As we discussed interest rates in Nigeria and the direction for this article, a tweet was posted on our Slack channel. It was a simple but powerful tweet that motivated us. Here’s the tweet:
Before we dig into this, let’s tell you our trust story. When we started our noble journey in 2017, we wanted to make it possible for everyone to access legitimate investments, and we did that.
We didn’t stop at making it possible for people to access these investment opportunities with just NGN100, we introduced an improved security structure to the fintech space. We did this by setting up a trust structure in partnership with Meristem Trustees; we’ll explain the importance of this here.
Right from our very first user, trust has always been our currency. Many have come to us with expectations that are impossible to achieve - 10% monthly for instance. We’ve always been clear about such requests, our commitment is to manage your money for steady growth and not make false promises that get you excited. Six years on, that hasn’t changed.
Interest Rates Update
From March 1, 2020, we’ll update interest rates for our savings plans. We’ll share every single detail with you on why we are making this choice. It’s a necessary move to preserve your trust in us and your funds. For your ease, we have broken this explainer into sections:
- Where does the interest on your savings come from?
- Why are our interest rates changing?
- Are mutual funds impacted by this change?
Where does interest on savings plans come from?
Investment Strategy
As your wealth partner, we take a conservative approach to investing your savings. Hence, we focus on investing in treasury bills, high-quality commercial papers and government bonds, in line with our Investment Policy Statement (IPS). The reason for our choices is not far-fetched. These investment instruments are low-risk by nature.
Are you a bit worried that we have treasury bills there despite the CBN restrictions in 2019? Have no worries. The CBN restricted access to OMO bills, not regular treasury bills. We wrote a simple explainer here.
Who oversees us?
When this journey started, we were only registered under the Cooperative Act. Many other firms were at the same time, but we knew we needed to be more to protect the interest of our customers. To provide an extra layer of security, we partnered with Meristem Trustees, which is regulated by the Securities and Exchange Commission, to carry out these key duties of:
- Providing total security for your funds
- Monitoring how we invest your savings
- Holding certificates of investments that back savings on the behalf of customers.
This sterling move took our security structure to the zenith in the fintech space. Today, our standard is being replicated by various online investment platforms. We are glad that this is happening as it translates to improved security for the digital Nigerian investor.
Why are our interest rates changing?
As the turn of the year approached in 2019, interest rates on treasury bills (T-bills) started to drop. Till date, they’re still low. Unsurprisingly, T-bills are significant in this conversation because they make up the bulk of short-term, liquid and secure investments; for many legitimate wealthtech platforms.
Here’s a graph on the performance of T-bills from December 2009 till December 2019:
From that graph, we can see that it is currently impossible to promise a low-risk investment offer, for less than a year, beyond single-digit returns. To reflect this reality, we are introducing dynamic interest rates.
Currently, it is impossible for anyone investing largely in relatively secure financial instruments, to offer 10% per annum or more.
How our dynamic interest rates work
At the point of creating a savings plan or rolling over one, the prevailing interest rate will be shown. If rates get higher tomorrow, there’ll be an automatic update for new plans or rolled-over plans.
To avoid any confusion, you’ll need to update your app. This is very important.
Are mutual funds impacted by this change?
Currently, we retail 31 mutual funds. This feat of ours was achieved in 2022; a key chapter in our story of democratizing access to investments. Our partner fund managers at the moment are Meristem, Afrinvest, United Capital, Lotus Capital, Stanbic IBTC, ARM, FSDH, Vetiva, SFS Fund and TrustBanc.
Here’s an interesting fact: we were the first platform to make this possible in Nigeria. We didn’t just make it possible, we spiced things up with improved inclusiveness. You can access these funds, which are regulated by the Securities and Exchange Commission, for as low as NGN1000.
On Cowrywise, we have 4 types of mutual funds:
If we break them down further, we also have the dollar and halal funds.
You can read our introductory guide to mutual funds.
With that covered, which of these fund types are likely to be impacted? Any fund that has major investments in T-bills and other money market instruments will be impacted. That is they’ll offer lower rates. In that light, there are three types of funds that can be impacted directly by the drop in interest rates. These are the money market, bond funds and balanced funds. Notwithstanding, money market funds are great for building emergency funds.
Let’s bring this to a close
When you create a savings plan, we take a look at your timeline and assign your funds to a set of financial securities that correspond to the timeline chosen. The longer the timeline, the higher the returns. Based on this, our first tip:
“Give your investments more time to soak in more interest juices.”
Our second tip, build an emergency fund using the emergency plan. It’ll help divert your attention from investments meant for other important goals.
Finally, you should invest in a dollar fund. We have a beautiful one from United Capital that earns 8% returns per annum, don’t leave without tapping here to view it.
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We appreciate you reading through this update. You are the reason why we wake up every day to make magic happen. Drop a comment and share with friends so they also know how to validate returns.
Straight forward explanation. I was secretly wondering if the savings interest rates won’t drop but also secretly hoping that it will continue( Typical Nigerian) but I am glad Cowriewise is open enough to state the facts clearly and not give false hope like some other fund managers do.Kudos to you guys for putting your trust levels on a high pedestal.
The good thing is that as rates get better, you’ll enjoy the benefits in real-time.
This is interesting the information and sense of clarity and uprightness in these dynamical times. Your write is very clear and makes your investors aware and confident in your process. Transparency and integrity is key to what are stating here and I believe that as sanguine poeple your investors will understand and will also understand to pull out whenever they feel that you are manipulating them.
It is however not clear what you menat by dynamic interest rates.
I’m pretty impressed. Thank you for the updates.
You’re welcome!
Yes I agree with Collins, CowryWise at it’s best in making everything they do and offer transparent.
🙌🏽
Quite impressive. I have been wondering how you are able to continuously offer 10% in this current low yield environment. Keep up the transparency..
Thank you
I have just started with Cowrywise through the introduction by a brother, whom I did not personally know like Cowrywise, but trust can be trusted. I am quite convince by this explanation and just hope that the relationship will get better. Thanks you education and explanation, I pray whatever it is that has kept you doing this great work will not fail.
Thank you!
Thank you @ Cowrywise for your consistent efforts to make money matters easier to understand. This was really helpful.
It’s our pleasure
Thanks for the information clarity and transparency. But I would like to know if the interest rate changes will affect top-ups In a subsisting plan. Thanks
Hi there, no it doesn’t. As we mentioned, once a plan has been created the interest rate sticks till maturity.
Kudose to cowrywise team, well explaind
Kudos to you too for being here!
The most beautiful aspect of this whole write up was its transparency. You made your customers to know in dept things that even there parents won’t tell them. Wouldn’t you take a hug from me.
I will do that gladly. Thank you
Nice one,from the moment I decided to use the app,knowing about four to five app,I was just drawn to this app,thanks cowrywise..🤑🤑💵
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Thanks for sharing explicitly. This has brought innovation to digital investment space in Nigeria. Keep up the great work! W are solidly with you, as we together we realize all our various investment goals and objectives. Cheers!
Cheers!
Thanks for your transparency.
You’re welcome
Well explained,you are simply the best.
Thank you
Cowrywise has been giving me what I need; transparency and trust. Thanks for this update.
And we will continue. Thank you!
Cowrywise, Simply the best!!!
🙌🏽
Your effort to explain the current market situation and your innovative effort to navigate it is understood. The cause of the downturn in interest regime across board is not the making of CrowryWise. It is beyond you. As challenging as it is, you are making the best effort possible to manage it and carry your investors along, hence this article. It is appreciated.
However, my little perspective in all this federal government inspired brouhaha is that in engenders a necessity to think far out of the box. In this wise, you may have to radically and robustly WIDEN YOUR INVESTMENT MIX. You may need to go AGRO. Yes, you may need to add agriculture to the portfolio. You may have to partner with big farm outfits. In this way, your investors can be offered the further option of investing/sponsoring aspects of farming activities in return for a percentage of the farms’ profit. That may help diffuse the uncertainty and despair caused by the crash of interest/return in the existing investment mix of T-bills, Mutual fund, Money Market.
Thank you.
We currently offer bond funds that are not significantly impacted by the drop in treasury bills.
Great success story of Cowrywise is awesome. Pls keep it up. It is not interest rates that attract; it is your commitment, sincerity, security of funds that stand you out.
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Thank you for your explanation. This is very professional. I appreciate.
Please clarify these: For an ongoing Plan meant to mature at a much later date, will the interest rate at the point of locking the plan drop too?
If NO, can the tenure of an ongoing Plan be extended before March 1st just to preserve the interest rate?
The prevailing interest rate would be the one that existed at the time of locking the plan. Changes in rates only affect new and rolled over plans.
So what will be the new interest rate from march 1
That will depend on the prevailing interest rate. Although, this won’t affect existing plans until maturity. Once mature, and you choose to roll over, you’ll reinvest at the prevailing market rate.
What would be the new rate @cowrywise?
That will depend on the prevailing interest rate. Although, this won’t affect existing plans until maturity. Once mature, and you choose to roll over, you’ll reinvest at the prevailing market rate.
Thank you so much Cowrywise! Your explanation is very detailed and helpful. Thanks for being transparent, it makes trusting you very easy. Keep doing what you do.
Thank you
Thanks Cowrywise, for the transparency. This was really enlightening. Great job!
Nice work cowrywise keep it ip
Hi Osahon, we are quite open to working with relevant parties on this. It is quite impossible for us to not pay you accurate returns as we are under the watch of a trustee. The trustee monitors your investments daily, to ensure you earn accurate returns. If you don’t mind, we can schedule a call to show you the calculated breakdown of your returns. Thanks for reaching out.
Good work guys. Don’t fall my hand in the days to come.
Hi, we have a couple of videos that can help with this.
Welldone, but I think you guys have to demystify your App. It’s complex to navigate and not straight forward, more like an encrypted message.
👌👌👍
Nice
Well done guys
Thank you🤗
I came here for Cowrywise and I learnt a thing or two about money and investments.
The simplicity of the content deserves an accolade.
Well-done to the team.
Impressive to find online business I can trust, please keep it up
We will. Thank you 💙
Very comprehensive and apt.
Thank you for the response and information, I would quote this section from the write up “In essence, the interest rate at the point of creating a plan is what that plan earns until maturity regardless of any external changes that occur. That is if you have an existing plan, your rates won’t change in line with the new schedule except you choose to roll over after maturity. This will be effected from March 1, 2020.” My complaint was to why interest rate of the emergency plan kept dropping and that statement said if a plan is chosen before the drop there shall be no effect to the original but later on it still said depending on the type of fund it is invested in. I would have quoted that part of the statement to argue my point but I guess I’ll just leave it. I only hope that the next time I login I will not see that even the one percent interest is no longer there. Thank you
Can one withdraw from is the investment?
Good platform I go through ur information it is okay but the issue is me submit my bvn number to you guys I don’t know how secured it is
We only require your BVN for your own safety. We need to make sure that only you have access to your funds and can be settled in bank accounts that you own. In a case where your device falls into the wrong hands, your funds would not be tampered with because of this extra layer of security. I hope this helps to clarify things for you.
Thanks for the update because it’s matters alot
Anytime!