RED Sphere Finance, the microfinance arm of CBZ Holdings, has experienced exponential growth since its formation two years ago. The microfinance giant’s managing director, Desmund Ali, recently gave an insight into Red Sphere Finance’s which has gained a lot of traction in the market.
Below are excerpts of the interview:
QUESTION (Q): Please briefly share with your background and what Red Sphere Finance is all about?
ANSWER (A): Red Sphere was formed in 2019 by CBZ as a microfinance company. It is 100 percent owned by CBZ Holdings. I joined last year from Homelink. Before that I was with BancABC where I was the founding managing director of the group’s microfinance arm called Banc Easy in 2012 having been previously been an Executive in Treasury, Marketing, Retail Bank at BancABC.
I also worked in Botswana, Mozambique and Tanzania within BancABC. I left BancEasy in 2016 to join Homelink as the Chief Executive Officer.
I was there until 2020 when I joined Red Sphere when it was still in its infancy as the Managing Director.
We were around probably number 18 in the top 20 of the country’s microfinance companies. Since then we have grown in leaps bounds because of the model we are using and we now in the Top 2.
Q: Where are you represented?
A: Our model is such that you may not see a branch written Red Sphere. But I can tell you that we are represented throughout the country. We try to be present where we feel that there is economic activity.
Our presence in most cases is through partnerships. For example, if one walks into a reputable furniture shop and they are interested in buying furniture and they offer you credit for 24 months at zero percent deposit, the entity offering this credit is bound to be Red Sphere! We have a number of such partnerships with many big departmental stores, including big clothing ones. You just walk in there and get credit for the products you want and Red Sphere pays.
You will then pay to us over 24 or 30 months.
Our head office is at corner Robert Mugabe and First Street in Harare. We also have offices in Bulawayo, Gweru and Mutare manned by just two or three people. The whole of Red Sphere Finance we have just 15 or 16 people but we cover the whole country. We utilise technology a lot and a significant number of our staff work from home.
This is our strength because we are able to work at all hours.
Q: Why has CBZ holdings added a microfinance arm in the diversified group?
A: We went into microfinance because there was a segment of individuals and individually-owned companies who may not have the capacity to meet the loan requirements set by banks. The key question guiding our operations is: How can we make it possible? Ordinarily, financial institutions have more than a 100 reasons not to give you a loan. But for Red Sphere, our focus is to make it possible.
How can we help the guy who has an order from a trustworthy buyer but has no security? How can we help someone who wants to buy a house but has no security? How can we securitise to make it possible? For example, you can have a guy who is big in the sale of cellphones but has no capital to buy the cellphones even though he has a ready market. We come in as Red Sphere to make this transaction
Traditional banking insists on security-say a house- to people with no capacity to provide it. As Red Sphere we believe that people have to start from somewhere.
Q: Since you opened your doors to the public, how has been the response?
A: The response has been very good. The public may not see us directly but they see us when they get into shops because we provide convenience.
For example we can help you if you don’t have deposit or cash to outlay at that particular time. Our service is not just limited to furniture. We do other things-celphones, laptops etc. Online learning is the in thing now. We are entering into partnerships with universities under which we offer students laptops they can use for their studies.
They will pay for the laptops in installments every time they pay their fees. Twice a year, when they pay fees there is an installment for the laptops. We have started with one university, with the first years.
The plan is to replicate this with other universities. Besides that, we are also looking at SMEs. We can finance SMEs supplying goods and services to our partners and top companies.
They might not have security but we know that they can buy and sell and have a good track record. We have particularly been impressed by rural SMEs.
We have seen, for example in Matabeleland, that some SMEs are really building structures in peri-urban areas where they do projects such as poultry, cattle fattening etc. It is cheaper for them to run their businesses there.
Those are some of the opportunities we are seeing for SMEs in the rural setting.
Q: Red Sphere is now one of the biggest MFIs in the country. What is behind the exponential growth?
A: Red Sphere is now the biggest on Zimbabwe’s microfinance scene. We have experienced phenomenal growth.
This has been possible thanks to our model which makes it possible for us to assist SMEs, individuals and individually-owned companies who may not have the capacity to meet the security requirements set by banks. We are creating a market for our partners and we are paying them cash.
There is always cash for them to do business. Technically, our partners have become our branches. We are regulated by the central bank and we are a member of the Zimbabwe Association of Micro-finance Institutions (ZAMFI). As Red Sphere, we are partners in competition with fellow ZAMFI members.
There times when we work together to achieve certain objectives.
Q: Can you share with us loan products available from Red Sphere Finance and the key target markets?
A: We are quite big on financing products. Cash loans account for less than 1 percent. Our model seeks to improve people’s lives in a sustainable way.
We don’t want to advance a loan that could be squandered in a beer hall. We would rather finance a peanut butter-making machine because this way we would have empowered someone. Our focus is on financing products so as to improve lives.
We want them to say we borrowed from Red Sphere and this is the business I am running as a result. We also do order finance and invoice discounting for SMEs as well as short term working capital, particularly if we know and understand your market.
Q: What role is Red Sphere playing to promote financial inclusion?
A: Our role is to make sure that financial services are available to all across the board. Like I said earlier, there is a lot economic activity taking place in growth points and rural areas that should be financially supported.
These small businesses are very limited in terms of production because they can’t be supported by banks as they can’t meet the necessary security requirements. We are preoccupied with the desire to make assistance possible to people or small businesses using what they have.
Q: What are the plans for the future?
A: We believe we have to go deeper than microfinance and also offer micro insurance. Several times the Glenview home industry has been burnt. Sadly, all of those people no one is insured.
They always start from zero, which is a tragedy. We need find ways to protect and insure them. We need to go where they are to offer them the insurance services.
We also have to learn from Kenya which has done very well in terms of microfinance. Kenya has developed MFIs that can even offer mortgages. In Kenya they do what is called sequential building. They borrow and build one room and borrow again and build another room. They do this until the house is complete.
Another area that we want to venture into is green energy. We have got products for that such as water tanks and solar products like pumps and even lighting for houses in the rural areas.
We are partnering with suppliers, local and international, to do this solar energy initiative. Zimbabwe arguably has the most dams in Africa yet in the areas where these dams are, hardly any meaningful agricultural activity takes place.
What we want to do to address this issue is bring a special solar-powered water pump to the market which can be used in any water source, whether it’s a river, dam or deep well.
Its advantage is that you can water your garden and once you are done, you pack it and take it home. As such, you can easily secure your pump.
Q: What are Red Sphere Finance’s growth plans?
A: We believe there is a scope for Red Sphere to grow. Our audacious goal is to have Red Sphere in the region. Going forward, our aim is also to play an important role in the communities that we operate in.
Right now we are supporting women’s football, so far we are still doing donations but we are hopefulthat it will grow into sponsorship.