In January we published an overview of how investments made through MYC4 are doing in terms of repayments, defaults and currency. Here is an update on those numbers as of March 31, 2011.
The overall picture is the same as we presented in January. While investors generally lost money on loans given out in 2007-9, loans from our current providers disbursed in the last two years have, on the average, returned more in interest than they have lost in defaults seen in local currency. These gains have, however, been reduced due to currency losses because of the strengthening of the Euro. The overall result for this portfolio has been a small positive return of just under 1% after currency losses.
Investing in Africa is still risky though and the results you get on your investments will vary from loan to loan.
Partner performance has continued to improve during 2011. Risk sharing agreements and recoveries have covered some of the defaults reported in the January numbers, resulting in a reduction in investor losses due to defaults from 93 thousand EUR to 86 thousand EUR on the portfolio of loans from current partners disbursed since mid 2009. At the same time, the percentage of this portfolio that is more than 30 days late in repayments has been reduced from 5,2% to 3,2% of the funds disbursed.
While the results seen in local currency have continued to improve during Q1, the strengthening of the Euro relative to the African currencies has reduced the value of repayments when converted back to Euro. Currency losses on this portfolio have grown from 57 thousand EUR at the beginning of the year to 95 thousand at the end of first quarter.
Now lets look at the details. First, how good were our partners and collecting the money lent out – ignoring the effects of currency and interest for the time being?
This graph shows the status on March 31st, 2011 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).
While approximately 40% of the funds disbursed before Q3 2009 defaulted, there is an improving trend for loans disbursed from Q4 2009. Of the funds disbursed in the first half of 2010 about 1% have defaulted so far and 91% of the portfolio for this period is either already repaid (76%) or repaying on schedule (15%) while 8% 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 since mid 2010 are still too young to judge accurately, but 94% of the funds disbursed during this period are either repaid or repaying on time.
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 have been suspended since 2009, the 2010-11 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. The overall performance of the loans disbursed by current partners since March 2009 are as follows: 63% repaid, 31% repaying on time, 4% late, 2% defaulted.
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 gained more on interest than they have lost to defaults every quarter in the last eight quarters.
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 up the total portfolio disbursed since Q2 2009 by current providers shows a small net gain for investors of 0,9%. Again, the 2010-11 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.