September Provider Update

In this update, you can read about Yehu, Micro Africa, Gatsby, BELITA, and PRC. For previous updates, follow this link.

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Yehu Microfinance Trust

It’s been a while since we shared some news on Yehu. Essentially, Yehu has been operating quite effortlessly on the platform since the pilot review earlier in the year, and consequently there has not been a lot of information to share. As we have mentioned before, one of the main challenges for Yehu is volume seeing as its average loan size is very small (around €350). After some months of good growth on MYC4 – an average of 23 % monthly between May and August – the outstanding loan balance (OLB) has now reached €167,000. This is a positive development considering that Yehu began the year at €60,000.

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Micro Africa Ltd

Micro Africa Ltd (MAL) is now holding around 8 % of MYC4’s total outstanding loan balance (OLB) – down from close to 33 % at the time of exiting. In absolute numbers, it means that approximately €130,000 remains outstanding in Kenya while Uganda is left with just €50,000. Some of MAL’s loans in Kenya fell into arrears in the month of September which resulted in its PAR30 drastically increasing. This was due to a change of responsibilities in the organisation which necessitated a reconciliation by MAL staff with the support of the MYC4 team. The issue has been addressed and the situation is back to normal.

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Gatsby Microfinance Trust

In September, the risk cover of Gatsby (GMFL) was adjusted up from being 10 % of the outstanding loan balance (OLB) to 20 %. This increase was made as a reaction to some performance issues, more specifically due to the fact that GMFL’s PAR30 has been exceeding 5 % for a prolonged period of time. While all providers are required to guarantee their portfolios 100 %, the instrument used to support this guarantee differs from provider to provider (usually in terms of percentage covered). By increasing its risk cover, GMFL’s star rating on the platform has therefore been improved.

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BELITA

Since the first BELITA defaults hit the platform back in July, another 27 loans have defaulted, bringing the total to 40. Just 18 active loans remain which have a combined OLB of €7,500. BELITA continues to honour its risk guarantee agreement by returning the defaulted principal to investors. So far, close to 73 % has been recovered and new amounts continue to be repaid every 1-2 weeks. MYC4 is planning to do an annual review as well as a capacity building needs assessment of BELITA once this portfolio has been fully repaid to explore how best to proceed with the institution.

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Premier Resource Consulting

As we wrote in last month’s update, we had received some funds (€2,000) from PRC which were in the process of being transferred back to investors. In the meantime, we have received another repayment from PRC bringing the total to approximately €4,600. We managed to receive these funds about three weeks ago which allowed for the pending repayments to be processed (i.e. credited to investor accounts). PRC has informed us that another repayment should be on the way which we will naturally follow up on in order to recover as much as possible of the defaulted principal.

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August Provider Update

The new provider update is ready for you below. This month we have information about KEEF, Mtaji, SISDO, Fanikiwa, Micro Africa, and PRC.

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KEEF

With an outstanding loan balance (OLB) of around €440,000, KEEF is one of the largest providers on the MYC4 platform. KEEF has been performing really well both on- and offline in its 19 months on the platform and the portfolio has been built steadily in a controlled way. This year it has been growing at an average of 3 % per month. At the moment, however, KEEF’s further growth is constrained by two MYC4 policies: first of all, one provider should not hold more than 20 % of MYC4’s overall OLB; and secondly, MYC4 should not hold more than 30 % of the provider’s total OLB. Both ceilings have been reached by KEEF at this point which means that MYC4 and KEEF will need to grow independently of each other before KEEF can grow again on the platform. Here it is worth noting, however, that repayments are coming in from KEEF’s borrowers on a weekly basis and investors will therefore still have the opportunity to fund new loans from KEEF as long as the value of these loans does not exceed the value of the repayments received.

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Mtaji Credit Facility Ltd

Mtaji has been a provider on the MYC4 platform for 6 months now and we therefore carried out an on-site pilot evaluation this month in accordance with our policies. The findings from the evaluation are positive and the pilot period can be considered mutually successful, especially considering the institution’s steady but consistent presence on the platform and its solid operations. It is expected that Mtaji’s activity on MYC4 will be largely unchanged in the months to come, meaning that the OLB will continue to grow at a relatively slow pace. Mtaji has so far disbursed a total of €130,866 in 125 loans and its current OLB on MYC4 is around €110,000.

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Fanikiwa Microfinance Company Ltd

Fanikiwa Microfinance Company Ltd (FMCL) has also been a provider on the MYC4 platform for 6 months and consequently a pilot evaluation was due this month. The outcome of the evaluation is positive and it is expected that we will soon see more loans from Fanikiwa on the platform. In the case of Fanikiwa, the pilot period on MYC4 has been somewhat irregular in the sense that the activity on the platform has been unpredictable – with a high level of uploads in the first three months, and hardly any in the following three – and the performance of the portfolio has not quite been satisfactory. The irregularity has to a large extent been due to a transition to new management (and the restructuring that followed) while the performance issues are caused by a lack of reconciliation between Fanikiwa’s own management information system (MIS) and the MYC4 platform, i.e. the relatively high PAR30 does not reflect the situation on the ground. This second issue is naturally being addressed.

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SISDO

August has been a month of ups and downs for SISDO on the MYC4 platform. A lot of loans were uploaded – a total of 140 to be precise – and successfully funded. This is a very positive development for SISDO volume wise considering that the portfolio has been stagnant since the beginning of the year. Unfortunately, it coincided with some delays in SISDO’s weekly repayment transfers to MYC4 which necessitated that the funds for disbursement were withheld. Consequently the loans are still pending on the MYC4 platform; the situation has been regularised though and we expect these loans to be disbursed by the end of this week.

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Micro Africa Ltd

Repayments from Micro Africa continue to come in on a regular basis and the exit is still progressing according to plan. Micro Africa’s OLB was reduced by another €77,000 in the month of August and it now remains with around 11 % of MYC4’s total portfolio. This is great news seeing as almost a third of our OLB was with Micro Africa four months ago when the exit was announced. Here it is important to note that MYC4’s OLB has in the meantime increased to reach €2.2 million owing to the growth of the other providers. The parting with Micro Africa has consequently not had as big an effect on the MYC4 portfolio as one could have feared at the time of exit.

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Premier Resource Consulting

PRC, the only remaining provider in West Africa, no longer has an active portfolio on the MYC4 platform. PRC does, however, have a defaulted portfolio of approximately €51,000 corresponding to a default rate of 10.5 %. We have previously given detailed updates on the situation with PRC – read one from June here and one from December here – and we will make sure to keep investors informed on what is happening with this defaulted portfolio in Ghana. In August, we received €2,000 from PRC which is in the process of being transferred back to investors. We expect these funds to be in investor accounts some time in September.

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January Provider Update

This year we will introduce something slightly new on the blog, namely monthly updates with key information about the MYC4 providers. We will not cover all providers in each update, but rather select the ones where we have some news to share. Considering that this is the first update, however, we have included all the active providers below.

 

Micro Africa Ltd

Micro Africa Ltd (MAL) currently has a combined outstanding MYC4 loan portfolio of approximately €620,000 in three countries (Kenya, Uganda, and Rwanda) and has now become the biggest provider on the platform in terms of volume. MAL has furthermore the responsibility for the Growth Africa portfolio which has around €600 left in 4 active loans. The efforts to recover on the defaulted Growth Africa portfolio will continue after the active loans have been cleared. It is expected that MAL will further grow its portfolio on MYC4 in the coming months in all three countries of operation.

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Tujijenge Tanzania Ltd

Last year, Tujijenge Tanzania grew its outstanding MYC4 portfolio from €75,000 in January to €300,000 in December. Despite a slow start to the year, it is expected that the growth will continue in 2013 and that Tujijenge Tanzania thereby will become one of the largest providers on the platform. This is a positive development considering that Tujijenge Tanzania is a well established institution with a proven track record on and off the platform; and furthermore that the country diversification of the overall MYC4 portfolio will be improved with more volume in Tanzania.

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Yehu Microfinance Trust

Yehu has had a slow but good start on the platform since joining in June last year, and its outstanding MYC4 portfolio is currently close to €60,000 in 174 loans. The average size of Yehu’s loans is around €390 which is the smallest of all active MYC4 providers. It is therefore necessary for Yehu to have a large number of loans in order to build some volume. MYC4 has scheduled a pilot evaluation with Yehu next month where growth projections for this year will be determined. The expectation at this point is that Yehu will begin increasing its volume in the next couple of months, however more information will come once the evaluation has been completed.

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Tujijenge Uganda Ltd

Tujijenge Uganda is one of the smaller providers on – and off – the MYC4 platform. The current outstanding MYC4 portfolio is around €90,000 where it has been more or less steady over the last 12 months. Tujijenge Uganda specialises in group loans in rural areas with a particular focus on women and youth. It was also a Tujijenge Uganda group that inspired the post Disability is not Inability here on the blog back in September. In terms of projections for this year, it is expected that Tujijenge Uganda will continue to upload loans for €15-20,000 per month and thereby maintain the current volume, or alternatively grow its portfolio slightly.

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KEEF

When KEEF joined the platform in January last year, all growth expectations were quickly exceeded; its outstanding MYC4 loan portfolio reached €350,000 in less than 6 months and KEEF immediately became one of the largest providers on the platform. At the pilot evaluation in April last year, it was agreed that KEEF’s portfolio on MYC4 should remain below €350,000 until further notice to ensure that the institutional capacity could keep up with the portfolio growth. This week, MYC4 is carrying out the annual review at KEEF and we should therefore have more information to share in next month’s provider update.

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SISDO

The newest provider on the MYC4 platform, SISDO, had a strong finish to 2012 with more than €180,000 disbursed in November and December alone. The current outstanding MYC4 portfolio is around €200,000 which was the maximum target for the pilot phase. MYC4 carried out the pilot evaluation a couple of weeks ago and we are now in the process of agreeing on the best way forward with SISDO. Once the evaluation has been finalised, SISDO is expected to resume uploads of new loans to the MYC4 platform.

 

Gatsby Microfinance Ltd

Gatsby Microfinance Ltd (GMFL) is the second largest provider on the platform in terms of volume, having only recently been overtaken by Micro Africa. While GMFL was previously holding more than 40 % of the overall MYC4 portfolio, its share has now come down to 25 % which is a very positive development in terms of provider diversification and risk. The size of GMFL’s portfolio on MYC4 has not changed much in absolute amounts, however, as it has stayed around €650,000 for the most part of 2012. It is expected that 2013 will be business as usual for GMFL on the MYC4 platform.

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BELITA

BELITA is another small provider on – and off – the MYC4 platform, and since joining in November 2011 focus has been on slow and controlled growth. While BELITA had a good first 10 months as a MYC4 provider, the last couple of months have been relatively challenging in terms of performance. The portfolio at risk above 30 days (PAR30) started to increase back in September and since then BELITA and MYC4 have worked hard to get the loans back on track. While these challenges are being addressed, no new BELITA loans are being uploaded to the MYC4 platform.

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Makao Mashinani Ltd

When Makao Mashinani Ltd (MML) became a MYC4 provider two years ago, expectations were high. MML has an innovative approach to providing low-cost housing for people moving out of slum areas and MYC4 was excited to be part of funding these loans. Unfortunately, MML only managed to upload four loans on the platform before it became clear that the partnership was premature; the pipeline of new loans was insufficient. It was therefore decided to do a slow exit with MML, meaning that the four loans are being repaid on a monthly basis (around €4,500 remain outstanding) while no new loans are uploaded.

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Premier Resource Consulting

As we reported in an update last month, Premier Resource Consulting (PRC) is currently experiencing challenges in terms of institutional capacity and portfolio quality. No major improvements have been made since then in relation to the portfolio performance; however, the bundled repayment that had been pending in the MYC4 system since November did come through last week. The backlog of repayments which has been the source of frustration for investors over the last 4-5 months has thereby been cleared. We will be back with more information on PRC in next month’s provider update.

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Growth Africa

MYC4 and Growth Africa mutually agreed to terminate the partnership approximately one and a half years ago when Growth Africa decided to exit the lending business. A handover agreement was then made with Micro Africa (MAL) who took over Growth Africa’s MYC4 portfolio. As mentioned above, MAL continues to manage this portfolio which at this point has less than €600 outstanding. Recoveries on defaulted loans will continue after the active portfolio has been cleared.

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Portfolio Performance 3rd Quarter 2012

Another quarter has gone by so here is an update on MYC4’s Portfolio Performance.

The positive trend from the first half of the year continued in the third quarter of 2012: first of all, more than 950,000 euro was disbursed this quarter, thereby surpassing last quarter’s high volume of 800,000 euro by a significant margin; secondly, the net return on loans disbursed after Q2 2009 by the current providers* improved to 1.9 % after currency (up from 1.2 % in Q2 and -0.1% in Q1). Investors’ net result before currency also improved from 3.6% in Q2 to 3.9% in Q3; thirdly, the performance of the portfolio disbursed in the last three years by the current providers continues to be strong – around 73 % has so far been fully repaid, net defaults are kept below 2 %, and just 1 % is currently being repaid late (by more than 30 days).

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).

With regards to the effect of currency gains and losses, the picture has not changed a lot over the last three months: there have been significant losses on loans disbursed in 2010 and in the first quarter of 2011, the investors then experienced large gains on loans disbursed in the second half of 2011, and so far in 2012 the currency effects have been minimal (with the exception of Ghana).

Profit & Loss – current providers (click to enlarge)

The Profit & Loss graph above shows the current result on loans disbursed since 2010 divided by quarter of disbursement. 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.

On the less positive side, 110 loans of close to 220,000 euro cancelled due to lack of liquidity this quarter. The demand for loans on the platform was thus higher than the supply of capital for the third quarter in a row. The outstanding loan portfolio grew despite the liquidity constraints and we are now very close to reaching 2 million euro in outstanding loan balance (OLB) – see development in the graph below.

MYC4 OLB (click to enlarge)

The portfolio is largely concentrated in Uganda (50 %), but Kenya is growing (now at 30 %), and increased activity from Tujijenge Tanzania this quarter has likewise helped growing Tanzania’s share (12 %). The portfolio at risk above 30 days (PAR30) deteriorated slightly this quarter to close at 4.7 %, yet it was still below the 5 % target (industry best practice).

Other notable highlights from the third quarter includes SISDO joining as a new provider, a new balance sheet for investors, and MYC4 reaching loan number 10,000. To read previous updates on the portfolio performance, including the historical results, follow one of these links: Q2 2012, Q1 2012, Q4 2011, Q3 2011, Q2 2011, Q1 2011, 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, Yehu Microfinance Trust, and SISDO.

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Portfolio Performance 3rd Quarter 2011

Another three months have passed, so here is the quarterly update on the performance of the MYC4 portfolio.

Let us start with the good news. Loans disbursed in the last two years by our current providers continue to return more in interest than what is lost in defaults. This portfolio now shows a net return of 3.5 % before currency. It is also positive to note that €547,058 were disbursed in the quarter which is the highest volume of disbursements in two years (all partners included).

Out of the almost €4.2 million disbursed since Q2 2009, 71 % has now been repaid, 24 % is being paid back on time, 3 % is repaying late, and 2 % has defaulted. This is visualised in the graph below which shows the current status for the loans disbursed in each quarter by the active MYC4 partners.

Portfolio Performance Current Partners (click to enlarge)

Now to the bad news. MYC4 investors continue to be hit hard by currency losses. This topic has previously been explored here on the blog in the posts As the Shillings Slide and Gatsby Uganda introduces new loan products in response to the sliding shilling. Click on the two links to read more about how the current rough patch of the East African currencies are affecting MYC4 investors, and also how one provider has decided to react to these developments by offering higher returns to investors.

When currency gains/losses are included in the equation, the net return for investors becomes -3.4% on the portfolio disbursed by the current MYC4 partners in the last two years (see graph below). For loans disbursed in 2010, the result will not change much as 89 % of these funds have already been repaid. The 2011 portfolio still has 62 % of the funds outstanding, thus the picture can still change for these loans in the next couple of months depending on the development of the currencies.

Profit/Loss Current Partners, incl. Currency (click to enlarge)

The final graph includes the historical perspective by showing the performance of the entire MYC4 portfolio since the beginning. The performance of the 2008/2009 portfolio has been analysed in detail in the previous portfolio performance posts, particularly in the one focusing on 2010.

Portfolio Performance All Partners (click to enlarge)

Finally, as we also reported last quarter, the active partners have all resolved to improve the MYC4 portfolio quality by reducing the Portfolio at Risk (PAR), i.e. the part of the outstanding portfolio that is more than 30 days late, from 15 % to below 5 % in 2011. At the end of Q1, the PAR was reduced to 11 % while Q2 ended with a PAR of 8 %. In Q3, we have witnessed a small increase in the PAR to 12 %. In the last three months of the year, we will strengthen our focus on reducing the PAR to below 5 %.

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Portfolio Performance 2nd Quarter 2011

It is time for the quarterly update on how loans made through MYC4 are doing in terms of repayments, defaults and currency. Follow these links for our previous overviews on Portfolio Performance 2010 and Portfolio Performance 1st Quarter 2011, and read on for an update on the numbers as of June 30th, 2011.

Loans from our current providers disbursed in the last two years have, on the average, returned more in interest than they have lost in defaults, and this portfolio shows a net return for investors of 3.3 % before currency. These gains have been reduced due to currency losses because of the continued weakening of the African currencies relative to the Euro. While we could report a net positive return of just under 1 % last quarter, the currency effects result in a negative return of -0.9% as of June 30th 2011 for the total portfolio disbursed since Q2 2009 by our current partners.

The performance of our partners has continued the positive trend that we reported earlier this year. At the partner conference in Nairobi in January, the partners all resolved to improve the MYC4 portfolio quality by reducing the Portfolio at Risk (PAR), i.e. the part of the outstanding portfolio that is more than 30 days late, from 15 % to below 5 % in 2011. At the end of Q1, the PAR was reduced to 11 % while Q2 ended with a PAR of 8 %.

 

All Partners

Portfolio Performance All Partners

This graph shows the status on June 30th, 2011 of all loans disbursed since the start of MYC4. It includes all partners, both those that are currently active and those that have been suspended. It shows what has happened to the money disbursed in each quarter – whether it has already been paid back (blue), still being paid back and on time (green), still being paid back but more than 30 days late (yellow), or defaulted (red).

While approximately 40% of the funds disbursed before Q3 2009 defaulted, there is a sustained improving trend for loans disbursed from Q4 2009. Of the funds disbursed in the first half of 2010 about 2% has defaulted so far and almost 94% of the portfolio for this period is either already repaid (90%) or repaying on schedule (4%) while 4% is late. Loans disbursed since mid-2010 are still too young to judge accurately, but more than 96% of the funds disbursed during this period are either repaid (44 %) or repaying on time (52 %).

The graph also illustrates that the volume of disbursements has been steady since Q2 2010 with around EUR 500,000 lent out in each quarter. This result is in line with MYC4’s strategic focus on improving the quality of the portfolio and reduction of risk rather than growing the volume.

 

Current Partners

The next graph shows the same data as the previous chart, but only for currently active partners (Growth Africa, Micro Africa, Fusion, Tujijenge, Gatsby, PRC, Makao Mashinani). Since portfolio performance is largely determined by partner quality, this chart may give a better basis for projecting future performance than the previous chart. Note that since no partners have been suspended since 2009, the 2010-11 numbers on this chart are identical to the previous chart.

Portfolio Performance Current Partners

The defaults within this portfolio are primarily due to two partners – Growth Africa and Gatsby who had some early problems, but are doing better now. In fact, Gatsby has continued to make significant progress on recoveries of defaulted loans with a 31% recovery rate to date (more than EUR 64,500 recovered). The overall performance of the loans disbursed by current partners since March 2009 is as follows: 70% repaid, 26% repaying on time, 2% late, and 2% defaulted.

Seen year-by-year there is a small improvement from loans disbursed in 2008 (15% default, 85% repaid) to loans disbursed in 2009 (7% default, 91% repaid, 2 % on time) and 2010 (1% defaulted so far, 77% repaid, 18 % paying on time, 4 % late). The 2011 portfolio is still young and some deterioration should be expected in the future, but so far 24 % is repaid, 75 % is on time, and 1 % is more than 30 days late.

The next two graphs include the effects of interest and currency to get the net return of the portfolio. The amount of interest earned on loans disbursed in each quarter is shown in green, the amount lost to defaults (less any recoveries) is shown in red, and currency gains or losses is shown in purple.

Ignoring the effects of currency for the moment, investments made through our current providers have gained more on interest than they have lost to defaults every quarter in the last nine quarters (illustrated in the chart below). Adding up the total portfolio disbursed since Q2 2009 by current providers shows a net return for investors of 3.3 % before currency.

Profit/Loss, excluding currency

The full picture once the effects of currency are included is less positive. As reported in the previous update, currency losses on the portfolio have been larger than the interest made by investors on the portfolio disbursed since Q2 2010. Unfortunately, this trend has continued in the second quarter of 2011 (see graph below). The currency effects therefore result in a negative return of -0.9% as at June 30^th 2011 for the total portfolio disbursed since Q2 2009 by our current partners.

Profit/Loss, including currency

Thanks to our partners for what they have achieved in this period as to strengthening the portfolio. We will continue to focus on reducing risk and improving investor return in 2011, yet risk is inherent in our mission of funding un-banked and under-banked small businesses in Africa.

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