CASE STUDY MAY/JUNE 2019 EXAM
You will receive the following case study in the May/June 2019 examination:
The collapse of African Bank Investments Limited (Abil)
African Bank Investments Limited (Abil) was co-founded by Leon Kirkinis in
1999, who has been described as one of the sharpest minds in banking that has
changed South Africa by expanding credit to the poor. From 1999, Kirkinis
build Abil into the country’s largest maker of loans not backed by collateral.
Styling himself a visionary for lending to South Africans ignored or deemed
too risky by conventional banks, Kirkinis fuelled profits making loans at
annual interest rates as high as 60%.
Abil did not take deposits, relying instead on stock and bond markets to fund
its lending. For the large part of the first decade of this century, Abil was one of
the hottest stock on the Johannesburg Stock Exchange. The company's share
price rose from around R5.25 per share in 2003 to more than R22.50 per share
in 2008. It also offered investors a very appealing cash dividend. At its highest,
Abil traded on a dividend yield of over 9.0%. Under the leadership of its
charismatic CEO, Leon Kirkinis, Abil was re-imagining what micro lending could
do in South Africa, and seemed to prove that this was not only a viable
business model, but also a very profitable one. Between 2003 and 2008, Abil
1
You will receive the following case study in the May/June 2019 examination:
The collapse of African Bank Investments Limited (Abil)
African Bank Investments Limited (Abil) was co-founded by Leon Kirkinis in
1999, who has been described as one of the sharpest minds in banking that has
changed South Africa by expanding credit to the poor. From 1999, Kirkinis
build Abil into the country’s largest maker of loans not backed by collateral.
Styling himself a visionary for lending to South Africans ignored or deemed
too risky by conventional banks, Kirkinis fuelled profits making loans at
annual interest rates as high as 60%.
Abil did not take deposits, relying instead on stock and bond markets to fund
its lending. For the large part of the first decade of this century, Abil was one of
the hottest stock on the Johannesburg Stock Exchange. The company's share
price rose from around R5.25 per share in 2003 to more than R22.50 per share
in 2008. It also offered investors a very appealing cash dividend. At its highest,
Abil traded on a dividend yield of over 9.0%. Under the leadership of its
charismatic CEO, Leon Kirkinis, Abil was re-imagining what micro lending could
do in South Africa, and seemed to prove that this was not only a viable
business model, but also a very profitable one. Between 2003 and 2008, Abil
1
