Retail investors are missing out on attractive investment opportunities in a safe, liquid and rewarding fixed-income market.
In this interview, Business Day speaks with Tosin Osunkoya, CEO Comercio Partners Asset Management on TradeFi, an innovative mobile investment platform that not only allows investors to access the fixed-income market with convenience, but also educates them on investing.
Q: What informed the establishment of this investment platform?
A: The fixed income market in Nigeria is dominated by banks and institutional investors such as insurance companies and pension funds. However, retail investors, who are at the bottom of the pyramid, are shielded from the benefits of the fixed income market. This is because the local financial market especially the fixed income market is capital driven, hence, institutional and big investors crowd out the retail investing community from the benefits of the fixed income market. So, in a bid to bridge the gap, we developed TradeFi.
Our aim is to help people have a better understanding of the fixed income space, whilst exposing them to the benefits such that they can profit from it. By encouraging more people to understand the fixed income market, we are also deepening the capital market which is positive for the economy.
Q: How is TradeFi different from other platforms?
A: Most platforms are execution platforms, but TradeFi goes beyond execution. I like to think of it as an experience platform. The first value proposition of this platform is safety. It is safe because assets are kept with a reputable custodian, and you receive your statement directly from the custodian.
The second thing is liquidity, because people sometimes need to have access to their money at any time, TradeFi allows you to conveniently terminate your investment with no penalties to fulfill your obligations.
The third point is competitive returns. It is amazing that despite Sovereign issued fixed income instruments such as the FGN Bonds and Treasury bills being safer than bank deposits, they also give higher returns than most banks offer.
The fourth is convenience. Being able to invest at the tip of your fingers, with your phone or computer at your convenience as opposed to the traditional and cumbersome way of investing in Nigerian fixed income is most certainly a game changer.
Above all, FMDQ, which is our self-regulatory organization (SRO) endorsed TradeFi. They are comfortable and satisfied with our operations and corporate governance structure.
Q: How secure are investors’ funds with TradeFi?
A: We partnered with a custodian to safeguard the cash and securities of the investors on the platform.
When you sign in and fund your wallet on this platform, the money goes straight to your designated account with our custodian. You receive a statement of holdings directly from the custodian.
When the coupon, which is the annual interest rate paid on a bond, is paid by the Federal government, it goes straight to bondholders TradeFi account with the custodian. Neither money nor securities comes to us. We believe it is important we have this level of transparency to make people feel comfortable and have high confidence in this platform.
So, our partnership with the custodian and the way we designed the system brings credibility to the platform. This means investors’ funds are always safe because they are warehoused with a trusted custodian.
The fact that investors are exposing their funds to risk free investments is another layer of comfort for them as well.
Q: How to get started with TradeFi
A: First you must download the application on your mobile (available on Appstore and Playstore for iOS and Android phones respectively). You can also go through the web browser www.tradefi.ng to access TradeFi. Thereafter, you sign up and your account will be activated on the same business day. Once your account is activated, you will receive a notification to that effect. To fund the account, the user will go to their wallet. Then you make a transfer or pay by card to TradeFi’s designated account with the custodian.
After funding your account, same value will reflect in your TradeFi account immediately after notification by the bank, and then you can start investing.
In the investment room, you have all the secured asset classes, basically treasury bills and Federal Government Bonds with different tenors.
You can choose your preferred securities in the investment room and click ‘ibuy’. If the money in your wallet is not sufficient, the system alerts you immediately. But if you have sufficient money, it takes you to another window that shows you how much you have invested and the valuation of the portfolio.
Q: What is the current size of your customer base and what is the value of transactions carried out so far on the platform?
A: The volume of the transactions is highly reflective of the potential of the retail market. Deploying TradeFi will raise turnover in the retail fixed income market to over a billion naira.
From inception, we have settled over N1 billion worth of investments on the platform and we currently have over 1,000 users.
Q: What is the minimum amount an investor can start with?
A: The minimum amount for now is N100,000. We have had feedback from people saying they would want it to be brought down to as low as N10,000. This is currently being evaluated.
Right now, we have over a thousand users and we are working towards substantially increasing that figure over the next five years.
Q: How do you ensure the low rate of financial literacy doesn’t get in the way?
A: One medium we are using to reach people is education. To demystify what many people find confusing about investing in fixed income, we think we are justified to begin by providing information to the public, starting with basic knowledge of investment and dynamics of Federal Government Securities.
The average Nigerian doesn’t know they are better positioned to invest in government securities than keep their money in a savings account or fixed deposit.
Why put your money in a savings account where you earn an average of 4.2 percent per annum, you can conveniently invest same in government securities that will give yields between 12 to 14 percent?
The reason a lot of people save in banks is the safety of investment, but there is a higher degree of safety in Government Securities.
The interesting thing is you don’t even have to hold them for long as there are 30-day, 90-day and 180-day plans. Government securities provide better returns than a savings account or fixed deposits.