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Milango

Milango microfinance is experiencing challenges that have kept the provider from the MYC4 platform for under 4 months. However, our interactions so far indicate that the provider is ready to commence repayments for the MYC4 loans and is eager to return to the MYC4 platform on completion.

We were made aware of the existence of conflicts between management and the Board at Milango. Management and Board disagreed on the direction of the company and the shareholders resorted to settle the dispute in court. As a result, most borrowers are holding back on their repayments and taking advantage of the clear lack of management oversight.

Milango borrower

As a business strategy, Milango relies heavily on group lending methodology; a strategy that is preferred due to its low default rates, compared to the individual lending approach. In group lending borrowers who are financially challenged form a group and pool their resources, borrowed or otherwise, into their individual and/or group-owned business. However, sometimes group lending methodology makes a business vulnerable when it faces an obstacle in normal operations because as disbursements falter so do repayments from borrowers. The model is promoted by group pressure and succinct management practices.

So far, Milango has submitted payments of approximately 2665 Euros. However this amount will not reflect in the investor accounts until all repayments that have fallen due, are cleared.

Our recent interactions with the Provider also reveal that Milango is restructuring in order to build an efficient business. They are reconciling shareholders to hasten the process of normalizing operations. They are also incorporating other shareholder functions into the board governance structure. To tie all these down, an Annual General Meeting (AGM) is scheduled for the 6th of December and a decision on a way forward is expected.

Meanwhile, in their quest to normalize operations, shareholders have injected new capital into the business to ensure the survival and growth of the business in the future. These funds will go towards disbursements. Since disbursement of loans bring about repayments, the provider appreciates that the sooner they resume normal business operations, the faster the repayments will begin to trickle in. We are aware of some loans that will soon fall due. Nonetheless, repayment of these loans is expected as agreed and according to schedule.

To this end, Milango is keen to normalize operations on their end, repay MYC4 loans and continue with our partnership. The restructuring of shareholder functions, the AGM for decision-making on the best way forward and injection of capital into the company by shareholders for normal business operations to resume, are key interventions worth counting on.

Default

In the past week, we have had several loans defaulting on MYC4. The defaults are as a result of individual challenges being faced by our providers. We will discuss in this blog the topic of defaults in general and also the factors contributing to current high defaults with specific providers.

MYC4 loans default on attaining 180 days late. This means that they no longer carry interest, but it does not change the claim which investors have to their funds, which will be repaid in the form of recoveries from the Provider. When loans default, providers are required to pay them in full on MYC4 – and then pursue recoveries from the borrowers: In pursuing recoveries of defaulted loans from the borrowers, the providers are free to enforce their rights to recover against collateral provided.

photo m
It is a requirement that providers take full responsibility for the MYC4 portfolio they are handling; and they have all signed 100% Risk Guarantee Agreements against defaults. To ensure that there will be sufficient liquidity to pay for the loans as they default, MYC4 demands that providers hold 20% of outstanding portfolio in liquid assets (Referred to as the Risk Guarantee Fund): industry standard (outer limit) for default rate in the microfinance industry is 2%. In the ordinary course of business, MYC4 loans default at a rate that providers are easily comfortable to pay the defaulted loans without having to dig into the Risk Guarantee Fund.
If the MFI continues activities they are obligated to collect the outstanding funds and pay pack as recoveries to investors via MYC4. If the MFI defaults as an institution MYC4 taps into the 15-20% Guarantee fund and channels these funds back to investors. Providers will normally only stop repaying in case of institutional collapse, whereby investors will only receive the 15-20% back, which the Provider has deposited under the Risk Guarantee agreement.
Many MFI’s go through difficult periods where they manage to restructure and continue operations. MYC4 usually takes a constructive approach and tries to help the MFIs to survive. However, MYC4 does not allow re-scheduling of loans: Thus whereas an MFI may decide to alter/ reschedule repayment agreements with their borrowers, on MYC4 the loans will continue appearing as late on MYC4, even as the repayments are received.
Here is a breakdown of the issues contributing to defaults among the providers and subsequent steps.
KEEFKeef
KEEF was a very well run and performing MFI till the incident with the fraudulent loan officers. MYC4, as well as KEEF, had not seen signals that fraud was imminent. KEEF did the mistake to stop operations for 2 months. This sent the wrong message to the market. One key motivating factor for MFI borrowers to repay loans is the inherent promise of getting subsequent loans: With KEEF not disbursing fresh loans, many borrowers held onto their repayments. MYC4 has been working with KEEF to start up loan activities for the past several months and it finally looks like we shall have success within a fortnight. KEEF has secured a loan from a local bank that will be a catalyst for return to normalcy at the institution.

MtajiMtaji
Due to the sudden stop by our funds transfer service provider, INTL, of operations in Tanzania, MYC4 had to stop activities in this country. Some of our Providers were counting on continued growth and income from handling MYC4 loans and were thus challenged on their cash position by us stopping disbursements. Mtaji therefore had to look elsewhere for loan capital to expand their operations. MYC4 has made a repayment agreement with them by which they commit to paying back their outstanding portfolio in monthly installments over the next 10-12 months. This impacts the repayment pattern to investors but should ensure that all funds are eventually repaid.

An Update on Providers

KEEFKeef
Following the July update on KEEF that included a statement from KEEF CEO, Daniel Kimani, investors have requested for more details on the situation. This blog post intends to answer these questions share with you progress made so far. KEEF momentarily pended normal operations in the collection of repayment and issue of new loans, in order to investigate fraud charges against some of their loan officers. This resulted to slow or no repayments beyond the temporary 2 months’ halt of activities, as it has taken tremendous effort to get the groups back into a steady, monthly repayment pattern.. The team at KEEF is now focused on reactivating borrowers amidst rumors within the industry that the company may be struggling to remain afloat. While such rumors may slow down repayments, the new structures in place are more effective and yet deliberate in flagging anomalies in loan uptake and repayments. ,
The court case against the loan officer suspected to have initiated the fraud has seen several sessions in court. However, the slow pace at which the case is moving encourages us to

A KEEF Borrower

A KEEF Borrower

begin a normalization process rather than get held up by the pending outcome of the case. A key output from the MYC4 and KEEF recent engagements is the decision for KEEF to access credit that will be partially used to pay off the late installments that have accumulated since June. Upon receipt of this funding, KEEF will be able to drop their PAR 30 Days, to zero, and bounce back to offer new loans on the MYC4 platform. This is just one of the many decision areas implemented by KEEF to get the business back on track. We look forward to support KEEF as they re-start normal operations and counter the distrust in industry.

At MYC4, we appreciate that fraud automatically lends our providers to financial and reputational risks, among other risk types. We therefore work very closely with the Provider to establish quick ways back into main stream business. The return of KEEF on MYC4 platform is as a result of joint efforts, cooperation, and transparency by KEEF, MYC4, and our valued investors. We are looking at a two week lead time before KEEF is back on MYC4 platform. When this happens, we shall bank on your support to fund their new loans. The learning picked from this case will be used to improve our Investor Communications to ensure timeliness and speed of information sharing.
Uganda and Tanzania Providers
In June, MYC4 decided to stop lending activities in Uganda and Tanzania to concentrate on the Kenyan market. The Providers in the two countries were disappointed but appreciated the change in MYC4’s strategy for East Africa. Providers such as, Gatsby, Fanikiwa and Tujijenge, in Tanzania, expressed their wish to pay back their outstanding MYC4 loan balance over a period of few months. , Others, like UMF in Uganda, preferred to pay back to MYC4 as the loans matured. A third category, consisting of Mtaji and Tujijenge Uganda, requested for a structured repayment agreement over the next 12 months. Investors will therefore notice their loan repayments coming in at irregular intervals, yet some at later than scheduled. MYC4’s motivation is the commitment to meet all Providers with a solution within their capabilities as long as the full repayment of the outstanding portfolio is assured.
Premier Kenya Limited a new, experienced MYC4 Provider in Kenya22
This summer MYC4 was proud to extend our first wholesale loan to a Kenyan start-up MFI Premier Kenya Ltd. Start-up is, however, not a very precise description, since the team behind Premier is the same that built Micro Africa, a MYC4 Provider since 2008 that has successfully extended 2,639 MYC4 loans to Kenyan entrepreneurs. Since the start of operations in early 2014, Premier has already grown to 11 branch offices and 67 loan officers. They apply state-of-the-art modern technology in their loan methodology and administration, based on the new and highly efficient MAMBU MIS. Due to their fast growth rate, MYC4 and Premier agreed in September 2014, that Premier will also be offering retail loans on the MYC4 platform, the first of which were uploaded and funded within hours on October 13th. A warm welcome to Premier Kenya! We are confident that you will spot many loan opportunities from them going forward.
Loans on the platform
Many investors may have noticed the empty page whenever they visit the MYC4 platform to choose an African entrepreneur to support. This

regrettable situation is a combination of three things:
1. Our old Providers in Uganda and Tanzania stopped offering loans on the platform this summer when MYC4 decided to concentrate activities

in Kenya in order to penetrate the Kenyan market.
2. The process of identifying and screening new Providers in Kenya has to be thorough and precise. This requires additional resources at MYC4 East Africa
3. As there is a temporary surplus of capital on the Platform, loans fund very fast. Since we recently reduced the time for loans to remain open for bid after funding, the loans disappear a few hours after they have been uploaded
As we sign up new Providers in Kenya and more loans get uploaded, this will increase the time of bidding and availability of loans to bid. Until that happens, we request our investors to be patient.
To those investors who have concerns about the inactive fee which is applied to investors after 12 months without any bidding activity, we suggest that they make one bid on a loan (or activate autobid) as this will give them another 12 months window where the fee will not be applied.
New faces at MYC4 East Africa
Mid-October 2014, two new members of staff joined the MYC4 team in Nairobi – both of them with the mission to grow the activity in Kenya in the future: Dickson Momanyi and Julius Kasanga. Both have solid financial backgrounds and they are currently undergoing training in the MYC4 system before they can start supporting our existing Providers and sign on new ones. It is MYC4’s ambition to obtain nationwide coverage in Kenya and to channel loans to both micro- SME- and rural entrepreneurs within the next year.

Recognizing that MYC4 has not been living up to our investors’ and other stakeholders’ expectations when it comes to communication, MYC4 has decided to hire a Communications Officer at our Nairobi office. Caroline Mbugua will be in charge of investor communication; she is a communications graduate from Daystar University and will be updating the investors on the providers’ performance as well as other news items pertaining MYC4.  MYC4 appreciates the support received from investors thus the need to prioritize communication.

Dickson, Carol and Julius at the MYC4 Nairobi office

Dickson, Caroline and Julius at the MYC4 Nairobi office

September Update.

Below is an update of providers in the month of September.

Kenya Providers
Kenya providers paid a total of 67,271 Euros in the month of September, below is a break-down of which provider paid what and the general overview of their performance;

 

 

KEEFMilangoSisdoJubilant

 

 

 

 

 

 

 

KEEF –  is MYC4’s biggest provider with a significant share of our outstanding portfolio. We will update more specifically on the situation in a separate blog. In a nutshell, at the moment they are experiencing problems due to fraud by staff, and subsequent immediate action taken to address the fraud: The suspension of activity for a certain period to facilitate investigations meant that some repayments were skipped. We however remain optimistic that the situation will turn around – group meetings have now resumed.

Milango – This month saw Milango pay approximately 5,000 Euros. MYC4 suspended further uploads from them until they increase capitalization of the institution, and address issues. They are having disputes among key shareholders that are now in court of law. The OLB still stands at € 166,191.65 and the par 30 is at 79.17%. They have two grouped amounts totaling to about 15,000 Euros for which we are expecting payment.

SISDO -  is in the process of reconciling their records with MYC4s ; but in the meantime they have grouped the pay-off amount to clear their portfolio. This is expected to be received in October. SISDO management team has changed from the time of our initial engagement, and we hope to have positive discussions on re- engaging with MYC4.

YEHU – repaid a total of 60,494 Euros in the month of September, and has continued to upload loans every week. YEHU has potential to grow with MYC4 and MYC4 is therefore encouraging her to upload more on the platform. The current OLB is € 327,115.34 and has no loans on Par 30 and above.

Jubilant – so far has paid a total of 1,771 Euros and continues to pay on weekly basis. The pilot review for Jubilant has been done and they will have their limit increased. Their current OLB is €€ 80,608.66 and they currently have no loans on Par 30 and above.

Premier Kenya – MYC4 East Africa already had the wholesale loan disbursed to Premier Kenya for on-lending to their borrowers. We are pleased to have Premier Kenya on board now as a provider for the retail lending. Premier Kenya is growing well as it has good governance, good structures, and adequate capitalization.

Tanzania Providers

Tanzania providers repaid as depicted below.

 

 

MtajifanikiwaTanzania

 

 

 

 

 

 

 

 

 

Mtaji – repaid a total of 8,139.91 Euros in the month of September. The current OLB is € 80,958.26 and the par 30 still remains at 100%. .

Fanikiwa – repaid their entire portfolio to MYC4 in this month and MYC4 wishes them all the best in their endeavors.

Tujijenge Tanzania – repaid a total of 42,537.69 Euros in the month and they are in the process of reconciling their accounts so that they pay-off the entire amount by the end of October. The OLB currently stands € 49,071.90 with a par 30 of 53%.

Uganda Providers

Uganda providers repaid a total of 23,350.58 Euros in the month, below is a breakdown;

 

 

TUGumf

 

 

 

 

 

 

 

 

 

Tujijenge Uganda – repaid a total of 8,104.41 in the month and is expected to continue paying every week until the portfolio is fully repaid. The current OLB currently stands at € € 65,297.37 and par 30 is 70%

Uganda Microcredit Foundation - repaid a total of 15,246.17 Euros in the month. Their current OLB is € 78,568.39 and they have no loans on par 30 and above. A grouped amount of around 25,000 Euros was grouped and is expected in the month of October.

 

 

 

premierPremier Kenya Limited is not new to MYC4 , as you would recall, they were the borrowers of the whole sale loan that was disbursed a few months ago. Premier Kenya joins MYC4 as providers of small business and group loans.
Premier Kenya is microfinance that specializes in credit only and was incorporated in 2014 January. Run by experience microfinance 34professionals, Most of Premier Kenya’s staff was working with MYC4 former provider Micro Africa and therefore have a vast knowledge on how the MYC4 system works. Premier Kenya was founded by Tim Carson and James Mugambi who are the former sole directors of Micro Africa Ltd. During the first months of operation, Premier Kenya recruited 2500 active clients in its first 5 months of business and has a portfolio of KES 240million. Average loan size at present is approximately KES 100,000. (approximately 900 Euros)

Products
Premier focuses on several products, which include-:

  • Group Loans – Product is meant for customers in groups of 3-20. Individuals form the groups and co-guarantee each other when applying/taking loans.
  • SME Loans – This product is the Premier Kenya business loan. This is given to both secured and unsecured business loans. The unsecured SME loans are offered to small and medium enterprises with no formal securities.
  • Housing Improvement Loans – This is alos given to those with or without securities and has enabled many households to improve their living standards by improving their housing structure etc.

Loan terms vary from 6 -36 months depending on usage of the funds by the client and also the amount required by the client.. These are some of the products that they will upload on MYC4.

August Provider Update

August has been a rather slow month in terms of repayments and below is an update on the countries. September however looks more promising…
Kenyan Providers

KEEFSisdoMilangoJubilant

 

 

 

 

 

 

KEEF – The provider started the month by repaying  KES.610,365.21 (5,186 Euros)  and later in the month grouped two amounts totaling to KES.735,540 (approximately 6,296 Euros).   This is however yet to be received by MYC4 and we are hopeful it will be receive in the month of September. The PAR 30 has remained at 100% and currently the portfolio stands at € 835,036.36. MYC4 is in dialogue with KEEF on a transparent way to make sure that repayments received are repaid to investors.

YEHU – Continues to upload every week although uploads have significantly dropped but they have promised to upload more in September , the repayments are timely and the Par 30 is at 0%. Their current OLB is € 319,972.59 and has potential to grow.

SISDO – The provider is working on a way to pay off the portfolio and are in the process of reconciling, MYC4 is looking at possibilities of having SISDO come back on the platform, more information on this shall be communicated once the a concrete decision has been made.
Milango – The Par 30 declined this month and is currently at 14% , MYC4 is working with Milango too make sure that repayments are entered once received and that transfers are done in a timely manner. Milango’s AGM is around the corner and they will be looking at ways of sourcing for funds from other lenders so as to grow in portfolio enough to start uploading on MYC4. MYC4 is currently 30% of Milango which is the limit.
Jubilant- Our newest provider started repaying on MYC4 loans late in August, they continue to upload loans every week. There current OLB is € 42,107.60 and their Par 30 is at 0%. A pilot review will be performed on the provider later in the month of September as the pilot period comes to an end.

Uganda Providers

GatsbyTUGumf

 

 

 

 

 

 

 

 

Gatsby – The provider fully paid off the portfolio in the month and MYC4 wishes Gatsby well in all their endeavors.

Tujijenge Uganda limited – The Par 30 deteriorated towards the end of August and is currently standing at 20%, after audience with MYC4, Tujijenge uganda agreed to be transferring an amount of approximately € 1300 every week for the reminder of the OLB which stands at € 73,543.07. This week MYC4 received  € 3,953.41 from Tujijenge Uganda which was supposed to have been confirmed last week but was not.

Uganda Micro-credit Foundation – has been continuing repaying the MYC4 portfolio and in the month of August repaid a total of € 24,525.52 and they are expected to continue with that trend till they finish repaying the entire portfolio. Their current OLB is € 102,744.57 and Par 30 stands at 0%.

Tanzania Providers

MtajifanikiwaTanzania

 

 

 

 

 

 

 

Mtaji – After a meeting with MYC4, Mtaji has committed to paying approximately €6,977 every month in the process of repaying the portfolio. This monthly installment will be increased once Mtaji gets funding from other lenders; they are currently looking for funding sources to replace the gap MYC4 left.  This week a total of approximately € 6,900 is expected to be received from Mtaji. The institutions current OLB is at € 80,958.26 and Par 30 is at 100%. This is expected to be a start to consistent  repaying by the institution, MYC4 is also closely monitoring the default situation to make sure that no loans are defaulted.

Fanikiwa – The institution repaid a total of € 12,503.54 in the month of August and continues repaying every 2 weeks. The OLB currently stands at € 28,824.05 and the Par 30 stands at 31% – MYC4 is working with Fanikiwa to ensure they Par 30 drops to acceptable levels even as they continue making repayments.

Tujijenge Tanzania – The institution repaid a total of € 46,022.70 in the month of August and they are expected to pay a similar amount in the month of September. The OLB stands at € 98,588.43 with a Par 30 of 49% , Tujijenge is working on reducing the Par 30 even as they continue repaying the reminder of the OLB with MYC4.

 

 

 

July Provider Update

July is the month that saw the first ever wholesale loan on MYC4 fund which is a great milestone. Jubilant Kenya also joined  the list of Kenya MYC4 providers in the month. Below is an update on how the other providers are fairing…

Kenya Providers

 

KEEF

SisdoMilango

 

 

 

 

 

 

 

 

 

KEEF – As you are aware KEEF experienced Fraud in the recent past hence the deterioration of their par. In the last 2 weeks of July, KEEF has been working on ways to reduced their PAR 30 and have had repayments of 5,186 Euros. They are expected to continue with repayments every week as was before and this week MYC4 is expecting approximately 3900 Euros from them.

SISDO – has continued repaying the portfolio and there currently have an OLB of  € 34,646.44  with a par 30 of 2.87% .

Milango – reached its ceiling as per our policy. After the evaluation it was noted that their total PAR30 both internal and on the platform for the organization was high and therefore they were given some time to rectify the situation which they are progressing well. In addition, MYC4 is almost 30% of Milango’s total OLB, which is the ceiling. Milango will be having an AGM this month where the shareholders will discuss and approve more funding for Milango to give them more leverage to borrow.

Jubilant Kenya – The youngest kid on the block is doing well, and currently has an OLB of € 16,491.00 and a Par 30 of 0%. They are expected to upload loan equivalent to € 12,500 a month.

Tanzania Providers

 

TanzaniafanikiwaMtaji

 

 

 

 

 

 

 

Tujijenge Tanzania – The month of July saw Tujijenge pay a total some of € 42,639. They have agreed to be transferring repayments every month, this will enable them reduce the portfolio and also regulate Par 30. Tujijenges OLB stands at € 139,701.32 with a Par 30 of 49%.

Fanikiwa- has been gradually repaying the portfolio every bi weekly, the Par 30 currently stands at 21% with an OLB of € 36,864.38. This week MYC4 is expecting repayments amounting to € 6,000.

Mtaji – July saw Mtaji transfer repayments of € 4,334.50, it is expected that they will continue repaying the portfolio in the months to come. Their OLB currently stands at€ 80,958.26 and Par 30 is 100%. Mtaji is working hard with the help of MYC4 staff to see the Par 30 is reduced and that repayment of the portfolio is back on track.

Uganda Providers

 

umfTUGGatsby

 

 

 

 

 

 

 

 

 

July saw MYC4 Officially pull out of Uganda a few months after pulling out of Tanzania while strategizing to remain in Kenya. The uganda providers have continued repaying their portfolio as expected.  Uganda Micro credit Foundation and Tujijenge Uganda transfer their repayments in good time and their current OLBs are € 138,186.40 and € 69,823.75 respectively and the Par 30 for both is currently at 0%

Gatsby – is in the process of paying off the portfolio , so far they have grouped all their repayments and have transferred half of the amount.

 

 

 

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