2011 will be a year of challenges and opportunities for MYC4.
The three main challenges faced by MYC4 are funding, profitability and risk. In spite of these challenges we also see opportunities for growth, improvement, innovation and impact in 2011.
Funding for the rest of 2011, with the current staffing and at the current cost level, is in place. We are a very small staff now but we still expect to develop and grow the company during 2011. We will also continue to manage the current partners and even bring on some new ones. We also have enough runway to pursue additional funding sources. When additional funding is found it will be used to strengthen team with additional financial services skills, further development and professionalization of processes and platform, as well as hiring additional resources to drive growth both on the borrower and investor side.
MYC4 is a young company, and we do not expect to be profitable for a few more years. As expected in 2010, our income was about EUR 50,000 while our expenses were well over EUR 1 million. Moving towards profitability will be a key challenge in 2011. As mentioned earlier we are implementing a new fee on idle investor accounts. We will also be increasing our lending fees by taking a 2% closing fee on all new loans from February 1st. These increases in our revenue combined with the recent staff reductions will not be enough to make us profitable in 2011, but they will bring us a step closer.
Risk remains a fact of life in when lending money to small businesses, especially in Africa. The steps we took to address risks in 2010 appear to be bearing fruit (more on this in a separate post soon). These steps include adjusting partner fees to reward repayments, implementing risk sharing agreements with partners and improved spot checks and capacity building of partners. We will continue to focus on reducing risk and improving investor return in 2011, but risk is inherent in our mission of funding un-banked and under-banked small business in Africa.
In spite of the challenges facing us, the need for MYC4 is enormous. Even with our limited resources we see the opportunity for growth, improvement, innovation and impact during 2011. We have a number of exciting projects on the way including health care, solar power, agriculture and youth entrepreneurship. Last week we signed an agreement with MML to fund low-cost housing for slum dwellers. We expect to see the first loans on the platform during February. I had the opportunity to visit one of their projects in Nairobi on Saturday. It was inspiring to see how much impact a small loan for a simple house can have on someone’s life. We are looking forward to seeing this and other projects unfold in 2011.