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.
This liquidity issue could have something to do with how providers seem to be going overdue.. so open and this could be far from the mark but why would someone want to risk more capital??? if providers aren’t doing there jobs and collecting outstanding loans. Wouldnt it be a good idea to move from the focus of building the loan book to managing the current loan book improve the liquidity situation along with quality????
You might not like how direct I can be but it comes down to this:
Why would investors risk more capital ???
What are myc4 doing to help reduce PAR even more??
What is MyC4 doing to help reduce currency risks to investors??
Could it be an idea to have to so instead of been converted back to Euro which is in a mess as bad as the US at the moment to be kept in the crrencies of the countries and allow that to be used for loans instead of going thu the currency exchange risk??
And yes a focus on loan quality is good…
Well this is just my POV but: improve collection of overdue loans will improve the liquidty issues..
Since key providers are the ones putting the most at risk isnt it a good idea to have tighter controls on the key providers???
Adding providers yes good because it reduces risk if anything happens to one provider..
And yes reduction in the concentration with Gatsby is good… at least the other providers seem to be better at collection of loans… Gatsby on the other hand would rather be uploading more loans then collecting current ones…
And 15 Percent PAR for a provider who holds 39 percent to me seems high..
3 for example:
ID’s 8193, 8191 and 10132
All 3 are overdue 2 of which are just about paid off and should be already paid off over 2 months ago.
2 mio. EURO OLB. Way to go. What is the next mile-stone?
A positive thing. GrowthAfrica today cleared some of their outstanding loans.
I still have around 10 unpaid GrowthAfrica loans in my portfolio (most are repaid 75+ % – and some even 99.6 %). Would love to see them fully repaid some day, though
[…] has doubled the Open Loan Book (OLB) since January 2012 and today the OLB is above 2,000,000 Euro disbursed to 3,250 micro- and small businesses, still with a high quality of loans with a portfolio […]