We are coming off a great year and begin 2013 with a lot of enthusiasm.
As we reported in our most recent Portfolio Performance update, we have achieved excellent results in 2012 in our two key areas of concern, namely portfolio quality and growth. In relation to quality, the portfolio at risk above 30 days (PAR30) was kept below the industry best practice of 5 % throughout the year while net defaults on loans disbursed in the last three years remained below 2 %. In terms of growth, the outstanding loan balance (OLB) grew quarterly by 17% to close the year just above €2.2 million with more than 3,800 active loans. Moreover, three strong Kenyan providers joined the platform in 2012 – KEEF, Yehu Microfinance Trust, and SISDO – which not only provided volume, but also improved the diversification of the overall portfolio country and provider wise.
As we look at the new year ahead, several opportunities and challenges await. First of all, it is key for MYC4 to continue the good quality growth that characterised 2012. We have a couple of interesting new providers lined up to join the platform in the short and medium term, and most of the existing providers are also looking to increase their MYC4 loan portfolios. The challenge here is primarily liquidity which has been a recurring theme in the last 1.5 years. To grow the portfolio, more available investor capital is necessary. That being said, there was a net inflow of funds to the platform in 2012 with more than €1.1 million uploaded as new liquidity and investor withdrawals of less than €250,000 – a positive trend that we will work to strengthen further in the new year. Secondly, MYC4 has the opportunity in 2013 to reach break-even given that the portfolio volume takes another leap and operating expenses are kept at the current low level. This would be a huge achievement for MYC4 as a company and, more importantly, for the business model in general.
On the investor side, foreign exchange risk remains a key challenge when it comes to making a positive return on the platform. While it is unrealistic to eliminate this risk, it may be possible to improve the MYC4 model in such a way that foreign exchange risk is better contained and that expenses related to currency conversions and money transfers are reduced. This has been an ongoing objective for MYC4, especially since improved risk management policies have resulted in very limited loan defaults, and we see certain opportunities in 2013 to make some progress in this area. Another point of interest in relation to investors is the reporting tools available on the platform. Two important reports were developed last year, namely an improved Profit & Loss and a brand new Balance Sheet, both of which have created value for investors in terms of transparency and accountability. There is still room for further improvements though and we are planning to release a couple of additional reports and also bring the balance sheet out of its current beta version sometime this year.
On the borrower side, we see some opportunities in improving the flexibility and attractiveness of the loan products we offer, e.g. in terms of turnaround time, structure of instalment plans, interest accrual on late loans, and rescheduling/refinancing. Furthermore, we are keen to explore how best to protect the privacy of borrower data while maintaining the high level of transparency on the platform.
All in all, we will use 2013 to do more of what we did in 2012 – and then some. We hope you will join us.