Piggybank goes bullish on interest rate payment - Sundiata Tech

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Friday, June 29, 2018

Piggybank goes bullish on interest rate payment

Piggybank has announced an adjustment to its interest rate for savers on its platforms from 6 percent to 10 percent annually for normal savings. Safelock savings has also been increased from 10.95 percent to 12.4 percent.
Effectively, Piggybank’s move renews pressure on banks’ digital services such as Alat by Wema and core fintech startups like CowryWise, which also provide savings services to the estimated 26.5 million low and middle income savers in Nigeria with a market size of $2.2 billion.
Piggybank customers will also start receiving interest on their savings every first day of the month. This is against the old practice of paying interest at 2.5 percent on July 1st.
The company have also introduced a new feature called Piggy Flex Account – a sub-account where all interests earned on Piggybank.ng will be paid.
“All funds in your Piggy Flex Account are yours and can be accessed anytime, at no charge. This is separated from your normal savings,” an email from the company stated.
The company had on May 31, announced $1.1 million seed funding it raised from high net worth individuals, led by Olumide Soyombo, founder of LeadPath Nigeria, with participation from Village Capital and Ventures Platform.
During the announcement, Piggybank’s co-founder and Chief Marketing Officer, Joshua Chibueze, noted that the funding will fast-track their expansion projects and help them capitalise on many opportunities that the market presents. He also disclosed that Piggybank was at the verge of securing a microfinance institution licence from the Central Bank of Nigeria.
The increase in interest rate may come as a welcome gift for it’s over 53,000 registered users and encourage them to save for longer with the hope of earning higher interest. It could also surprise some industry experts, given that the company generates its revenues through asset management, which currently stands at 5 to 7 percent.
“We pay interests from revenues generated after our float is invested in instruments such as government bonds and treasury bills,” Piggybank told BusinessDay via email.
Yields on treasury bills are down presently from about 14 percent to around 12 percent. However the company believes that this will not affect its new strategy in the long term.
“While yields are indeed down, investing as a corporate institution and in bulk with financial houses affords us higher interest rates than investing as individuals would,” the company explained. “Also, establishing relationships with other financial institutions has given us the opportunity to diversify our portfolio and open up more revenue streams. Our operational costs are also relatively low because a lot of our processes are automated.”
Businessdayonline

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