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Baobab, a global financial services group managing over $900 million in its loan portfolio, has fully acquired its Nigerian subsidiary, Baobab Nigeria. This acquisition marks a significant milestone for Alitheia Capital and Goodwell Investments, as it represents the first exit from their jointly managed uMunthu Fund, delivering a threefold return on their original investment.
A Profitable Exit Amidst Challenging Private Capital Landscape
Alitheia and Goodwell initially invested in Baobab Nigeria—formerly Microcred Microfinance Bank—in 2012, targeting financial inclusion for individuals and small businesses in underserved communities. The acquisition has contributed to uMunthu Fund’s internal rate of return (IRR) of 39.3%, underscoring the profitability of impact-driven investments.
This exit comes at a time when private capital exits in Africa are experiencing a downturn. In 2023, only 43 exits were recorded—a 48% decline from 2022’s peak of 82. By the third quarter of 2024, just 31 exits had been documented, indicating a continued slowdown.
Expanding Financial Inclusion Across Nigeria
Since receiving the initial investment, Baobab Nigeria has expanded from a single branch in Kaduna to 38 branches across 16 states, significantly broadening its reach. The customer base has surged from 19,000 to 230,000, while the bank’s balance sheet has expanded 37-fold, and its loan book has grown 43.5 times, according to uMunthu.
Despite its rapid expansion, Baobab Nigeria maintains its focus on small-scale financial inclusion, with an average loan size of ₦2 million ($1,300) and an average deposit of ₦91,000 ($60).
Tokunboh Ishmael, Managing Partner at Alitheia, reflected on the bank’s remarkable journey:
“This was a bank operating out of a single room in northern Nigeria when we invested, and today, it is a top-three nationally licensed microfinance bank. We’re proud of what’s been achieved together and look forward to seeing where the future will take Baobab Nigeria.”
Strengthening Local Financial Ecosystems
According to uMunthu, Baobab Nigeria’s growth was driven by a strategic approach that combined local governance expertise, financial structuring, market insights, and access to key networks. These elements were instrumental in transforming the microfinance institution into a leading player in Nigeria’s financial landscape.
Successful exits like this reinforce investor confidence in Africa’s private capital market. However, with Africa lagging behind emerging markets such as Asia—where exits exceeded $65 billion—the continent must strengthen its investment ecosystem to attract sustained foreign capital.
uMunthu emphasized the broader significance of this milestone:
“This exit not only highlights the impressive financial stability and growth of Baobab Nigeria but also demonstrates the power of patient capital to deliver both financial returns and meaningful impact.”
As Baobab Nigeria moves into its next phase under full ownership of Baobab Group, its continued expansion will be a testament to the long-term potential of financial inclusion in Africa’s evolving economic landscape.
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