Growth from a small island, with Mark van Beuningen

To grow from a small island you need a dual aspect: looking inward, CIM has a relationship with about 60% of commercially active Mauritians; looking outward, CIM is expanding into East Africa and possibly beyond?

You can read more about CIM's finance arm at https://cimfinance.mu/mu/en/

Or, if you'd rather visit them and the beautiful island of Mauritius in person, here's where you can start your planning https://www.mymauritius.travel/ 🤣

You can learn more about myself, Brendan le Grange, on my LinkedIn page (feel free to connect), my action-adventure novels are on Amazon, some versions even for free, and my work with ConfirmU and our gamified psychometric scores is at https://confirmu.com/ and on episode 24 of this very show https://www.howtolendmoneytostrangers.show/episodes/episode-24

If you have any feedback, questions, or if you would like to participate in the show, please feel free to reach out to me via the contact page on this site.

Oh, and if you’re in need of more banking podcasts, you can find related content at https://blog.feedspot.com/banking_podcasts/

Regards,

Brendan

The full written transcript is below:

Mark van Beuningen 0:00

Mauritian companies have got a lot of long way to go in terms of taking advantage of the opportunities outside of Mauririus. But certainly, given the size of the markets, there has been opportunities, good opportunities to grow. And we've grown well over the last six, seven years as a business.

But if you do want to meaningfully grow as a business, you certainly need to look outside of Mauritius. And most commercial companies that are looking at geographic expansion typically do look at East, and in some cases West, Africa, Southern Africa, and obviously depends on what you do business.

But there's certainly opportunities for Mauritian companies to go into into Africa, to invest into Africa.

Brendan Le Grange 0:45

Okay, it's time to ask for a Christmas favour. I'm away from my desk for the next two weeks - skiing in Switzerland, so I have to be honest, I'm not going to be missing you. But I'm also not going to be able to do the usual social media push as these next few episodes go out, so it would mean a huge amount of me and even more to the show, if you could go on to LinkedIn, find and follow the How to Lend Money to Strangers page there, and then like, share, and even comment on the latest episode announcements.

And I'm going to make it easy for you because this one's a goodie.

For a couple of years around 2005/ 2006, I worked for Barclays Africa - in a lovely little handpick team that had been tasked with modernising the retail lending risk operations of the bank's various businesses around the continent, under the wing of the enigmatic Nick Geimer.

We were all new, and so the first task was to divvy up the various markets: you get Zambia, I get Botswana; you get Ghana, I get Kenya; you get Mauritius... wait a minute, I didn't know tropical islands were an option.

In the end, I think it was Paul Maske who was first to be sent there on a business trip, only to return saying that, arriving at the airport alone and in a suit, when everyone else was a loved up couple in beach gear, may not have been the prize we'd all first thought it was.

Anyway, what I'm supposed to be saying is that while most people go to Mauritius as tourists, there is a thriving banking ecosystem there. Welcome to How to Lend Money to Strangers with Brendan Le Grange.

Mark tvan Beuningen, CEO of the CIM Financial Services Group in Mauritius, welcome to the show.

You and I both share the same excellent educational foundation her graduating in 2001 with a Bachelor of Business science from UCT. And we both followed that up with some country hopping, albeit in different directions around the world. So before we talk about your life now on a tropical island, let's talk about how you got there. What was your professional background? Pre the same group? Yeah, thanks.

Mark van Beuningen 3:02

Thanks, Brendan. So post graduating with you in 2001 from UCT, I worked for KPMG in Cape Town, qualified as a chartered accountant and focused on financial services/ insurance in Cape Town. I then spent five years in Australia, first working for Macquarie Bank in Sydney, I was in their Structured Products Division.

I then did an MBA and joined the Boston Consulting Group, BCG in Sydney and spent just under two years there, before moving across to Johannesburg and spending four years with BCG in Johannesburg. I was one of the founding members of the of the Johannesburg office for BCG.

Brendan Le Grange 3:46

So Mark, MBA and BCG are gold stars on the corporate CV. And then working in Johannesburg, which arguably the most corporate city in Africa. That, with that previous experience you had in Australia, means as a neutral looking at your your career path, they might have expected New York or London or Tokyo to be where you're headed next. What took you to Mauritius?

Mark van Beuningen 4:13

I had a fantastic career at BCG, and really love BCG, but for anyone who's been in consulting, there's not much balance in the work:life balance equation! So I guess I made the choice, which my wife actually prompted me to, either to make a choice between her or or the company... so obviously prefer my wife.

So I decided to look for something else. And I looked at opportunities in Johannesburg, but I was actually born in Mauritius - my mother's Mauritian so spend summer first nine/ ten years of my life in Mauritius before moving to Zimbabwe, my father's from Zimbabwe - but then came back to Mauritius every year. So a lot of friends and family here. And my wife is Mauritian. So all her family lives here.

So I thought, let me just try out, see if there's any opportunities in Mauritius. It's a nice, nice place to live. So I put my feelers out here and got an opportunity to work with CIM Financial Services/ CIM Group. And I guess what attracted me to that was I was the job was MD, managing director of CIM Finance, which is our biggest business unit, with the opportunity to go up to Group CEO.

And the board and shareholders wanted me to expand the business into Africa, so then coming to a small island, obviously, there's the lifestyle aspect of it, which was nice, but then there's opportunity for me to have a like a very big operational as well role as well. And to look at the African expansion, which excited me a lot

Brendan Le Grange 5:48

Beyond the palm trees and the sandy beaches. What does the market actually look like in terms of financial services in Mauritius?

Mark van Beuningen 5:55

Thanks, Brendan. Maybe just starting on what Mauritius is, before I jump into from a market perspective, Mauritius started pretty much as a sugar island. So sugarcane production was, I guess, the main economic activity for hundreds of years. And then it branched out into tourism, then into textiles. And those three sectors are still very important and the tourism in particular.

So, like you said, we've got a population of about 1.3 million, and we've get a similar number of tourists coming to Mauritius each year. So obviously, beautiful beaches, but fantastic hotels as well in Mauritius. And the offshore sector has grown significantly in Mauritius - from a jurisdiction perspective, it's built a reputation of being a very safe jurisdiction with well-skilled people. For companies that want to invest into predominately African, India, Mauritius has a lot of double tax agreements with countries across the world, has done a great job of getting those in place for India and for Africa. So there's a huge amount of FDI that's flowed through Mauritius into into Africa. And you get a lot of companies that are investing into Africa that set up the, the I guess the offshore operation had offices in Mauritius.

And off the back of that the banking sector has grown significantly. So I guess there's given the size of the island, the banking sector is very big with quite a few big international banks, like HSBC, Standard Chartered etc, in Mauritius as well as as the as the local banks.

And then real estate is a big part of the economy as well. Golf estates, villa estates, beachfront estates, where, if foreigners come and buy into those estates, they get permanent residency here, and then are able to take advantage of the tax rate of 15% that we enjoy in Mauritius as as individuals. So obviously, off the back of real estate, construction is a huge part of the economy as well. And then business process outsourcing is a BPO is taken off a lot as well. So started off in call centres, but then as gone into IT services, software development is it's accounting etc.

So it's a fairly well diversified economy. And from a per capita income perspective, Mauritius is a high income country now. So if you look at that from an African context, most of the countries have a low or middle income. So even though we were 1.3 million people, it's a relatively wealthy, wealthy country, especially compared to Africa.

And also the one big benefit of Mauritius as a, I guess as an offshore sector as far as BPO is the language fluency of operations. They mean friend like is creol, which is like the local pidgin French - if you want to call it that - is the main language, but then French is the most widely spoken language, but because it's a was a British colony, education systems is British, so everyone speaks English fluently, and writes English well as well. So you have people who can, like from a call centre or BPO perspective, you can serve as both an English speaking and French speaking countries, which is very useful, obviously,

Brendan Le Grange 9:27

When we look at that some group, what are we talking about in terms of bank, how's it structured, what businesses are in there? And also maybe how do you balance that view, or those dual views of serving a Mauritian market and in serving the much bigger global market outside.

Mark van Beuningen 9:44

Mauritian companies have got a long way to go in terms of taking advantage of the opportunities outside of Mauritius, and certainly given the size of the markets out there, there has been opportunities opportunity to grow. And we've grown well over the last over the last six, seven years as a business. But but if you do want to meaningfully grow as a business, you certainly need to look outside of Mauritius.

Most commercial companies that are looking at geographic expansion, typically do look at East and in some cases West Africa, even Southern Africa. And they are starting to gain a lot of a lot of traction. So I think - depending on obviously, what your business does - there's certainly opportunities for Mauritian companies to go into into Africa to invest into Africa.

And that that ranges from sugar, we still have a lot of expertise in sugar. So you typically see a lot of Mauritian companies in the sugar industry that have invested across Africa, in the sugar industry. We're seeing some of the big companies investing into into retail and Africa, into logistics and Africa. Some of the banks, like Mauritius commercial bank, MCB, is the largest bank here, and they've then expanded significantly into Africa. They there many lend to banks, or do syndicated lending across Africa that they've given the size of their balance sheet here. It's they they they've been able to leverage, I guess, the dollar deposits from the offshore sector to support the growth into into Africa.

And a lot of the banks have been really pushing hard into Africa, as well as some of the big non-bank groups. From a CIM perspective, we're a lending business. So maybe a bit of context around who exactly CIM is: we were a bit of a diversified mini conglomerates when I joined, which we've really focused on being a financial services business. We had an offshore management company. So I spoke about the offshore sector will have the largest second largest offshore management company in Mauritius. And we sold that to private equity backed private equity for about $95 million, about five years ago. And then we had a property development business, which was spun out and separately listed about three or four years ago.

And now we purely focused on financial services. And that's our core business courts and finance and militias, which is really a consumer finance, business. And that's higher purchase, which is a bit like micro leasing, I guess, for the lower income folks who want to buy TVs, furniture, and mobile phones, we will give them credit to buy that and that can pay us off in two to four years with the largest leasing company militias as well.

And we issue and acquire Visa and MasterCard. And we've got a factoring business, which has like invoice discount thing that banks do. So it's very good working capital solution for SMEs. So from a market positioning some, some finances really, we service, the lower to mid income sector, the population, which is typically underserved by the banks, as well as SMEs, which are also underserved by the banks, it's a quite a nice space to be in.

And it's served us so just very well. And then from an investment perspective, we started, we started in Kenya with two main businesses in consumer finance, being hire purchase and unsecured loans we decided to go with, with hire purchase. And we did build out two retail partnerships there with us with all the big furniture and consumer electronic good mobile phone stores and giving credit to the customers. And our second largest business is leasing. And so next year we'll start we'll start doing leasing in Kenya as well. And looking at other opportunities across Africa and leasing as well.

Brendan Le Grange 13:47

Yeah, and I actually well as seeing on your LinkedIn, I think update a press release on education loans in Kenya as well. That something you want to chat about,

Mark van Beuningen 13:57

I guess from a Kenyan context, that was very much a market specific demand. So I think it's a great, great example of doing something that supports your customers, I don't think it's going to necessarily make us a huge amount of money. But in Kenya, because the public school system has deteriorated significantly, the private school system has is very big. So you've got about 2.6 million children at over 3000 private schools in Kenya, which if anyone knows Africa, that's pretty pretty huge.

In Kenya, they place a huge premium on education to get the kids better educated but opportunities in life but all the schools they require you to pay your term fees in advance, which people struggle with from a cash flow perspective. So it's really a it's kind of like a buy now pay later product where we'll pay your school fees upfront and then you can pay us back over three to four months at a low interest rate.

Brendan Le Grange 14:58

Yeah, and I see the CIM Group was the first non-banking financial institution in Sub Saharan Africa to issue MasterCard and Visa credit cards, the first to issue China UnionPay cards, and the last several years now, you've been investing very heavily in mobile based lending platforms, like WhatsApp enabled SME loans and things that wouldn't necessarily be expected in a smaller, more far flung markets.

So before we deep dive into any lending products, just in terms of the philosophy at the group, what is your innovation philosophy? And what's been behind this big drive to digital?

Mark van Beuningen 15:37

I think, in a sense, the big drivers have been around analytics and digital.

It really started in analytics when I first joined. And I think for me, as you know, if you want to learn, strong analytics really helps you to make better credit decisions. So we really worked with Experian on scorecards, but we built out a very strong analytics capability in the business. I guess that goes from the data warehouse through to the frontend with dashboarding and all the analytical tools that you use, as well as, like the actual people capability that we bought in.

And that's really helped us to, to be able to tweak that we do some very deep analytical reviews on a monthly basis.

And it's helped us to understand our loan portfolio performance at a very granular detail and be able to tweak our scorecards very, very, very quickly to respond to to any credit risk portfolios to be seen. And it's helped us from a margin perspective has certainly helped us a lot to grow the business sustainably.

But then from a digital perspective, our focus has been on operational efficiency, and then customer experience.

So from an operational efficiency perspective, it's really around making sure that all all backup back office type processes that were very manual in the past can be automated as much as possible. And afternoon, including processes that are cut, I guess, customer customer facing so I can our leasing business, for example.

Now we've partnered with a South African company called sorority, which is effectively like a loan origination system where you put the customer's details on onto the system that integrates into our, into our into our systems. And we can use an automated workflow. That helps us to to get a very quick turnaround time on on granting these applications all the way through to contract fulfilment. So from having to print out reams and reams of contracts, everything's all pretty much DocuSign, or digitally digitally enabled contracts, like consumer finance, or consumer finance businesses, like I said, our biggest business.

We have close to 300,000 clients - that's out of a net economically active population of 550,000 people in Mauritius. So we've got a very big data customer base relative to the population here, close to 55-60% of the population! And we were printing out all their contracts, and now an SMS is sent to them, they sign off on a contract, and it's done very quickly.

And then from a customer-facing perspective, given the nature of our business, it was very people heavy. So like I said, our higher purchase business, by definition, we granting credit on furniture, consumer electronic goods, mobile phones, so had people in stores around the island as well as seven branches. So we got people sitting in 110 stores around the island. And then you've got so you've got about 100,000 loans being generated a month, we've got 250,000 people paying us back in person every month. So it's just a huge, huge volume of this loan origination as well as monthly cash repayment for the instalments.

So we think we've been thinking through how can we optimise that to give people the choice of being able to originate a loan through a digital channel, or to be able to pay us back through a digital channel. And that's for obviously, our existing customer base, but also with the realisation that the younger demographic who pretty much spend their life on mobile phones expect that kind of experience customer experience.

So we need to have a good digital platform and we built out a very nice, I guess, mobile app that helps helps customers to do exactly that.

Brendan Le Grange 19:49

If you think about, say five years ago, what they might have looked like in terms of raising money in the factoring side or just in in the general credit side for an SME, to what is like now in the digital world that you're providing them. What are we talking about in terms of difference in days to get alone in number of first steps taken, anything like that, how bigger changes as for the actual people as well on the other side?

Mark van Beuningen 20:14

Well, from an SME perspective, it's I guess we brought it down to a matter of two to three days from loan origination to loan disbursement. So it's a very quick, quick turnaround time.

And that used to take a few weeks, because it's I guess, we had a much more traditional approach to both client engagement and client sourcing, as well as to the credit assessment, and we realised that a lot of the SMEs actually are pretty much sole proprietors. So I think that's true across across the world.

So we've used used our scorecards - our scorecard capabilities - to help us to build out a simple scorecard for SMEs. It obviously helps to have the bank statements available, bank statements, etc. We've got a bank statement scraping tool that basically takes six months' bank statements and helps you to helps you to understand what what kind of loan loan you can can give them.

And yeah, so I guess we've worked, we have, we have, we have significantly changed the way that we we think about what SMEs are and how we grant loans to them. I think given our experience, the different products we've got in terms of unsecured loans, factoring, which is working capital, finance, as well as leasing. Like what we did, as we set up, we didn't have an SME team before we had like a product lead team. And all we had product lead teams. And now it's really like the SME team. It's we've got desks and all our branches. And it's really about understanding the needs of the SMEs, something they can apply through a digital channels, but if they do want to come in person and talk through things a bit more, we can do that to them. And and based off their needs mean SMEs typically either need cash working capital purposes, they need to invest in some equipment or vehicle etc. So once you understand that, you can say, Well, okay, let's let let's base our career decision of something a lot simpler, based on based on the actual needs.

Brendan Le Grange 22:28

You mentioned, Experian, I assume, in terms of the infrastructure in place there's credit bureau in place, we've talked about credit cards out there, what does that landscape look like what products are popular is like the rest of the world whereby now pay later is the hot new topic, or what are the the products that get the most traction in terms of the consumer borrowing and lending?

Mark van Beuningen 22:48

In the Mauritian market, BNPL hasn't taken off yet, something that we are we are seriously looking at. Because I mean, in effect, we're a BNPL company anyway - people buy, like the goods that I've told you about earlier, and then pay off over 24 to 48 months, where I guess BNPL as we know it as a three to four month payment product. So we're looking at that as well.

But in the Mauritian contexts, people have an affinity to owning their own homes here. So I guess, like a traditional mortgages are still still a big thing. And unsecured lending was when we started doing unsecured lending about five, six years ago. And wasn't wasn't really done at all in the market. So that's, I guess that's a product we've seen significant growth. And so a lot of people got small projects, whether it's renovation, and having a wedding, whatever it is, and, and then they just need a loan to to help them so so we've used our areas, we've used our scorecards, and off the back of the experience we've got on the loan performance for unsecured loans to be able to really, really customise that as well to the clients that take unsecured loans.

And, yeah, now we've literally got a turnaround time of someone applies for that scikit learn and we'll give them a credit decision instantly. So and, and it's done, and we Despard we have dispersed the next day. But I think the other product that's taking gonna take off quite a lot in Mauritius is digital payments or instant payments. So the central bankers has put in place like an instant payment system. That's that's all the financial services participants can can apply to, to link into.

And for non-bank, it's fantastic because basically nothing in our case, we've got an app like I told you, and now now we can get our customers to link their cards to their bank accounts and effectively pay pay us back automatically on a monthly basis or they can arrange to do it themselves on a monthly basis. But then from an unsecured lending perspective, we can just disperse instantly through to their backyard, once they have applied for a loan on our mobile app. So that's, I guess, the instant payments, product is taking off well, and we're launching our digital loan unsecured loan in the next few months so that we think that could given the growth you've seen in our traditional unsecured loan portfolio, we think that could be a game changer and then look at maybe doing micro loans, look at doing the infield as

Brendan Le Grange 25:25

We talked about some of the unique business challenges in terms of being an island nation and having a small, concentrated population. But obviously, in this world, there's also much bigger challenges, particularly when we think of island nations around things like climate change, and what that's going to mean, I see that you guys also quite heavily involved in that space, I saw you issuing green bonds with FSD Africa and being heavily involved in broader ESG and initiatives.

Do you want to talk about what you're doing in that space as well?

Mark van Beuningen 25:55

Yeah, so I think it's I mean, we, I guess, is the senior executive, we wanted to, we wanted to do something in the I guess, in the ESG, or renewable space, I just do, I guess make a difference in the country. At that point in time, which was actually beginning of 2021, there was no, no framework around issuing green bonds, because you want to provide green financing, you effectively need to issue green green bonds to build to fund the financing that you're doing from a green perspective. So we did our business case, and then basically put together a green bond framework, in line with in line with international best practice.

And then eventually, the regulator head did issue issued a framework around green bot regulatory framework around green bonds. So they did that end of December last year, we applied for, like approval for our green bonds, or a week later, and in January, this year, we we issued our green bonds, and that's that was really to, you know, be able to give Mauritians cheaper funding or financing to in the first instance, given the type of business we've got, as is us leasing the green leasing to buy electric vehicles to buy plug in hybrids.

Solar PV is taking off in a big way in Mauritius so to be able to instal solar PV, water storage tanks, etc. So any is any sustainable weathers for an individual for corporates in the sustainably linked projects? We will we will, we will finance that.

Brendan Le Grange 27:32

Yeah, that's great to hear. And I think there are now more moves around the world but certainly in some of the bigger markets. Yeah, here in UK go to a lot of conferences, and the talk is still a lot about how are we going to get this off the ground. So it's a gap, I think, and it's great to hear that you're taking big steps already in that space. Mark, you've obviously got a lot on your plate already. You've made a lot of changes in in a short time.

But when you think about next year, what are your plans for the CIM Group in 2023? Are there any kind of big exciting headlines for us to be on the lookout for?

Mark van Beuningen 28:05

Yeah, I think from our perspective, we want to double down on investment into Africa. So we've got to we've got four years of track record in, in Kenya. So really, really push push the business one Kenya as well start looking at opportunities outside of Kenya. And then really, like I said, I think we spent a couple of the last three years investing a lot into into digital lot into our analytics side of our business. So it's really, it's really around now leveraging that infrastructure and capability, we've got pushing a lot more digital products, lending products, as well as payment products, like I mentioned, whether that's instant payment, or by not by letter into the market.

So I think for us, it's a very exciting space, it's been a few years of a lot of hard work of putting the building blocks in place. And now now we really want to be even more innovative in the market and what we take to market over the next 12 to 18 months.

Brendan Le Grange 29:02

And if anyone listening would like to follow that stay in touch with the story. where's a good place for them to go to see what the some group is up to?

Mark van Beuningen 29:10

They can either have a look on our website, they're welcome to come to Mauritius. It's a beautiful island and come and visit and we can we can

Brendan Le Grange 29:20

put legs to the website and also to some travel agencies in the show notes. Definitely. I think actually speaking of that, if anyone is looking to travel now, I did actually just a few episodes ago, interview, Chris Hutchins who does this, your optimises a miles and flight out paths and things and finds the best way to travel and had done himself for seven months round the world trip with his wife at one stage at sort of budget rates from his savings but he travelled from San Francisco to Cape Town in about seven steps. I think it was invite different transports. I should have asked him but I have a memory from from further back of someone who used to do booked their tickets, I think round the world out of Mauritius because you could get around the world trips on a Mauritius at at the base rate.

Yeah, definitely worth checking out Mauritius to visit and maybe for optimising your travel plans if you've got bigger around the world or ambitions or you do multiple trips a year. But Mark, thank you so much. I definitely, it's now just one degree. So it's warmed up from last night a little bit but freezing here in the UK. Mauritius sounds very attractive. So I'm good friends and family living out there now. So definitely, we'll take you up on that, that idea and pop over there one day, but thank you very much for your time. It's been great catching up

Mark van Beuningen 30:48

Thanks Brendan, it's been great catching up with you.

Brendan Le Grange 30:50

And thank you all for listening.

Please do look for and follow the show on your favourite podcast platform and share the updates widely on LinkedIn where lending nerds are found in our largest concentration. Plus, send me a connection request while you're there. This show is written and recorded by myself Brendan Le Grange in Brighton, England and edited by Fina Charleson of FC productions. Show Music is by Iam_wake and you can find show notes and written transcripts at www.HowtoLendMoneytoStrangers.show

And I'll see you again next Thursday.