It is time for the quarterly update on how loans made through MYC4 are doing in terms of repayments, defaults and currency. Follow these links for our previous overviews on Portfolio Performance 2010 and Portfolio Performance 1st Quarter 2011, and read on for an update on the numbers as of June 30th, 2011.
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, and this portfolio shows a net return for investors of 3.3 % before currency. These gains have been reduced due to currency losses because of the continued weakening of the African currencies relative to the Euro. While we could report a net positive return of just under 1 % last quarter, the currency effects result in a negative return of -0.9% as of June 30th 2011 for the total portfolio disbursed since Q2 2009 by our current partners.
The performance of our partners has continued the positive trend that we reported earlier this year. At the partner conference in Nairobi in January, the partners all resolved to improve the MYC4 portfolio quality by reducing the Portfolio at Risk (PAR), i.e. the part of the outstanding portfolio that is more than 30 days late, from 15 % to below 5 % in 2011. At the end of Q1, the PAR was reduced to 11 % while Q2 ended with a PAR of 8 %.
This graph shows the status on June 30th, 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 a sustained improving trend for loans disbursed from Q4 2009. Of the funds disbursed in the first half of 2010 about 2% has defaulted so far and almost 94% of the portfolio for this period is either already repaid (90%) or repaying on schedule (4%) while 4% is late. Loans disbursed since mid-2010 are still too young to judge accurately, but more than 96% of the funds disbursed during this period are either repaid (44 %) or repaying on time (52 %).
The graph also illustrates that the volume of disbursements has been steady since Q2 2010 with around EUR 500,000 lent out in each quarter. This result is in line with MYC4’s strategic focus on improving the quality of the portfolio and reduction of risk rather than growing the volume.
The next graph shows the same data as the previous chart, but only for currently active partners (Growth Africa, Micro Africa, Fusion, Tujijenge, Gatsby, PRC, Makao Mashinani). 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 to two partners – Growth Africa and Gatsby who had some early problems, but are doing better now. In fact, Gatsby has continued to make significant progress on recoveries of defaulted loans with a 31% recovery rate to date (more than EUR 64,500 recovered). The overall performance of the loans disbursed by current partners since March 2009 is as follows: 70% repaid, 26% repaying on time, 2% late, and 2% defaulted.
Seen year-by-year there is a small improvement from loans disbursed in 2008 (15% default, 85% repaid) to loans disbursed in 2009 (7% default, 91% repaid, 2 % on time) and 2010 (1% defaulted so far, 77% repaid, 18 % paying on time, 4 % late). The 2011 portfolio is still young and some deterioration should be expected in the future, but so far 24 % is repaid, 75 % is on time, and 1 % is more than 30 days late.
The next two graphs include the effects of interest and currency to get the net return of the portfolio. 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 nine quarters (illustrated in the chart below). Adding up the total portfolio disbursed since Q2 2009 by current providers shows a net return for investors of 3.3 % before currency.
The full picture once the effects of currency are included is less positive. As reported in the previous update, currency losses on the portfolio have been larger than the interest made by investors on the portfolio disbursed since Q2 2010. Unfortunately, this trend has continued in the second quarter of 2011 (see graph below). The currency effects therefore result in a negative return of -0.9% as at June 30th 2011 for the total portfolio disbursed since Q2 2009 by our current partners.
Thanks to our partners for what they have achieved in this period as to strengthening the portfolio. We will continue to focus on reducing risk and improving investor return in 2011, yet risk is inherent in our mission of funding un-banked and under-banked small businesses in Africa.