CONVERTIBLE ASSET BACKED EQUITY(CABE)

1. What does CABE facilitate?

CABE facilitates borrowing and lending for various tenors, from overnight up to a maximum of one year, in a fully collateralised environment. Finally a money market platform that allows members of the public to invest and place funds directly with Nigerian Microfinance banks via an electronic trading system, and guarantee the safety of the investment is now available. 

 

Our platform has been approved by the Central Bank of Nigeria to conduct these money market transactions for the benefit of Microfinance banks and provide an avenue for these banks to obtain liquidity and carry out their mandate of providing financial inclusion and credit to individuals and small businesses.

CABE is a type of Repurchase Agreement (i.e. REPO) that all or a portion of the Principal payments due the investor will paid with an agreed shareholding in the MFB.

 

2. How does CABE work?

Prior to transaction commencement an interested Investor will open a custody account with the custodian and wire funds directly to its custody account. Upon transaction completion (i.e. agreement of terms – amount invested, rate and tenor) via our e-trading platform, settlement of the transaction is conducted by our custodian. Collateral received from the borrowing MFB are moved and kept in the custody account of the investor, throughout the life of the transaction. The investor can periodically view its statement online.

 

At maturity any delay or default from the lender will result in T-bill assets kept in the investors account to be liquidated to pay back the investor. At maturity the investor may choose to receive principal payment in the form of equity or shareholding in the bank in which case the debt obligation has been converted to shareholding in the Microfinance bank. 

This video is hypothetical, but a typical situation that illustrates a Repurchase Agreement (REPO) transaction and Convertible Asset Backed Note (CABN).

 

The characters and analogies used in the video depict the following  in a REPO transaction:

  1. Anne - Managing Director, Cooperative Capital, Note Investor (i.e. Lender):  Members of the public and institutional investors who can place deposits with licensed Microfinance Banks on the e-Links platform. 
  2. Frank - Owner, Pay Day Loan, Note Issuer (i.e. Borrower): Microfinance Banks, these institutions are mandated to insure their customer deposits with the Nigeria Deposit Insurance Corporation (NDIC).
  3. John - Small business Owner: Loans given out by a Microfinance Banks (i.e. Risk Assets)
  4. Office Car - Collateral: Financial Instruments owned by Microfinance Banks, such as Federal Government of Nigeria-Treasury Bills, Time Deposits and Bank Guarantees from a Commercial Banks  

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