Frequently Asked Questions

Myc4 has received several questions from investors and in this post we shall address some of the most recent frequently asked questions.

Q. Are there loans that are still defaulting?

A. Yes, all the loans that are 180 days late belong to Tujijenge Uganda. Myc4 has an agreement with Tujijenge Uganda for monthly remittance. Tujijenge Uganda has pre-paid two months in advance in April; and as per the agreement, they will pay a lumpsum again in May. All their loans that are above 180 days will be defaulted after the May repayments have been processed.

Q. How is Mtaji doing with repayments?

A. Mtaji has adhered to the negotiated payment plan. Mtaji has made repayments of 26, 400 Euros since February 2015.

Q. KEEF aside, have other providers stopped repayments?

A. With the exception of Milango, all other providers are making repayments. Yehu Microfinance Trust did not make repayments in the month of April, but have now entered a sufficient amount on the platform to regularize their position; we expect to receive the funds this week.

Q. What is the expectation on upcoming defaults?

A. Upcoming defaults are from Tujijenge Uganda. Myc4 expects that all defaults from Tujijenge Uganda will be paid off through the monthly repayment agreements and from the Risk Guarantee Fund.

Q. Does the Risk Sharing Funds still have relevance?

A. The Risk Sharing Funds of existing providers are sound. Milango has paid their risk fund to the tune of 28, 850 Euros in February 2015. Jubilant has transferred all their risk share funds to Myc4’s account. The risk guarantee fund of Yehu is in the form of a reliable bank guarantee.

We shall you updated with more information and updates.

Thank you for your continued support. If you have more questions, do not hesitate to contact us on info@myc4.com

 

 

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March Provider Update

Below is an update on providers for the month of March.

Kenyan Providers

KEEF –  They hold a substantial amount of MYC4’s portfolio which defaulted several months ago. There has been no cooperation from KEEF on all matters repayments for a while now. Attempts at talks to get them to honour their financial obligations did not bear fruit and MYC4 sought legal action. Additionally, MYC4 contacted KEEF borrowers who had received MYC4 loans. Majority of KEEF borrowers indicated surprise at having being informed of their loan balances with MYC4. From their testimonies it has come to our attention that most if not all of the borrowers had cleared their loans months or years prior and had submitted all due repayments to KEEF, who have not remitted these funds to MYC4.

 

Milango – Their PAR 30 currently stands at 99.99 %. We received repayments from Milango amounting to  2,518.64 Euros.

The MYC4 team was in Milango offices in Mombasa in February for a a portfolio audit exercise and from this exercise, it came to our attention that Milango did not submit to MYC4, Kes. 9.2 Million of investor funds that was collected from borrowers repaying MYC4 loans.

MYC4 had a Finance and Strategy meeting with Milango management team and we have come to the agreement that the collection made on repayments should be remitted on a weekly basis as they work on how to fully repay the Kes. 9.2 million.

In a few weeks time, the MYC4 team will be going to Milango offices in Mombasa for a follow up.

Once this exercise is complete, we will provide more updates.

 

 

YEHU – Their PAR 30 currently stands at 49.53%. We received repayments amounting to 40, 496.53 Euros from YMT for the month of March.

 

Jubilant Kenya Limited – Their PAR 30 currently stands at 16.18%. We received repayments amounting to 6, 884.27 Euros from Jubilant Kenya Ltd for the month of March.

 

Premier Kenya – Their PAR 30 currently stands at 0%. We received repayments amounting to 428, 537.59 Euros from Premier Kenya for the month of March.

 

Tanzania Providers

Mtaji – Their PAR 30 currently stands at 0%. We did not receive repayments from Mtaji for the month of March.

 

Uganda Providers

Tujijenge Uganda -Their PAR 30 currently stands at 99.95%. We did not receive repayment from Tujijenge Uganda for the month of March.

Uganda Microcredit Foundation – Their PAR 30 currently stands at 0%. We received repayments amounting to 29, 503.68 Euros from UMF for the month of March.

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Quarterly Report – Q4 2014

Here is the last quarterly portfolio performance update of the year 2014.

There were decline in disbursements in the quarter – meaning there were successive declines in each quarter this year. The disbursement figure for the fourth quarter (379,423 Euros) was achieved from only 3 partners; Premier Kenya accounted for 60% of disbursements in the quarter. The fraud situation at KEEF continued to have a big effect on the platform performance: (reduced liquidity on the platform due to non-remittance of repayments has far reaching consequences). Other contributory factors included the stopping of activities in two countries: Good news is that the portfolio in those two countries is being repaid well (Tujijenge Tanzania, Gatsby and Fanikiwa have fully cleared their portfolios; Tujijenge Uganda and Uganda Microcredit Foundation continue repaying their portfolios well. We now have a team that is actively identifying strong potential providers to add to the platform.

The portfolio at risk above 30 days (PAR30) closed the quarter at 18%, which seems (considering effect of defaults on PAR) an improvement compared to 54% in the previous quarter. The net defaults declined sharply in the quarter – from 4% the previous quarter to 13% as at end of the year. There was a high level of defaults in the quarter coming from two providers, 86% from KEEF in Kenya and the rest from Mtaji in Tanzania. Mtaji continues making monthly repayments – thus investors should get all their funds back as recoveries. The relationship with KEEF has turned adversarial, yet we will make the utmost effort to recover the portfolio. Remember default is the technical term for loans that are more than 180 days late – thus, whereas the possibility of full recovery is reduced, the term is not synonymous with loss of funds.

From an investor point of view, the overall net return is negative for the fourth quarter (-4.22%) on loans disbursed by the current providers* in the last five years. The figure is heavily affected by the defaults in the quarter; reduced repayments; lower bids due to competition for available opportunities.

 

 

Portfolio Performance – current providers* (click to enlarge)

The Portfolio Performance Graph above shows the performance of loans disbursed since 2010 divided by quarter of disbursement. The colour blue shows funds that have already been repaid, green shows amounts that are being repaid on time, yellow indicates the balances on loans that are currently more than 30 days late, while red shows the net defaulted principal (i.e. defaulted principal less recoveries).

The disbursements were distributed through 3 providers, all in Kenya. Premier Kenya started well on retail loans on the platform and accounted for 60% of the disbursements in the quarter. The other portfolio was distributed among Yehu (12%) and Jubilant (28%).

The distribution of the funds can be seen in the graph below.

 

Disbursements in € per provider in Q4 2014
(click to enlarge)

Loans disbursed between Q2 2011 and Q4 2011 have experienced forex gain. Without factoring in defaults, the overall net result of 14 of the last 15 quarters – the exception still being Q3 2012 – continues to be positive seeing as interest earned covers losses on currency (see graphs below). There have been significant defaults in the quarter, and this has weighed very negatively on the returns.

Profit & Loss – current providers* (click to enlarge)

Net profit & loss (sum of interest, defaults less recoveries, and currency gains/losses) – current providers* (click to enlarge)

The Profit & Loss graphs above show the current result on loans disbursed since 2010 divided by quarter of disbursement. In the first graph, the colour green shows the earned interest, the red indicates the net defaults (i.e. defaulted principal less recoveries), and the purple shows the net realised currency gains or losses. The second graph shows the same figures as a net sum to give an easy overview quarter by quarter.

The total MYC4 portfolio closed the quarter with an outstanding loan balance (OLB) of €1.16 million in 2,932 active loans. This is a significant decline from the previous quarter’s €1.96 million. The defaults no longer form part of the OLB, and are a major factor in the declining OLB. Over 94% of the portfolio is concentrated in Kenya.

Remember that you can always monitor the development and performance of the portfolio in real-time by following this link: MYC4 Portfolio

 

* Current Providers: GrowthAfrica, Gatsby Microfinance Ltd, Micro Africa Ltd, Premier Resource Consulting, Tujijenge Tanzania, Fusion Capital Ltd, Makao Mashinani Ltd, Tujijenge Uganda, BELITA, KEEF, Yehu Microfinance Trust, SISDO, Fanikiwa Microfinance Company Ltd., Mtaji Credit Facility Ltd, and Uganda Microcredit Foundation Ltd,MYC4 East Africa, Premier Kenya.

 

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Quarterly Report – Q3 2014

Here is the third quarterly portfolio performance update of the year.

The 3^rd quarter of the year marked the 3^rd quarter of successive decline in disbursements. The term loan (wholesale loan) of 250,000 Euros to Premier Kenya accounted for 53% of disbursements in the quarter. The fraud situation at KEEF had a big effect on the quarter’s performance, given that KEEF had sizeable disbursements in previous quarters. Other contributory factors included the stopping of activities in two countries. We now have recruited experienced personnel so as to aggressively grow the Kenyan market and are optimistic of improved activity going forward. We have also engaged with Premier Kenya to upload the retail loans.

The portfolio quality declined sharply in the quarter. The portfolio at risk above 30 days (PAR30) closed the quarter at 54% and net defaults were at 4%. There were no defaults in the 3^rd quarter. Several factors have affected portfolio quality in the quarter including termination of activity in other East African countries, fraud situation at KEEF, shrinking portfolio size among others.

From an investor point of view, the overall net return is again positive at 0.8 % on loans disbursed by the current providers* in the last five years. This represents a drop compared to previous quarters, where the return revolved around the 1.5% mark. The investor interest has been low due to competition to fund the limited opportunities that were available in the quarter

Portfolio Performance – current providers* (click to enlarge)

The Portfolio Performance Graph above shows the performance of loans disbursed since 2010 divided by quarter of disbursement. The colour blue shows funds that have already been repaid, green shows amounts that are being repaid on time, yellow indicates the balances on loans that are currently more than 30 days late, while red shows the net defaulted principal (i.e. defaulted principal less recoveries).

The disbursements was distributed through 5 providers, all in Kenya; except a few from Tujijenge Uganda that had been funded close to their upload deadline of 30^th June. The wholesale loan of 250,000 Euro to Premier Kenya accounted for 53% of the disbursements in the quarter – being further testament of subdued activity in the quarter. The other portfolio was distributed among Yehu (27%), Jubilant (14%), Milango (5%) and Tujijenge Uganda (1%).

The distribution of the funds can be seen in the graph below.

Disbursements in € per provider in Q3 2013
(click to enlarge)

There were changes in terms of the profit and loss. Loans disbursed between Q2 2011 and Q4 2011 have experienced forex gain. 2012 were further affected by currency losses, but the overall net result of 13 of the last 14 quarters – the exception still being Q3 2012 – continues to be positive seeing as interest earned covers losses on currency (see graphs below). There have been significant defaults in the month of November 2014, which is reflecting on Q3 data (given that production of the Q3 report has been delayed, the status of defaulted loans do not represent the status as at end of Q3).

 

Profit & Loss – current providers* (click to enlarge)

Net profit & loss (sum of interest, defaults less recoveries, and currency gains/losses) – current providers* (click to enlarge)

The Profit & Loss graphs above show the current result on loans disbursed since 2010 divided by quarter of disbursement. In the first graph, the colour green shows the earned interest, the red indicates the net defaults (i.e. defaulted principal less recoveries), and the purple shows the net realised currency gains or losses. The second graph shows the same figures as a net sum to give an easy overview quarter by quarter.

The total MYC4 portfolio closed the quarter with an outstanding loan balance (OLB) of €1.96 million in 4,593 active loans. This is an increase from the previous quarter’s €1.79 million. Around 85% of the portfolio is concentrated in Kenya where KEEF is the largest provider; 9% is held in Uganda; and with 9% in Tanzania.

Remember that you can always monitor the development and performance of the portfolio in real-time by following this link: MYC4 Portfolio

 

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Portfolio Performance 2nd Quarter 2014

Here is the second quarter portfolio performance update of the year 2014.

The volume of loans disbursed in Q2 2014 was significantly less compared to the disbursements done in Q1 this year. In Q2, a total of €566,253 in 867 loans was disbursed compared to €764,506 in Q1 2014. The decline in disbursements was anticipated owing to MYC4 being unable to disburse to Tanzania partners as from 1st of April this year. This was attributed to our partner INTL not being able to support MYC4’s cash management activities due to regulations in the country as per the beginning of the quarter.

In terms of quality, the portfolio has been stable in the period although the PAR 30 suffered a decline in the last few weeks of the quarter to close at 23%. This is largely attributed to some pending repayments from some Tanzania providers, Gatsby and KEEF. The net defaults remained below 1%. It is also positive to note that cancellation of loans reduced from €7,896 in Q1 2014 to €2,897 in Q2 2014. This figure is exclusive of €13,446 worth of loans to Tanzania which were pending disbursement but cancelled as a result of closing down disbursements to the country at the beginning of the quarter.

We had only one loan defaulting this quarter worth €570 from Fanikiwa. This defaulted loan has since been paid off. From an investor point of view, the overall net return is again positive at 1.87% on loans disbursed by the current providers* in the last four years. This is an indication of stability in overall net returns when looked at in the light of the last few quarters: 1.94% for Q1 2014, 1.9% for Q4 2013, 1.7% for Q3 2013, 1.6 % for Q2 2013, 1.5 % for Q1 2013, 1.7 % for Q4 2012 and 1.9 % for Q3 2012.

Portfolio Performance – current providers* (click to enlarge)

The Portfolio Performance Graph above shows the performance of loans disbursed since 2010 divided by quarter of disbursement. The colour blue shows funds that have already been repaid, green shows amounts that are being repaid on time, yellow indicates the balances on loans that are currently more than 30 days late, while red shows the net defaulted principal (i.e. defaulted principal less recoveries).

The disbursements were distributed among 5 providers, three in Kenya and two in Uganda. KEEF continued being the most active partner for the second consecutive quarter this year with 45% of the disbursements. This was followed by Milango, a new provider, at 27% and YEHU at 14%. The rest of the disbursements came from Uganda with Tujijenge Uganda accounting for 9% and UMF at 6%. The distribution of the funds can be seen in the graph below.

Disbursement per provider – Q2 (click to enlarge)

In terms of country performance, Kenya accounted for 86% of the disbursements in the quarter while Uganda took the remaining 14%. Milango’s aggressiveness on the platform in the first three months of uploading contributed significantly to Kenya’s total disbursements. Poor performance by Uganda is largely attributed to pausing of Gatsby throughout the quarter and low volumes from Tujijenge Uganda and UMF.

Disbursements by Country (click to enlarge)

There were not a lot of changes in terms of profit and loss. Currency losses continue to impact on the profit and loss but the overall net result has been positive as far as the last seven quarters. The interest earned covers the losses on currency and defaults (see graphs below). Losses arising from defaults are further covered by the partner MFI. Loans disbursed in 2013 and 2014 have not been affected much by the currency fluctuations, however since most of this portfolio is still outstanding; it is too soon to know how the next few months will turn out.

Profit & Loss – Current providers* (click to enlarge)

Net profit & loss (sum of interest, defaults less recoveries, and currency gains/losses) – current providers* (click to enlarge)

The Profit & Loss graphs above show the current result on loans disbursed since 2010 divided by quarter of disbursement. In the first graph, the colour green shows the earned interest, the red indicates the net defaults (i.e. defaulted principal less recoveries), and the purple shows the net realised currency gains or losses. The second graph shows the same figures as a net sum to give an easy overview quarter by quarter.

The overall MYC4 portfolio closed the quarter with an outstanding balance (OLB) of 2.06 million in 4,837 active loans. This is a decrease from the previous quarter’s 2.12 million, a decrease of 5.4%. This is mainly attributable to the exit with Tanzania partners at the beginning of the quarter and Gatsby remaining paused throughout the quarter. With the funding of the wholesale loan and more providers coming on board in the coming quarters, we expect the OLB to be on an upward trend again; however in the short term, it will be affected by the exit with Tanzania and July exit with Uganda partners since they will only be repaying. The biggest portion of the portfolio is concentrated in Kenya at 67%, where KEEF is the largest provider; 20% is held in Uganda where Gatsby and UMF hold the biggest share; and 13% in Tanzania with Tujijenge Tanzania being the largest provider there.

At the end of Q4, over 93,200 people had been influenced directly through 18,794 businesses funded through MYC4. 84% of these businesses are informal and majority (62%) are owned by women. Business and farming loans continue to dominate the platform accounting for 71% of the loans disbursed. Other include service, health, education, transportation and renewable energy loans.

* Current Providers: GrowthAfrica, Gatsby Microfinance Ltd, Micro Africa Ltd, Premier Resource Consulting, Tujijenge Tanzania, Fusion Capital Ltd, Makao Mashinani Ltd, Tujijenge Uganda, BELITA, KEEF, Yehu Microfinance Trust, SISDO, Fanikiwa Microfinance Company Ltd., Mtaji Credit Facility Ltd, Uganda Microcredit Foundation Ltd and Milango Financial Services.

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Portfolio Performance 1st Quarter 2014

Here is the first quarter portfolio performance update of the year 2014.
The volume of loans disbursed in Q1 was significantly less than Q4 2013. In Q1 2014, a total of €764,506 in 978 loans was disbursed compared €1,014,000 Q4 2013. But when you compare Q1 2014 performance to a similar period in 2013, you will realize that 2014 was just slightly below 2013 performance (Total disbursements in Q1 2014 were €827,021). That said, the year begun rather sluggishly and most of our providers especially in Tanzania and Uganda struggled to produce loans throughout Q1. In Uganda, Gatsby remained paused throughout the quarter while Tujijenge Uganda did not come with any significant volumes.

In terms of quality, portfolio continues to be healthy with PAR 30 being 2.9% the by end of Q1. The net defaults remained below 1%. It is also positive to note that cancellations of open loans reduced from €29,156 in Q4 2014 to €7,896 in Q1 2014 although this can also be attributed to the fact that there were fewer loans on the platform.

The defaults for the quarter were €4826 in 4 loans (Gatsby (€4376 and BELITA €450). Gatsby has since paid off the defaulted amounts and we are working with BELITA to have the defaulted amounts paid off. From an investor point of view, the overall net return is again positive at 1.94 % on loans disbursed by the current providers* in the last four years. This is an indication of stability in overall net returns when looked at in the light of the last few quarters: 1.9% for Q3 2013, 1.7% for Q3 2013, 1.6 % for Q2 2013, 1.5 % for Q1 2013, 1.7 % for Q4 2012 and 1.9 % for Q3 2012.

Portfolio Performance – current providers*

The Portfolio Performance Graph above shows the performance of loans disbursed since 2010 divided by quarter of disbursement. The colour blue shows funds that have already been repaid, green shows amounts that are being repaid on time, yellow indicates the balances on loans that are currently more than 30 days late, while red shows the net defaulted principal (i.e. defaulted principal less recoveries).
The disbursements were distributed among 8 providers, three in Kenya, three in Tanzania and two in Uganda. KEEF in Kenya was the most active in the quarter with 32% of the total disbursements, followed by YEHU and Tujijenge Tanzania with 15% each. The other significant ones were UMF in Uganda at 13% while Mtaji and Fanikiwa had 11% and 10% respectively. Tujijenge Uganda continues to bring low volumes and could only manage 3% of the total disbursements. Milango Financial Services (MFS) is our newest provider located in the coastal region of Kenya. MFS became a provider in the third week of March and accounted for 1% of total disbursements in the quarter. This portrays significant potential.

 

Disbursements per provider in Q1 2014

In terms of country performance, Kenya accounted for nearly half of the disbursements, Tanzania 36% while Uganda accounted for 15%. The poor performance of Uganda is largely attributed to pausing of Gatsby throughout the quarter and low volumes coming from Tujijenge Uganda.

Disbursements by Country

There were not a lot of changes in terms of the profit and loss. Currency losses continue to impact on the profit & loss but the overall net result has been consistently positive. The interest earned covers losses on currency and defaults (see graphs below). Losses associated with defaults are further covered by the Partner MFIs. Loans disbursed in 2013 & 2014 have not been affected that much by currency fluctuations, but considering that most of this portfolio is still outstanding; it is too soon to know how it will develop in the months ahead.

Profit & Loss – current providers*

 

Net profit & loss (sum of interest, defaults less recoveries, and currency gains/losses) – current providers*

The Profit & Loss graphs above show the current result on loans disbursed since 2010 divided by quarter of disbursement. In the first graph, the colour green shows the earned interest, the red indicates the net defaults (i.e. defaulted principal less recoveries), and the purple shows the net realized currency gains or losses. The second graph shows the same figures as a net sum to give an easy overview quarter by quarter.

The total MYC4 portfolio closed the quarter with an outstanding loan balance (OLB) of €2.12 million in 4438 active loans. This is a decrease from the previous quarter’s €2.35 million, a decrease of 9.8%. With more providers coming on board in Q2, we expect the OLB to be on an upward trend again. 52% of the portfolio is concentrated in Kenya where KEEF is the largest provider; 24 % is held in Uganda where Gatsby is still holds the largest portion; and with 24% in Tanzania with Tujijenge Tanzania being the largest provider there.

At the end of Q4, +88,700 people had been influenced directly through 17, 954 businesses funded through MYC4. 82% of these businesses are informal and majority (61%) is owned by women. Business and farming loans continue to be the major funding areas accounting for 71% of the loans disbursed. Others include service, education, health and renewable energy loans.

* Current Providers: GrowthAfrica, Gatsby Microfinance Ltd, Micro Africa Ltd, Premier Resource Consulting, Tujijenge Tanzania, Fusion Capital Ltd, Makao Mashinani Ltd, Tujijenge Uganda, BELITA, KEEF, Yehu Microfinance Trust, SISDO, Fanikiwa Microfinance Company Ltd., Mtaji Credit Facility Ltd, Uganda Microcredit Foundation Ltd and Milango Financial Services Ltd.

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Spot Checks Q1 2013

In the first quarter of 2013 we carried out spot checks on four of our partners. These were Gatsby Microfinance (Uganda), Tujijenge Uganda, Micro Kenya and KEEF. The partners had scores ranging from 4 to 8 out of 10. The spot check score forms part of the parameters that are used in overall risk rating on MYC4 (commonly referred to on MYC4 as the star rating, due to the five stars displayed on each provider profile). Subsequent action points are given for each provider, including measures such as pausing of loan uploads until certain issues are adequately addressed.

The spot check is a tool used by MYC4 bi-annually to verify that the data captured on MYC4 is accurate; and that the borrowers not only exist but are carrying out the businesses as detailed on the platform. Another objectives of the spot checks is to verify that the providers are carrying out best practice as laid down in their policies (MYC4 only engages with providers that demonstrate, during due diligence process, that they have sound risk management policies). Many will agree that, it is one thing to have good risk policies in the finest print, but consistently implementing the same requires a multiplicity of factors – including management commitment, staff motivation & ownership, adequate training, and a good incentive scheme. Thus from the aforementioned, there are two principal aspects: Adherence to MYC4 model; and implementation of risk management practices.

Over a period of time since 2010, we have seen tremendous improvement in adhering to best practice. Many of our partners have incorporated aspects that were not part of their routine into their overall risk management structures. Areas that have seen good improvements include loan assessment, collateral perfection, and documentation. We have also managed to enforce more strictly, adherence to the MYC4 model.

The MYC4 model basically requires that borrowers access the loan funds at exactly similar terms and conditions as stated on the MYC4 platform. Thus, for example, loan for Odeke Julius is lent on MYC4 at an effective interest rate (EIR) of 41.87% for 12 months with collateral of a motor vehicle: We expect during the spot check to find a properly appraised loan at same terms and with collateral adequately perfected. Repayments received from borrowers should also be entered on MYC4 system as and when received from the borrowers. Suffice to say that loan status on MYC4 should mirror the provider’s information system with regard to each loan on MYC4. The withholding tax must also be remitted to the tax authorities.

The grading of the four institutions was divided as follows
1. Adherence to MYC4 model
2. Implementation of sound risk management practices
i. Completeness of loan files
ii. Perfection of collateral
iii. Loan assessment and documentation
iv. Processing of loan repayments
v. Client visits

Gatsby Microfinance holds our biggest portfolio per provider (about 23% of our portfolio). It was thus refreshing and comforting that they achieved the highest score from the spot checks, 8 out of 10. Among the highlights were that they had adequate loan assessment and approval mechanisms which were well documented; collateral perfection was sufficiently and consistently done; business visits revealed businesses with capacity to meet loan obligations; and there was strong adherence to MYC4 model with regard to disbursement amounts, interest charged, borrower awareness and consent of MYC4. The concerns noted included that there was a gap in repayment processing on MYC4 resulting in loans being cleared in GMFL books whereas small balances were outstanding on MYC4. Other concerns were that MYC4 currently finances a big part of GMFL portfolio (30%) and as such GMFL is required to urgently diversify funding sources.

Tujijenge Uganda (TUG) holds about 4% of overall MYC4 portfolio, while MYC4 holds over 40% of its portfolio. About 99% of its portfolio comprises of short term group loans. The perception of positive impact among its borrowers is very high – as several of the borrowers visited (who can be classified as bottom of the pyramid) attributed their elevated level of income to TUG. TUG was found to have good assessment of groups; had good documentation; collateral mostly was group co-guarantee and the necessary guarantees were in place. The key concern with TUG was on adherence to MYC4 model, whereby it was established that there was quite a high degree of non-compliance (TUG mostly pre-funds the loans it uploads on MYC4 at predetermined interest rates). This informed their low score of 4 out of 10. Other concerns noted were on documentation especially of the approval process and referencing/ file retrieval. TUG has been paused from further uploads so as to address adherence to MYC4 model and also give way forward on diversification of loan funding.

KEEF (Kenya Entrepreneurship Empowerment Foundation) holds a significant part of overall MYC4 portfolio, about 17%, and the converse is even more significant with MYC4 financing about 27% of KEEF portfolio. KEEF has demonstrated commitment to following the MYC4 model, as there was no issue of prefunding that existed previously. Repayments processing was found not to be accurate and with room for improvement. Loan assessment was not well captured in the documentation on file. Collateral perfection was satisfactory. KEEF  generally has sound risk management principles and is complying with the MYC4 model. The omissions in loan documentation and lack of consistency in repayment processing have informed the average score KEEF scored 6 out of 10. Further growth of KEEF on MYC4 will be limited to ensure that MYC4 remains below 30% of overall KEEF portfolio.

Micro Kenya holds about 15% of MYC4 portfolio, while MYC4 holds below 5% of Micro Kenya portfolio. Micro Kenya is part of the Micro Africa group that has made a strategic decision to exit from MYC4 platform, after acquisition by Letshego of Botswana. Micro Kenya is to a large extent uploading freshly approved loans as per our pre-funding policy. However, the requirement for compliance is 100%, which has been violated. Over 90% of the loans funded through MYC4 have been through the group lending methodology. The loan appraisal and documentation were well documented. However, the loan documentation was not consistently and completely done as several loans did not have critical loan documents such as loan agreements. Compliance with MYC4 policies on other areas than pre-funding, was noted to be good.

The next round of spot checks will be carried out in this 2nd quarter on our partners in Tanzania.

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