Another quarter has gone by so here is an updated report on the performance of the MYC4 portfolio (to read the previous performance post go to Portfolio Performance 1st Quarter 2012).
Total disbursement this quarter amounted to 801,850 euro which is the highest volume in more than 2.5 years and a growth of 10.5 % compared to the previous quarter. A total of 949 loans were disbursed. This was also the quarter where investors could choose from 200 open loans on the platform at the same time and where Yehu Microfinance Trust joined as a new MYC4 provider.
The good performance of the portfolio has continued: net defaults on loans disbursed in the last three years by the current providers* are kept at 2 % with around 75 % of this portfolio repaid to investors. When looking at loans disbursed in the last one year only, defaults are less than 0.15 % (3,029 euro) with around 41 % (1,072,919 euro) of the total portfolio repaid so far. These defaults are all from Growth Africa who is no longer an active provider.
The portfolio at risk (i.e. the outstanding balance on loans late by more than 30 days relative to the total outstanding loan balance) was 3.6 % at the end of the second quarter. This is an improvement from last quarter’s 5 % and it is now our best result since late 2008.
With defaults kept at an absolute minimum, the key factor determining investor returns is currency. Here it is positive to note that the East African currencies have remained fairly stable this year, especially in comparison with last year’s excessive fluctuations, and the currency losses realised on loans disbursed in the first quarter have so far been sufficiently covered by earned interest while loans from the second half of 2011 have brought large currency gains (see graph below). This is reflected in the net return: while it was -0.1 % after currency in the first quarter, the net return on loans disbursed after Q2 2009 by the current providers is at this point 1.2 % after currency. Investors’ return before currency has also improved, albeit modestly, from 3.5 % in Q1 to 3.6 % in Q2.
The key challenge for the coming quarter is to continue the positive trend in terms of portfolio growth and quality. The current MYC4 providers have proven that the quality is there and that they also have the will to give investors a real opportunity to obtain a positive return (all MYC4 Providers have agreed to 100 % risk guarantees). With four new providers joining the platform in the last 10 months (Tujijenge Uganda, BELITA, KEEF, and Yehu Microfinance Trust) there is now a good scope for portfolio growth in terms of loan production.
On the investor side, more capital is needed on the platform to satisfy the demand for funding – in the second quarter alone, loans of more than 250,000 euro were cancelled in the bidding process due to lack of financing. Existing investors have nevertheless plenty of reason to be pleased with their efforts so far in 2012: the outstanding loan portfolio has grown from 1.2 million euro at the start of the year to 1.6 million at the end of this quarter. We hope to see this level of growth continue in Q3.
If you are yet to read about our quest to find more liquidity for the MYC4 platform, make sure to click here. If you want to read more about the 2007-2009 portfolio, go to one of our previous performance posts, e.g. Portfolio Performance 2010.* Current Providers: GrowthAfrica, Gatsby Microfinance Ltd, Micro Africa Ltd, Premier Resource Consulting, Tujijenge Tanzania, Fusion Capital Ltd, Makao Mashinani Ltd, Tujijenge Uganda, BELITA, KEEF, and Yehu Microfinance Trust.