Investing in 13 emerging and frontier markets

 

Socially responsible lender committed to financial inclusion 

The average disbursement of the bulk of the loans (six to twelve-month loans) is USD 289. The Company prevents its clients from over-borrowing by evaluating the loan amount based on each individual borrower’s capacity to repay. The Company regularly benchmarks loan interest rates against equivalent providers and currently charges in a range from 23% to 50% per annum, depending on the country, product and loan term. The interest rates offered are generally similar to those offered by other lending institutions for the same duration and loan sizes.

The Company’s lending methodology is without joint-liability. Borrowers receive individual loans. The Company incorporates the benefits of a group, while preserving each group member’s personal aspirations, by making the group co-responsible only for non financial obligations, such as proposing and screening of potential new clients. In addition, group members help foster financial discipline by encouraging each other to repay loans on a timely basis through social cohesion. Clients who comply with the terms of their loans and involvement within the group are never penalised for the poor performance of defaulting clients.

The Company provides collateral free loans and offers a moratorium on loan repayments in emergency situations (e.g. lockdowns, natural disasters, death of family member etc.). Where it is customary and allowed under the current licence, the Company takes a security deposit.

The Company only offers loans to start or grow businesses, rather than for general consumption purposes. To ensure compliance with this policy, loan officers visit a client’s business as part of the initial loan application process, and review the use of prior loans when considering applications for future loans.

Only when a loan is repaid, clients will be eligible to apply for a new, often larger, loan to further develop their businesses, based on an assessment of client needs and business potential. This ensures that clients do not become over-leveraged, and therefore unable to repay an existing loan.

There is a maximum increment and loan limit for each loan cycle, including follow-on loans, without the possibility of increasing the amount of existing loans before they are repaid in full. Follow-on loans are tailored to local conditions and take into account local inflation rates, as well as the earning capacity of the client’s business. These follow-on loans are, on average, 20% to 50% larger than the previous loan.

Local staff are well trained and work alongside highly-skilled senior managers. Almost all of the field staff have been trained in-house and are eligible for promotion to more senior positions over time.

Experienced management team executes proprietary ASA Model in 13 high-growth markets

The Group’s risk profile is diversified across 13 high-growth markets in Asia and Africa. The COVID-19 pandemic occurred in every market where the Company operates simultaneously. The Group does, however, see that the impact on its clients was very different from country to country and the Company still benefited from this diversification.

The Group’s experienced management makes sure the Company executes its proprietary microfinance ‘ASA Model’ in a disciplined way across all markets. The model is based on the following principles:

  • All entities have the same policy and procedures for client mobilisation, selection, loan disbursement and collection.
  • The risk management features embedded within the ASA Model, such as ‘high-touch’ client interaction, income-generating loans only and ongoing assessment of client needs and satisfaction, have a positive impact on the Group’s returns and risk profile.
  • The AMBS, which has been developed in-house, supports the scalability and the introduction to digital financial services if and when its clients are ready.

**PAR>30 is the percentage of gross on-book OLP that have one or more instalment repayments of principal past due for more than 30 days, but less than 365 days, divided by total outstanding on-book gross loan portfolio. Credit exposure of the India off-book BC portfolio is capped at 5% of the outstanding portfolio amount. The off-book DA portfolio has no credit exposure.

~31%

OF BRANCHES < 3 YRS OLD

~338m

PROSPECTS IN EXISTING COUNTRIES

-0.2%

RETURN ON ASSETS (‘ROA’)*

13.1%

PAR>30 DPD**

Nil

DIVIDEND***

*Return on assets (ROA) is calculated by dividing the net profit after tax by the average of total asset. ROA is displayed as a percentage.

***In light of the Company’s financial results, the Board has decided not to pay a dividend for 2020.

Superior credit methodology 

Managing credit risk is an integral part of the Company’s operating methodology. Loan officers are in regular contact with clients through weekly, bi-weekly or monthly group meetings to collect loan instalments or deposits. The Company’s ‘high-touch’ model fosters close client relationships, allowing branch employees to quickly identify any repayment or other issues experienced by clients and target the disbursement of higher value follow-on loans to clients who have successfully developed and expanded their businesses.

14 days

CLIENT SELECTION AND ASSESSMENT PROCESS

77.6%

CLIENT RETENTION RATE

"We know our clients very well."

The client selection and assessment process is thorough, based on physical visits to the client’s house, business, neighbours, and family members and takes 14 days for a first-cycle loan. These mechanisms help in preventing ‘ghost’ or fake loans and ensure that clients are not over-leveraged. Experience over the years has taught that in collateral-free lending situations, one of the key factors influencing timely repayment is the relationship between the clients and the institution.

Licences

Twelve of the Group’s thirteen microfinance institutions have a licence, except Pakistan, which is close to obtaining a microfinance bank licence. The Group aims to become fully regulated microfinance institutions in the countries where it operates, with the capacity to mobilise deposits, initially from its clients with the wider public to be included over time. Currently, the Company has deposit-taking licences in Ghana, Nigeria, Rwanda, Myanmar and Sri Lanka, which means it offers clients loans and savings products in these countries. Savings help the Company to increasingly fund its operations.

5

DEPOSIT-TAKING LICENCES