Back in January, we set out some targets for the year ahead. We wrote:
A key opportunity for 2012 is portfolio growth. We have spent the last 1-2 years on improving the MYC4 business model, our organisational capacity and procedures, as well as our local partner network, meaning that our focus has been on quality rather than growth. We feel that we are now ready to start growing again, and we are experiencing a pull from MFIs that are interested in joining the MYC4 platform. Rest assured, we will not forget our (tough) lessons learned: quality must always remain at the centre of attention, and we strive for controlled growth with good quality loan providers.
The best way to measure our growth is to look at the Outstanding Loan Balance (OLB), that is the total outstanding principal on our active loans. When we started the year, we had an OLB of around 1.2 million euro in 1,200 loans; last week we hit the 2 million mark and we now have more than 3,000 active borrowers. Our overall goal for the portfolio is to end the year at €2.5 million – a target that is still within reach provided that the growth of the year’s first 9 months continues through this fourth quarter.
Another challenge at the beginning of the year was a lack of portfolio diversification country and provider wise. More than 53 % of the portfolio was at the time concentrated in Uganda while Rwanda (17 %), Kenya (11 %), Ghana (11%), and Tanzania (8%) shared the rest. The key issue at the time was that one provider, Gatsby Microfinance Ltd, was alone holding 43 % of the total portfolio. In this regard, the picture has also improved: the Uganda portfolio is still large at 49 %, but it is now held by three different providers and Gatsby’s share is slowly coming down (currently at 37 %); the Kenya portfolio has been growing steadily all year with the introduction of three new providers – KEEF, Yehu Microfinance Trust, and SISDO – and increased activity from Micro Kenya. It is now at 29 % and still growing, even with the exit of Fusion Capital, Growth Africa, and Makao Mashinani well underway; the third focus country for MYC4 is Tanzania where the portfolio has traditionally been small. The results of increased activity from Tujijenge Tanzania and the introduction of BELITA to the platform can be seen on the portfolio size which has grown to 14 %. It is furthermore expected that a couple of new MFIs from Tanzania will be joining the platform in the short to medium term. Evidently, the portfolios in Ghana and Rwanda have been reduced significantly in the same period (to 2 % and 5 % respectively), but we see that as a positive development as we deepen our presence in the three focus countries.
In terms of the portfolio quality, we were happy to report on another strong quarter in the recent Portfolio Performance update. The main challenge at the moment continues to be the liquidity situation on the platform – the loans in need of funding are plenty, but the capital available to fund them will need another boost if the growth is to continue.