Update on Growth Africa

It’s been a while since we last had open loans from Growth Africa on the MYC4 platform. So what have they been up to in the last couple of months?

Growth Africa has been busy re-strategising.

“We have been asking ourselves if what we do for our entrepreneurs is enough”, CEO Johnni Kjelsgaard explains. “What they need at least as much as access to capital is knowledge, exposure, a guiding hand and a critical friend, some thought-provoking events, managerial and practical tools, networking, and structured experience sharing with their peers. Initially we thought this could be done alongside providing loans – but upon testing this idea, we realised that the interests of those two sides of the business are misaligned.”

Growth Africa has therefore made the decision to exit the lending business to instead focus on enterprise development for SMEs. An appropriate exit plan for the current outstanding loan portfolio is in the process of being established.

Growth Africa and MYC4 have agreed to have an on-going dialogue to see if there could be a strategic fit again in the future.

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South-South…

This post is a massive tribute to the amazing work that M-PESA is doing every single day!!

I just saw a Facebook post from one of the people that I am connected with, that M-PESA’s mobile transactions in Kenya (ONLY!) now has now exceeded transactions in general made by Western Union GLOBALLY!!!!

Please read the above one more time and feel that the new wind blowing…

Besides writing this post to greet M-PESA it is also to ‘kick back’ on some of feedback that Mads and I have just been met with; we have just returned from the grand BBC set-up: Down to Business where four companies from the world has been invited to come and pitch in front of 150 social investors and 4 judges – but even better: it is recorded and it will be broadcasted to +300 million people around the world ultimo November.

As I have mentioned a couple of times, we are working on setting up a pilot of a South-South model of MYC4: myc4.co.ke – where Kenyan investors are investing directly in fellow Kenyan businesses.

This was the main part of the pitch in London on Monday and it is exaggeration to say that everybody likes the concept – but when reality hits the fan, people are also sceptical about whether the market is big enough in Kenya and whether the market is actually ready for modern structures like this… as several mentioned themselves: ‘I guess it is just how we look at Africa, because of how it has always been’. EXACTLY!

The good thing is to get tangible cases (or should I say: proofs) that can destroy the old picture we have of Africa yet keeping a humble attitude (yes, the last are also my own words)…

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Brief investor survey

MYC4 has entered a consulting agreement with 180 Degree Consulting with focus on current and future investors, so we encourage you to read their post below as well as participate in the survey they have set up.

180 Degrees Consulting take it away…

We kindly ask you as a MYC4 investor to fill in this brief survey.

The survey takes no more than 5 minutes to fill out and is a great opportunity for you as an investor to share your ideas and thoughts on how MYC4 can improve its services and help to make MYC4 better at doing what it does.

The results from the survey will be used to find out who the investors are and in the long run make MYC4 an even better partner for the thousands of borrowers who receive loans through MYC4.

The survey is conducted by 180 Degrees Consulting as part of a project with MYC4. We are a student-run organization offering free consultancy to voluntary organizations and social enterprises. To find out more on who we are and what we do, please visit our web site.

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Take a ride to a better future

 

 

Deonesios' plan is to have at least 20 vehicles

 

Setting up an appointment with taxidriver- and owner Deonesios Kamotho Gikunju turns out to be not so easy. He’s a busy man, and if you want to meet him for an interview you have to go where he goes. Business comes first. So I drive through most of Nairobi (which also isn’t easy, you have to be veeery patient). I find mr. Kamotho outside USIU, the United States International University in Kenya. He’s waiting for a customer, and he can squeeze in half an hour for me.

In a café he tells me his story.
– Listen, when I was a kid, I often had to stay away from school, because there was no money for the school fees. That’s bad, really bad. We were poor, so at a young age I decided that when I came of age I’d be my own boss. I don’t want my son, who is almost four years, to go through the same as I did, he says. Memories from his poor childhood don’t reflect in his face, which is one big smile all the time.

Deonesios Kamotho Gikunju, 32, already has two cabs, one he drives himself, and two other drivers take turns driving the other one around the clock. All thanks to his own determination and with the help of Growth Africa and MYC4, who have provided the loans for the cabs. And a third cab is on its way, a brand new Toyota at a price of 9.000 USD. But why stop there?

– No, no it doesn’t stop here, he says, I’m planning to have maybe 20 vehicles, some of them trucks, and I’ll get there with the help of Growth Africa and MYC4, believe me, because the transportation sector here in Kenya is booming. I count on having my first truck in between three and six years.

However small the business is there always has to be a business plan. His plan is to save up money, so that he can buy a small piece of land every year as an investment.
– I can buy it for 150.000 Kshs., and a year or two from now I can sell it for maybe 500.000 Kshs, says Deonesios, who started out borrowing money at another micro finance institution, but eventually they could not meet his need for funds, so he turned to Growth Africa, where he got his first loan late 2008.
– They have been good to me no doubt, but I think their interest is a bit steep, and the period over which I have to pay back is a little short, he says.

With me on this visit is Faith Wambua from the MYC4 office in Nairobi and a loan officer from Growth Africa . He assures me that Mr. Kamotho is a really good customer, who always has paid back in time. He is currently on his third loan. You can learn more about his business and loans here. His customer comes out from the university. It’s time for him to go.

I’m left with the good feeling that he and his son can rest assured, that there will be enough money for his school fees – and more.

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Update on Fusion Capital

Fusion Capital Ltd, one of the MYC4 Providers, has made a strategy to prioritise its SME activities such that focus is more on equity than on debt. Fusion therefore decided a couple of months ago to pay out the four outstanding loans on the MYC4 platform to effect a smooth transition (read more about Fusion Capital’s new equity fund on Reuters).

Fusion entered the final repayments in the MYC4 system back in August, however most of the amount remains outstanding (33 % received so far). In light of this development, MYC4 will ensure that the delayed repayments are deleted in the system as soon as possible in order to let the four loans accrue due interest while Fusion prepares to transfer the rest of the funds. In addition, we will make sure that the received repayments are re-entered correctly in the system and then processed into investor accounts.

We wish Fusion Capital success with the new venture.

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What a morning…

Reading the leading Danish business newspaper (Borsen) with a cup of nicely brewed (African) coffee this morning, was a true pleasure!!

I can’t remember when I have read a newspaper that had so much content about Africa… and even brought on page 4 before articles about how banks are going belly-up in Denmark (the latter topic currently has Denmark’s full attention)!

The upper part of page 4 is an ‘analysis’ of how China is paving the road for future growth in Africa written by Nikolaj Gammeltoft, Business Commentator in New York.

The Chinese are building roads, railways, schools and hospitals which is a good attractor for international corporations to enter the African markets, for real. As the author of the article states; when the international companies have made their entrance, the institutional funds will find their way, because the risk and reward will start balancing.

I fully support how Gammeltoft sees the development will take place in stages over the next years. He ends the article stating how private investors will be able to invest in Africa in an accessible way. Hear hear…

The lower part of page 4 is a chronicle that kicks back on a previous chronicle (brought some days ago also in Borsen) where Allan Søgaard Larsen, CEO of Falck articulates his view on aid; “the good-hearted development aid simply makes matters worse” (his view point is very much inspired by Dambisa Moyo’s book: Dead Aid which he refers to a couple of times).

The two authors of today’s chronicle (Poul Due Jensen, Chairman of The Poul Due Jensen Foundation under Grundfos and Henrik Stubkjær, General Secretary of DanChurchAid) do not agree with neither Larsen nor Moyo; “it is simply too controversial and rectangular to solve Africa’s complicated challenges”.

I like the way they kick back in a constructive way and thus do not enter the “the cold-hearted capitalism simply makes matters worse” trench. Jensen and Stubkjær argues that there is a need for both, hey, there should be no news in this part, but reading the cronichle made me think quite a bit more about the handshake that is needed for Africa to develop, than I normally do.

A handshake IS needed and I don’t think I have to argue that I believe business development (micro-, small- and medium sized businesses) is instrumental in this connection?!?!

Regarding aid, Jensen and Stubkjær were capable of providing me with some strong images of why aid is needed. I think it was their way of linking aid to business development that made me ‘catch it’. Below are some of their links:

Schools: so kids obtain basic knowledge that can be build on to create a future workforce

Roads: so raw materials and crops can get to the market and further to factories that are manufactoring goods

National health system: so absence due to sickness is limited (here I encourage you to read my previous post where I introduce a for-profit company that will revolutionize the African health sector via mobile phones)

Investment climate: to ensure a well functioning system where e.g. corruption is limited

Very well done Jensen and Stubkjær! This goes for Borsen as well for bringing the two interesting articles… on page 4!!

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Think BIG…

November 1st MedAfrica will go live and it looks like a rather interesting venture. Many initiatives in the medical industry see light of day, but MedAfrica seems to stick out from the traditional set-ups – below I have provided some lines as to why they caught my attention.

Like with the iCow example, I blogged about two months ago, MedAfrica is a mobile service that in a cost efficient way provides basic information about health and medicine (to humans). Yes, I love this kind of model, but it also has a connotation of something we have heard about before. Though, please take these two specific key elements into perspective before you make your final call:

1) In Kenya each doctor serves +7,000 individuals in average (mission impossible!!) which is why a mobile service like this (accessible and self-serve information) can be instrumental in improving national health

2) MedAfrica will launch their platform to become a sustainable business rather than going the traditional path of being not-for-profit which is rather widespread in this industry. To me it is logic; the more MedAfrica earns (being reasonable and not greedy), the more people they can serve with constantly improved health/medicine information

You can sign up to MedAfrica’s newsletter as well as follow them on Twitter via their website… I will keep you posted when something interesting happens in their court.

P.S. It could be interesting to have MedAfrica on MYC4 somehow…. not sure exactly how, but lets see where it will lead from here.

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Portfolio Performance 3rd Quarter 2011

Another three months have passed, so here is the quarterly update on the performance of the MYC4 portfolio.

Let us start with the good news. Loans disbursed in the last two years by our current providers continue to return more in interest than what is lost in defaults. This portfolio now shows a net return of 3.5 % before currency. It is also positive to note that €547,058 were disbursed in the quarter which is the highest volume of disbursements in two years (all partners included).

Out of the almost €4.2 million disbursed since Q2 2009, 71 % has now been repaid, 24 % is being paid back on time, 3 % is repaying late, and 2 % has defaulted. This is visualised in the graph below which shows the current status for the loans disbursed in each quarter by the active MYC4 partners.

Portfolio Performance Current Partners (click to enlarge)

Now to the bad news. MYC4 investors continue to be hit hard by currency losses. This topic has previously been explored here on the blog in the posts As the Shillings Slide and Gatsby Uganda introduces new loan products in response to the sliding shilling. Click on the two links to read more about how the current rough patch of the East African currencies are affecting MYC4 investors, and also how one provider has decided to react to these developments by offering higher returns to investors.

When currency gains/losses are included in the equation, the net return for investors becomes -3.4% on the portfolio disbursed by the current MYC4 partners in the last two years (see graph below). For loans disbursed in 2010, the result will not change much as 89 % of these funds have already been repaid. The 2011 portfolio still has 62 % of the funds outstanding, thus the picture can still change for these loans in the next couple of months depending on the development of the currencies.

Profit/Loss Current Partners, incl. Currency (click to enlarge)

The final graph includes the historical perspective by showing the performance of the entire MYC4 portfolio since the beginning. The performance of the 2008/2009 portfolio has been analysed in detail in the previous portfolio performance posts, particularly in the one focusing on 2010.

Portfolio Performance All Partners (click to enlarge)

Finally, as we also reported last quarter, the active partners have 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 %. In Q3, we have witnessed a small increase in the PAR to 12 %. In the last three months of the year, we will strengthen our focus on reducing the PAR to below 5 %.

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Memorylane…

1st of October (Saturday) it was four years since MYC4 opened up to the public…

I think I can say that it has been four exciting years with ups and downs but important to stress: we have gained a lot of key knowledge that we are now building the company on!!

Sometimes one picture says more than a thousands words – well, then here is +4,000 words:

Happy Birthday, MYC4….

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