another business it owns – PT Bank Amar Indonesia. Bank Amar is largely a digital institution, with loans and deposits for consumers handled over mobile phones. The publicly listed group has loaned almost US$300 million to around 300,000 customers and expects advances to increase more than 50% this year.
Africa shares some of the same characteristics. Non-traditional players without the legacy costs of established lenders are setting up digital banks to serve millions of smartphone-savvy customers. In 2018, the World Bank estimated as many as 95 million unbanked adults in Sub-Saharan Africa received cash payments for agricultural products, and about 65 million saved money using semi-formal methods.
Kunal Adnani, who also leads Tolaram’s mergers and acquisitions team, is helping coordinate the push. The ex-Barclays executive said the inspiration for becoming a digital bank came from an unlikely source – the group’s paper-mill operations in tech-forward Estonia. Expertise gleaned there was brought to Asia and will now be parlayed to Africa.
“What we’re looking to do is take the same technology, the same systems and the same learning into African markets where we have a presence, albeit in a very different area,” Adnani said in an interview. “We have access to thousands of distributors in these markets and that then can also have a knock-on effect to our business. The more credit we can give them, the more they can increase volumes.”
While Indonesia is experiencing a surge in online lending, much of it has been controversial amid reports of debt collectors intimidating borrowers who can’t afford the steep interest payments.
Adnani said Tolaram’s offering is more akin to a traditional bank, complete with interest rates similar to regular credit cards and savings accounts. Tolaram family member and senior executive Haresh Aswani also made a purely personal investment in Nigeria’s Kuda Bank, which is entirely digital.
The African country targets haven’t been finalized but Nigeria, Ghana, South Africa and Egypt are likely candidates. Tolaram said its fast-moving consumer goods business across the region generated about US$1 billion in 2019. And it’s open to acquiring smaller, existing banks – the group capitalized Bank Amar with US$70 million and “similar kinds of quantums across some of these countries are possible,” Adnani said.
To be sure, Tolaram will face stiff competition from incumbents including Standard Chartered, which is rolling out digital banking services across the continent. Africa also already has a fully digital bank in ALAT, which was started in Nigeria in 2017 by Wema Bank.
Offering millions of inexperienced borrowers access to credit can also bring higher default rates. But Tolaram isn’t a stranger to taking a few risks. Entering seemingly disparate lines of business around the world is nothing new for the clan’s empire, which started out making textiles in 1948 in Indonesia.
“We do see a significant need to bring people into the financial system, up the living standards, give them access to credit and improve efficiencies,” Adnani said. “It’s a huge opportunity for us.”