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While investors generally lost money on loans given out in 2007-9, investments made since mid 2009 through our current providers have given investors a small positive return on the average so far. Investing in Africa is still risky though and the results you get on your investments will vary from loan to loan.
Last time we published an overview of investor returns, we received a lot of feedback. One of the requests was to show the portfolio performance quarter by quarter rather than all rolled up into one number. Another request was to split out the effects of defaults, interest and currency so they could be seen separately.
Lets start by looking at how good our partners were and collecting the money lent out – ignoring the effects of currency and interest for the time being.
This graph shows the status on January 19th of all loans disbursed since the start of MYC4. It includes all partners, both those that are currently active and those that have been suspended. It shows what has happened to the money disbursed in each quarter – whether it has already been paid back (blue), still being paid back and on time (green), still being paid back but more than 30 days late (yellow), or defaulted (red).
So for example, if you look at what happened with investments made a year ago, in first quarter 2010, the graph shows that 350,000 EUR were disbursed in that quarter. Of these, 250,000 have been repaid, 73,000 are still to be repaid but are on-schedule, 22,000 are late with their payments and 5,000 have defaulted.
While approximately 40% of the funds disbursed before Q3 2009 defaulted, there appears to be an improving trend for loans disbursed from Q4 2009. Of the funds disbursed in the first half of 2010 less than 1% have defaulted so far and 92% of the portfolio for this period is either already repaid (64%) or repaying on schedule (28%) while 7% is late. Many of these loans are covered by risk sharing agreements which should reduce the impact on investors in case of default. Loans disbursed in the second half of 2010 are still too young to judge accurately, but 95% of the funds disbursed during this period are either repaid or repaying on time.
We’ve done a lot to improve things: non-performing partners have been suspended, partner fees have been changed to encourage repayment, we’ve strengthened our team in Africa and do much more thorough spot checks of partners. We’ve also implemented risk sharing agreements so partners cover a portion of the losses themselves.
The next graph also shows the same data as the previous chart, but only for currently active partners (Growth Africa, Micro Africa, Fusion, Tujijenge, Gatsby, PRC). Since portfolio performance is largely determined by partner quality, this chart may give a better basis for projecting future performance than the previous chart. Note that since no partners were suspended in 2010, the 2010 numbers on this chart are identical to the previous chart.
The defaults within this portfolio are primarily due two Partners – Growth Africa and Gatsby who had some early problems, but are doing better now. Fusion has defaulted one loan from Q4 2009, but this has since been covered by their 95% risk sharing agreement. Micro Africa, Tujijenge and PRC have not had any defaults yet.
Seen year-by-year there appears to be a small improvement from loans disbursed in 2008 (15% default, 84% repaid) to loans disbursed in 2009 (9% default, 4% late, 3% on-time, 85% repaid). Note that part of the defaults on the 2009 portfolio has since been covered by Fusion’s risk sharing agreement, reducing the investor loss so far from 9% to 7% on loans from 2009. In 2010 less than 0,1% has defaulted so far, 6% is late, 52% on time and 42% repaid. But the 2010 portfolio is young and some deterioration should be expected in the future.
The next graph shows the effects of interest and currency on the picture.
The amount of interest earned on loans disbursed in each quarter is shown in green, the amount lost to defaults (less any recoveries) is shown in red, and currency gains or losses is shown in purple.
Ignoring the effects of currency for the moment, investments made through our current providers have made more on interest than they have lost to defaults every quarter except one since second quarter 2009 . Fourth quarter 2009 is actually also positive now that Fusion has covered their risk sharing commitments.
The full picture once the effects of currency are included is less positive. In general the strengthening euro has resulted in currency losses for the investors. Adding together the effects of interest, currency and defaults, investors are earning a net positive return on loans disbursed in Q2 and Q3 2009 and Q1 2010.
Adding up the total portfolio disbursed since Q2 2009 by our current providers shows a small net gain of 0,7%. Again, the 2010 portfolio is still young, so additional defaults on this portfolio should be expected as the portfolio ages, though currency effects could go either way.
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.
Adding up the total portfolio disbursed since q2 2009 shows a small net gain of 0,7%. Again, the 2010 portfolio is still young, so additional defaults on this portfolio should be expected as the portfolio ages, though currency effects could go either way.
The above results only reflect realized currency gains or losses on the repayments received. There are also unrealized gains or losses on the remaining principal yet to be paid back. So additional gains or losses on this portfolio will be realized as repayments are made. We have not attempted to do a ‘mark to market’ valuation of the outstanding amounts. The currency rates are very volatile and any such valuation would change daily.
We received the following comment from an investor, which I promised to re-post on this topic:
‘Why an 1 Euro account fee will not make me bid again on MyC4
Dear MyC4 management,
In December I received an email from MyC4 announcing the introduction of a fee of 1 Euro per month for “inactive” accounts from investors that do not place bids. It was the first email I received from MyC4 management since starting to invest on MyC4 in October 2008. It was also the first email I received from MyC4 management after the Ebony Capital fraud and the suspension of several other loan providers because of ineptitude.
The stated goal of MyC4 management is “to get the inactive accounts to start bidding again”. Charging an account fee is not an effective way to that. All it does is angering investors who have put money in MyC4 in the belief that it would help people in Africa to change their lives for the better, but instead have watched it disappear because of fraud.
Wouldn’t you agree that corruption and fraud are among the most destructive evils in Africa? That it is the reason why this continent’s development is not progressing as it should?
As other investors, I have watched as my initial investment more than halved due to defaulted loans. Most of these loans did not default because small business owners in Kenya, Senegal, and other African countries had a spout of bad luck and made unforeseen losses. Most of these loans defaulted because MyC4′s due diligence and supervision of its African loan providers has been inadequate.
In October 2008, I invested EUR 1000 as a trial amount, EUR 472 are left. I don’t think it was a successful trial.
If MyC4 wants inactive accounts to invest again, how about writing us an email explaining why MyC4 should deserve our trust again. I don’t want to give even 1 more Cent to Kenyan fraudsters or Senegalese singers turned microfinance bankers. I want my money to help make a change for the better, not to perpetuate the same old evils. You lost a lot of goodwill during the last two years, a 1 Euro account fee will not bring it back. If I don’t get an email from you by January 30, I will withdraw the remaining money, however I would rather invest in Africa.
Best, Heike
PS: I would have loved to have posted the above in the forum or at least as a comment in the “inactive account fee” blog entry, but since the forum is closed and the blog entry is closed for comments, I am posting it here.’
No new loans uploaded
Hi Steven
Lately no new loans have been uploaded – what is happening. I might withdraw the money I have if its not possible to invest them soon.
Best regards, Peter M.
Hi Peter,
There are more loans on the way. It is the nature of the marketplace that there are periods with too many loans and periods with too few loans. Hang in there for a couple more weeks.
While I applaud MyC4’s latest achievement I fully agree with Heike. Being disappointed with the way MyC4 was handling the business I decided to take a break and see how my current portfolio develops and I don’t really recognize the rosy picture that is being painted by Steven Thomas above. More than 50% of my portfolio is not being paid back on time.
Now, monitoring my own portfolio’s performance MyC4 made two moves that made me really upset. 1) Closing down the forum and 2) Introducing a fee for so called inactive accounts.
Closing down my only source of information (the forum) does not boost my trust in MyC4: Shutting up critical voices is not solving any problems and now I have no contact with my fellow investors anymore. Effect: My interest in MyC4 died. Secondly, the recently introduced inactivity fee convinced me that I had to withdraw whatever money I had as soon as possible. As Heike I have no intention of supporting fraud or corruption, but obviously I can’t sit around and wait for my portfolio to deliver an acceptable return with money on my account: MyC4’s fee would only add insult to injury. Defaults and currency losses are enough. Should I ask for a higher interest rate from African entrepreneurs to cover MyC4’s fees as well? How does that improve the situation in Africa I wonder?
Kjell, the results I show are average for all investors, but there will of course be differences from investor to investor depending on which loans you have invested in. Just scanning through your portfolio, it looks like you are doing OK on loans from current providers since mid 2009.
I understand your comments on the fees and the forum. These topics have been pretty well debated here:
inactive-account-fee
and
help-what-happened-to-the-forum
so I won’t respond to them here.
Steven,
these are great statistics, much appreciated, that’s the kind of transparency I’ve been looking for from MyC4.
One thing: Could you please have a look at my portfolio. Of the loans I have in there, the ones I bid on since Q4 2009 (I can’t see the disbursement date in my portfolio) a little more than 50% are currently late (I didn’t count in the three with a “pending” state since I did not know where to count these in).
That picture doesn’t improve at all if I look at newer loans (it’s actually true for _every_ quarter).
Can you explain me what it is that makes my portfolio exceptional and my experience so different from the statistics you show above?
Joerg
Joerg, I haven’t had time to do a detailed analysis of your portfolio, but here are a few things that can give you different results:
– The % late in my figures is % of the amount of money disbursed that is now late. So a loan of 1000 EUR, where 800 is paid back and 200 is late would show up as 20% of the money being late. So even if 100% of your loans are late, the % of funds that are late would be significantly less.
– I count pending as being paid in my calculations.
– As I wrote, I don’t count a loan as late until it is more than 30 days late.
Steven
And it seems like the disbursement is at a steady (or slowly increasing) level.
As others have mentioned, the platform is a little low on open investments at the moment…. So more investments are needed. I have heard from one provider that new investments should be online within a short time frame – and hope that we also see MM Limited (https://www.myc4.com/Invest/Providers/View/38760) soon. It was mentioned that MM Limited should have their first investment opportunities during February.
I look forward to follow 2011 – and hopefully see more users and more investment opportunities at the MyC4 platform.
Regards
Claus Rudbeck
I have an observation regarding the recently published average investor ROI of 0,7% since Q2 2009:
This return seems disappointingly low but it is important to stress that this is an average number for all investors, which means that social investors who have been bidding 0-10% and thus not sufficiently high to compensate for currency losses are also included in this number. My Mum, for example, has insisted on not bidding above 3%, so due to currency losses her investment portfolio is bound to have shrunk and her negative return draws down the total average ROI. However, this does not mean that my Mum is dissatisfied as her motives are strongly social and a positive return is not a target for her in itself.
There are many other investors like my Mother and similalry there must be a number of for-profit investors who have realized ROI’s higher than the average, which is why I believe that even a modest return of 0,7% may cover up the fact that most investors on MYC4 may, in fact, be happy with their return.
It could be interesting to hear from other investors what return they have seen over the past 1½ year.
Jes
It would be very nice if it was possible for the individual investor to access your ROI under My Account site. Maybe shown as
-All loans
-the last three years
-the last year
Today you have to do it manually.
Regards, Peter
Peter, good suggestion. I’ll add it to the list of things we’d like to do when we get more funding.
OK. Understand.
In that case it would be interesting to get an additional category of “repaid late” distinguishing the blue bar into what has been paid back on time and what has been paid back late.
Still, if even the newer loans are 50% (in numbers) late there should not be a difference between % of money late vs. % of loans late.
Thanks. Good point. It would be useful to have another color for repaid, but repaid late.
Thanks for posting this overview. The graphs are clear and make it very easy to get a good overall picture of how things are going.
I understand that MYC4 wants to look to the future and concentrate on the current portfolio, but I think it’s important that the mistakes of the past are not just swept under the carpet. That would result in rumours which would put off potential new investors even more.
At least this way newcomers can look at the statistics themselves and make their own minds up.
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