TIDMASAI
RNS Number : 9832B
ASA International Group PLC
14 October 2020
ASA International Group plc reports H1 2020 results
Amsterdam, 14 October 2020 - ASA International, ("ASA
International", the "Company" or the "Group"), one of the world's
largest international microfinance institutions, today announces
its half year results for the six-month period from 1 January to 30
June 2020 and provides an update on the impact of COVID-19 on its
business.
Key performance indicators
(UNAUDITED) H1 2020 FY 2019 H1 2019 YoY YTD YoY % Change
(Amounts In USD (constant
millions) currency)
Number of clients
(m) 2.3 2.5 2.3 1% -8%
Number of branches 1,956 1,895 1,812 8% 3%
Net loss/profit -1.5 34.5 16.1 -109% -105%
Outstanding Loan
Portfolio ("OLP")
(1) 388.6 467.4 419.5 -7% -17% -1%
PAR > 30 days (2) 3.6% 1.5% 1.0%
(1) Includes off-book Business Correspondence loans and Direct
Assignment loans and excludes interest receivable and the unamortized
loan processing fee
(2) PAR>30 is the percentage of OLP that has one or more instalment
of repayment of principal past due for more than 30 days divided
by the total outstanding gross loan portfolio.
H1 2020 Highlights
-- The Company's operational and financial performance was
substantially affected by the unexpected, sudden emergence of
COVID-19 and the associated disruption across all our operating
countries with a net loss of USD 1.5m in H1 2020 compared to a net
profit of USD 16.1m in H1 2019.
-- The reduction in profitability was primarily caused by (i) a
modification loss of USD 13.3m on interest income due to the
effective extension of the term of the Company's loans to clients
during the lockdown period and the moratorium on payments granted
to selective clients immediately after the end of the lockdowns,
which meant that part of the recognition and payment of interest
income scheduled for H1 moved to H2, and (ii) a USD 8.3m provision
for expected credit losses in H1 2020 compared to USD 1.2m in H1
2019.
-- Immediate health impact on our staff and clients remained
relatively low with no deaths amongst our approximately 12.5K
employees and 15 deaths amongst our 2.3 million clients due to
COVID-19.
-- Following the end of the lockdowns in our operating
countries, the Group granted many clients a temporary moratorium of
the payment of one or more loan instalments (which, in effect
extends the loan for the period of moratorium), which peaked at USD
16.9m in June with 485K clients benefiting from the moratorium.
-- PAR>30 increased to 3.6% (excluding loan instalments under moratorium) by the end of June.
-- As of 30 June 2020, the Group had approximately USD 110m of
unrestricted cash and cash equivalents, and the funding pipeline
exceeded more than USD 200m.
September 2020 Trading Update
-- Collection efficiency continues to increase in almost all
operating countries with 8 out of 13 countries achieving
collections in the mid to high nineties.
-- Disbursements increased as well, which resulted in a gradual
growth of the loan portfolio during the second half of 2020, from a
gross OLP amount of USD 399.7m by 30 June 2020 to USD 422.3m as of
30 September 2020.
-- Since the start of the COVID-19 crisis, the Group granted
many clients a temporary moratorium of loan repayments for an
aggregate amount of USD 45.9m as of 30 September 2020, which is
concentrated in four countries: India (32% of the total), the
Philippines (34%), Kenya (10%) and Uganda (10%).
-- As of 30 September, PAR>30 increased to 6.4%, excluding loan instalments under moratorium.
-- The Group's liquidity remained strong throughout the COVID-19
crisis with unrestricted cash and cash equivalents increasing from
USD 90m as of 30 March 2020 to approximately USD 105m as of 30
September 2020.
-- As of 30 September 2020, the Group has a pipeline of
wholesale loans exceeding 185m from a large variety of local and
international lenders.
-- In anticipation of potential covenant breaches with PAR>30
possibly exceeding 5% throughout the remainder of 2020, the Group
secured waivers, no action or comfort letters from almost all its
major lenders.
Outlook
The Company is positive about the expected operational and
financial performance of the Group for the second half of the year.
We have seen ongoing improvement of the business environment for
our clients, which resulted in increased demand for loans,
increased collection rates, reduced demand for moratoriums, and
lower loan loss provisions. Unless the disruption to our clients'
businesses caused by COVID-19 increases, it is expected that the
Company's operational and financial performance will gradually
normalize to more customary levels in terms of profitability and
return on assets/equity during the second half of the year. Subject
to COVID-19 related developments and any associated business
disruptions, net profits are expected to be approximately USD 10m
for the full year 2020.
Dirk Brouwer, Chief Executive Officer of ASA International,
commented:
"Considering the challenging operating circumstances in the
first half of 2020, we are pleased with the performance of the
Group. From the start of the crisis we were determined to stay
close to our clients and support them throughout these difficult
times which prevented many of our clients from doing their regular
daily business. Early on we decided to grant a payment holiday to
our clients for the lockdown period in each of our operating
countries, which in effect extended the term of each outstanding
loan. We also granted selected clients a temporary extension on the
payment of loan instalments for a period after the end of the
nationwide lockdowns.
Our clients have shown strong resilience in rebuilding their
businesses and adjust to the new operating circumstances. This
ability to recover from adverse circumstances together with our
support in providing more time for clients to settle their loans,
have enabled our clients to increase their earnings capacity and
gradually repay in full the loans granted by the Group.
We are grateful for the solid and consistent financial support
we are receiving from almost all our lenders. Once the business
environment has further stabilized, we will use these funds for
accelerating the growth of our branch network, client base and loan
portfolio in existing and new countries. At the start of 2020, we
planned to further evaluate the entry of several new markets and
due to COVID-19, we postponed these evaluations. Looking towards
2021, I expect we should be able to pick up these plans again and
continue to explore opportunities in countries in Asia and
Africa."
CHIEF EXECUTIVE OFFICER'S REVIEW
Business Review H1 2020
The first half year of 2020 probably has been the most
challenging six months in the Company's history with lockdowns
instituted in all our operating countries around the world in less
than two weeks.
As result of the disruption to our clients' businesses, we
focused more on collection of outstanding installments than
disbursement of fresh loans during the first 6-8 weeks after the
end of the lockdowns in order to re-assess the earning capacity of
each of our clients. This resulted in a gradual reduction of the
outstanding loan portfolio from USD 467.4 million by year-end 2019
to USD 388.6 million as of 30 June 2020. As of July 2020, the Group
has started to increase its new loan disbursements across all
markets, which lead to renewed growth of the Group's loan
portfolio.
We have seen positive developments on the regulatory front with
(i) ASA Pakistan securing an in-principle approval from the Central
Bank to transform into a microfinance bank, (ii) ASA Myanmar
receiving approval for taking voluntary savings from clients and
(iii) completing the merger of the activities of ASIEA NGO into
ASHA Microfinance Bank, our nationwide microfinance bank in Nigeria
on 1 April 2020.
Despite the COVID-19 crisis, staff satisfaction remained high
with hardly any staff drop-outs during the lockdown period. Most of
our approximately 12,500 staff started working at ASA International
immediately after university graduation and with many pursuing
careers within the Company.
The competitive environment did not change much during the first
half of the year as result of the crisis. Competition remains
highest in India and the Philippines where our strongest
competitors are three microfinance institutions which also follow
the ASA model of microfinance as taught to them by ASA NGO
Bangladesh more than 15 years ago. In most other markets, we face
less competition of traditional microfinance institutions. As of
now, we have experienced limited competition of digital lenders in
any of our markets, as the loans and services offered are not
particularly targeted to our client base as of yet. Digital lenders
are often perceived by our clients as lenders of last resort who
employ aggressive debt collectors, charge high interest rates and
have little or no connection to the local communities. With our
proprietary, real-time banking system, AMBS, we are well-positioned
to offer our clients digital financial services, which we expect to
be gradually introduced in our operating countries.
During H1 2020, we maintained a minimum foreign currency
mismatch, and benefited from the shorter duration of our assets
vis-à-vis our liabilities, which enabled us to draw some liquidity
from the field at the height of the COVID-19 crisis.
Compared to 2018 and 2019, our operating currencies remained
relatively stable vis-à-vis the US dollar during H1 2020, with the
exception of Pakistan, India, Nigeria and Zambia which have seen
significant depreciation of their currencies.
Modification loss
The modification loss of USD 13.3m on interest income and
interest receivable relates to the effective extension of the term
of the Company's loans to clients during lockdowns and individual
moratoria granted after the lockdowns. We have estimated the
modification loss through performing sample testing of borrowers
across each country and extrapolating the difference across the
remainder of the population. As such there is a degree of
estimation uncertainty in the recording of income as the sample
selected may not be indicative of the untested population. We have
further explained the modification loss in note 2.3.2 of the
interim condensed financial statements.
ECL provision
During H1 2020 the Company has increased its provision for
expected credit losses ("ECL") from USD 4.3m to USD 11.1m for the
combined OLP including the off-book BC portfolio. The related ECL
expense amounts to USD 8.3m in H1 2020 compared to USD 1.2m in H1
2019. This increase mainly relates to an additional management
overlay as part of the ECL policy under IFRS 9 due to the expected
impact on our clients of recent government and regulatory actions
related to COVID-19, like lockdowns and moratoria. Management has
applied its previous experiences from natural calamities and other
disruptive events like the Andhra Pradesh crisis and demonetisation
in India, as well as the current developments in each of its
operating countries, to determine the assumptions for the ECL
calculation. Because the removal or relaxation of restrictions in
certain countries occurred very recently, and in some countries
regional restrictions continue, the impact on borrowers and the
selection of the assumptions for the ECL provision include
significant uncertainty. As such, the resulting outcome of losses
on the loan portfolio may be materially different. Further details
on the ECL calculation are provided in note 2.3.1 of the interim
condensed financial statements.
Dividend
Due to the COVID-19 impact on the Group's financial and
operating performance during H1 2020 and the resulting uncertainty,
the Board ultimately decided not to declare a dividend on earnings
for the year 2019. The Company plans to reinstate the standard
dividend policy of 30% of Group earnings for the year 2020.
Webcast and Conference Call
Management will be hosting an audio webcast and conference call,
with Q&A today at 14:00 (BST).
To access the audio webcast, please go to
www.asa-international.com or use the following link:
https://brrmedia.news/qdw47
In order to ask questions, analysts and investors are invited to
submit questions via the webcast or dial into the conference call.
Please use the dial-in details below, including the confirmation
code:
Location Phone Number
United Kingdom +44 (0)330 336 9411
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Netherlands +31 (0)20 703 8261
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South Africa +27 11 844 6118
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India +91 (0)80 7127 9031
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Singapore +65 6320 9075
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United States +1 323-794-2094
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Confirmation code: 1817583
2020 Interim Financial Report
Today, we published our Interim Financial Report for the 6
months period ended 30 June 2020 on: www.asa-international.com
Enquiries:
ASA International Group plc +31 6 2030 0139
Investor Relations vschyns@asa-international.com
Véronique Schyns
GROUP FINANCIAL PERFORMANCE
(UNAUDITED) H1 2020 FY 2019 H1 2019 YoY YTD YoY
% Change
(Amounts in USD thousands) (constant
currency)
Net loss/profit -1,487 34,497 16,133 -109% -105%
Cost/income ratio 108% 60% 61%
Return on average assets
(TTM) -0.5% 6.7% 6.7%
Return on average equity
(TTM) -2.8% 34.5% 36.0%
Earnings growth (TTM) -109% 6% -2%
OLP (1) 388,649 467,429 419,493 -7% -17% -1%
Total assets 530,984 559,958 517,884 3% -5%
Client deposits (2) 74,488 78,080 69,395 7% -5%
Interest-bearing debt
(2) 301,094 317,810 298,093 1% -5%
Share capital and reserves 104,131 111,169 92,943 12% -6%
Number of clients 2,331,563 2,534,015 2,313,305 1% -8%
Number of branches 1,956 1,895 1,812 8% 3%
Average outstanding loan
per client (USD) 167 184 181 -8% -10% -2%
PAR > 30 days 3.6% 1.5% 1.0%
Client deposits as % of
loan portfolio 19% 17% 17%
(1) Includes off-book Business Correspondence loans and Direct
Assignment loans and excludes interest receivable and unamortized
loan processing fees
(2) Excludes interest payable
Regional performance
South Asia
(UNAUDITED) H1 2020 FY 2019 H1 2019 YoY YTD YoY
% Change
(Amounts in USD thousands) (constant
currency)
Net profit 594 14,098 7,492 -92% -87%
Cost/income ratio 99% 50% 49%
Return on average assets
(TTM) 0.5% 6.1% 6.5%
Return on average equity
(TTM) 2.0% 26.6% 33.2%
Earnings growth (TTM) -92% -5% -3%
OLP (1) 226,401 254,361 234,869 -4% -11% 7%
Total assets 229,747 252,034 238,720 -4% -9%
Client deposits (2) 2,363 2,082 1,198 97% 13%
Interest-bearing debt
(2) 159,136 177,257 174,728 -9% -10%
Share capital and reserves 57,777 58,703 48,972 18% -2%
Number of clients 1,191,888 1,234,638 1,135,004 5% -3%
Number of branches 766 751 699 10% 2%
Average outstanding loan
per client (USD) 196 208 209 -6% -5% -14%
PAR > 30 days 4.7% 2.0% 1.1%
Client deposits as % of
loan portfolio 1% 1% 1%
(1) Includes off-book Business Correspondence loans and Direct
Assignment loans and excludes interest receivable and unamortized
loan processing fees
(2) Excludes interest payable
Due to the impact of COVID-19 and associated lockdowns in each
country, operations were largely disrupted in the South Asia
region. A shrinking OLP along with increased provisions for
expected losses as well as currency depreciation in Pakistan and
India (PKR down 3% and INR down 9% YoY against USD) led to South
Asia's USD net profits going down 92% YoY (87% YoY down on a
constant currency basis).
-- The quality of the loan portfolio declined with PAR>30 increasing from 1.1% to 4.7%
-- Cost/Income ratio increased by 5,000 bps to 99% due to
reduced income caused by the COVI-19 disruptions compared to an
increased cost base YoY
-- Return on average assets was down 600 bps to 0.5% due to
lower profits caused by a declining OLP, and increase in expected
credit loss expenses
-- Return on average equity down by 3,100 bps to 2.0%
India
ASAI India grew its operations over the twelve-month period:
-- Number of clients up from 639 k to 727 k (up 14 % YoY)
-- Number of branches up from 352 to 402 (up 14% YoY)
-- OLP up from INR 8.3bn (USD 120m) to INR 8.5bn (USD 113m) (up 3% YoY in INR)
-- Off-book portfolio grew from INR 3.1bn (USD 45.5m) to INR
4.0bn (USD 53.8m) (up 30% in INR). This now includes INR 517.2m
(USD 6.9m) of the portfolio transferred under a direct assignment
(DA) agreement to State Bank of India
-- OLP/Client down from INR 13K to INR 12K (down 9% YoY in INR)
-- PAR>30 increased from 0.7% to 3.0%
-- USD 5.8m in moratoriums granted to 182k clients in June 2020
-- ASAI India continues to benefit from its strong business
correspondent relationship with IDFC First Bank and the ongoing
support of its many international and local lenders, including
State Bank of India raising over USD 20m of new funding in H1
2020
Pakistan
ASA Pakistan saw its operations shrink due to COVID-19 impact
and the uncertainty caused by the delay in securing the
microfinance bank license during the second half of 2019:
-- Number of clients declined from 429 k to 4 0 9k (down 5% YoY)
-- Number of branches up from 276 to 293 (up 6 % YoY)
-- OLP down from PKR 9.8bn (USD 60.2m) to PKR 8.7bn (USD 51.5m)
(down 12 % in PKR), OLP/Client down from PKR 22 .7 K (USD 141) to
PKR 22 .2 K (USD 1 32 ) ( down 2% YoY in PKR) due to lower
disbursements to clients during the period of uncertainty created
by COVID-19
-- PAR>30 increased from 0.6% to 7.6%
-- No moratoriums granted to clients up until the end of September 2020
Sri Lanka
Lak Jaya continued to feel the negative impact of the political
activism around the government's debt relief program and the Easter
Sunday bombings, and additionally the disruption due to
COVID-19:
-- Number of clients down from 67 k to 56 k ( do wn 17% YoY)
-- Number of branches maintained at 71
-- OLP down from LKR 1.6bn (USD 9.1m) to LKR 1.5bn (USD 7.9m) (down 9% YoY in LKR)
-- OLP/Client up from LKR 22.6K (USD 145) to LKR 29.1K (USD 156) (up 29% Y oY in LKR)
-- PAR>30 increased from 10.0% to 10.2%
-- Up to USD 1.1m in moratoriums granted to 37k clients between March and June 2020
-- Management implemented a strategy to focus on cost control
and improving the portfolio quality by consolidating some branches
and making a larger write-off of its bad loans
South East Asia
(UNAUDITED) H1 2020 FY 2019 H1 2019 YoY YTD YoY
% Change
(Amounts in USD thousands) (constant
currency)
Net loss/profit -3,969 5,349 2,279 -274% -284%
Cost/income ratio 464% 74% 78%
Return on average assets
(TTM) -6.7% 4.8% 4.5%
Return on average equity
(TTM) -38.3% 29.1% 27.7%
Earnings growth (TTM) -274% 38% 37%
OLP (1) 68,847 84,205 72,986 -6% -18% -13%
Total assets 111,870 125,750 111,074 1% -11%
Client deposits (2) 23,726 22,995 20,496 16% 3%
Interest-bearing debt (2) 59,140 72,419 64,558 -8% -18%
Share capital and reserves 19,964 21,453 15,986 25% -7%
Number of clients 448,707 491,813 468,424 -4% -9%
Number of branches 416 405 395 5% 3%
Average outstanding loan
per client (USD) 173 173 157 10% 0% -9%
PAR > 30 days 1.1% 1.0% 0.9%
Client deposits as % of
loan portfolio 34% 27% 28%
(1) Excludes interest receivable and the unamortized loan
processing fee
(2) Excludes interest payable
In South East Asia, client and OLP growth declined in H1 2020
compared to year end 2019 due in large part to disruptions brought
on by COVID-19 in especially the Philippines. The extended 10-week
lockdown period and the ongoing disruption afterwards in the
Philippines led to a reduction in OLP and higher expected credit
losses resulting in lower earnings, while Myanmar continued to
improve its profitability despite the subsequent decline in clients
and OLP as result of COVID-19, supported by a stronger currency (9%
up on USD from H1 2019 to H1 2020).
The Philippines
PPFC operations contracted due to impact from COVID-19:
-- Number of clients down from 324k to 309k (down 5% YoY)
-- Number of branches up from 307 to 323 (up 5% YoY)
-- OLP down from PHP 2.4bn (USD 46.2m) to PHP 2.0bn (USD 39.5m) (down 16% YoY in PHP)
-- OLP/Client up from PHP 7K (USD 143) to PHP 8 K (USD 1 54 ) (up 5% YoY in PHP)
-- PAR>30 increased from 1.1% to 2.6%
-- Up to USD 7.0m in moratoriums granted to 145k clients between March and June 2020
Myanmar
ASA Myanmar saw a decline in clients but marginal growth of its
OLP:
-- Number of clients down from 144k to 1 40 k (down 3% YoY)
-- Number of branches up from 88 to 93 (up 6 % YoY)
-- OLP down from to MMK 40.7bn (USD 26.8m) to MMK 40.5bn (USD 29.3m) (down 0.5% YoY in MMK)
-- OLP/Client up from MMK 295K (USD 187) to MMK 297K (USD 215) (up 1% YoY in MMK)
-- PAR>30 decreased from 0.5% to 0.6%
-- Up to USD 1.1m in moratoriums granted to 35k clients between March and June 2020
West Africa
(UNAUDITED) H1 2020 FY 2019 H1 2019 YoY YTD YoY
% Change
(Amounts in USD thousands) (constant
currency)
Net profit 5,297 15,935 7,029 -25% -15%
Cost/income ratio 55% 45% 47%
Return on average assets
(TTM) 11.2% 17.3% 19.4%
Return on average equity
(TTM) 28.5% 45.7% 51.8%
Earnings growth (TTM) -25% -6% -3%
OLP (1) 56,647 77,200 69,754 -19% -27% -10%
Total assets 93,962 95,240 84,239 12% -1%
Client deposits (2) 34,809 38,195 35,679 -2% -9%
Interest-bearing debt (2) 11,212 11,919 5,368 109% -6%
Share capital and reserves 37,003 37,452 34,771 6% -1%
Number of clients 389,453 459,022 416,024 -6% -15%
Number of branches 431 423 420 3% 2%
Average outstanding loan
per client (USD) 155 170 169 -8% -9% -5%
PAR > 30 days 4.0% 1.5% 1.2%
Client deposits as % of
loan portfolio 61% 49% 51%
(1) Includes off-book Business Correspondence loans and Direct
Assignment loans and excludes interest receivable and the unamortized
loan processing fee
(2) Excludes interest payable
West Africa's operational and financial performance saw a
decline due to the impact of COVID-19. Ghana saw a quick recovery
of its operations following the end of lockdowns with collections
back to pre-COVID levels within 2 weeks, while Nigeria faced a
longer recovery from lockdowns due to prior challenging market
conditions further impacted by COVID-19, including a depreciation
of NGN (7% down against USD in H1 2020). OLP was down 19% YoY (down
10 % YoY on a constant currency basis), which was affected by lower
disbursements to clients during the period of uncertainty following
lockdowns in Nigeria and Ghana.
Ghana
ASA Savings & Loans operations declined due to COVID-19 but
managed to recover and achieve good portfolio quality:
-- Number of clients down from 152k to 134k (down 12% YoY)
-- Number of branches up from 123 to 129 (up 5% YoY)
-- OLP down from GHS 206.8m (USD 38.1m) to GHS 190.0 m (USD 32.8m) (down 8% YoY in GHS)
-- OLP/Client down to GHS 1.5k (USD 250) (down 1% YoY in GHS)
-- PAR>30 increased from 0.2% to 1.2%
-- No moratoriums granted to clients in the period
Nigeria
ASHA Nigeria and ASIEA ('ASA Nigeria') saw a contraction of
operations due to COVID-19:
-- Number of clients down from 234k to 225k (down 4% YoY)
-- Number of branches maintained at 263
-- OLP down from NGN 10.5bn (USD 29.2m) to NGN 8.1bn (USD 21.0m) (down 22% YoY in NGN)
-- OLP/Client declined from NGN 45k (USD 126) to NGN 41k (USD 105) (down 11% YoY in NGN)
-- PAR>30 increased from 2.5% to 7.5%
-- Up to USD 0.6m in moratoriums granted to 10k clients between March and June 2020
Sierra Leone
ASA Sierra Leone continued to successfully expand with high
client and branch growth:
-- Number of clients up from 29k to 30k (up 3% YoY)
-- Number of branches up from 34 to 39 (up 15% YoY)
-- OLP up from SLL 22.2bn (USD 2.5m) to SLL 27.8bn (USD 2.9m) (up 25% YoY in SLL)
-- OLP/Client up from SLL 746k (USD 86) to SLL 974k (USD 100) (up 31% YoY in SLL)
-- PAR>30 increased from 1.4% to 8.9%, due to a substantial
fraud in in one of its branches combined with the impact of
COVID-19 on clients
-- Up to USD 31k in moratoriums granted to 1.3k clients between March and June 2020
East Africa
(UNAUDITED) H1 2020 FY 2019 H1 2019 YoY YTD YoY
% Change
(Amounts in USD thousands) (constant
currency)
Net profit 333 6,160 2,527 -87% -91%
Cost/income ratio 97% 62% 63%
Return on average assets
(TTM) 1.2% 12.6% 11.0%
Return on average equity
(TTM) 4.3% 51.0% 48.3%
Earnings growth (TTM) -87% 69% 60%
OLP (1) 36,753 51,664 40,958 -10% -29% -10%
Total assets 55,856 59,356 51,383 9% -6%
Client deposits (2) 13,591 14,808 12,022 13% -8%
Interest-bearing debt (2) 24,245 25,835 23,201 5% -6%
Share capital and reserves 15,408 15,476 12,080 28% 0%
Number of clients 301,515 348,542 293,853 3% -13%
Number of branches 343 316 298 15% 9%
Average outstanding loan
per client (USD) 131 149 140 -6% -12% -12%
PAR > 30 days 1.9% 0.6% 0.4%
Client deposits as % of
loan portfolio 37% 29% 29%
(1) Includes off-book Business Correspondence loans and Direct
Assignment loans and excludes interest receivable and the unamortized
loan processing fee
(2) Excludes interest payable
East Africa saw a decline in operations and profitability
attributable to COVID-19 impact on the operating countries though
managing to maintain a good-quality loan portfolio.
Kenya
ASA Kenya decreased its operations:
-- Number of clients down from 83k to 78k (down 7% YoY)
-- Number of branches up from 81 to 99 (up 22% YoY)
-- OLP down from KES 1.4bn (USD 14.0m) to KES 1.2bn (USD 11.6m) (down 14% YoY in KES)
-- OLP/Client declined from KES 18K (USD 169) to KES 17K (USD 159) (down 3% YoY in KES)
-- PAR>30 increased from 1.0% to 2.5%
-- Up to USD 4.1m in moratoriums granted to 20k clients between March and June 2020
Tanzania
ASA Tanzania managed to expand its operations:
-- Number of clients up from 102k to 104k (up 2% YoY)
-- Number of branches up from 98 to 112 (up 14% YoY)
-- OLP down from TZS 36.1bn (USD 15.7m) to TZS 32.8bn (USD 14.1m) (down 9% YoY in TZS)
-- OLP/Client down from TZS 415k (USD 155) to TZS 340k (USD 147) (down 18% YoY in TZS)
-- PAR>30 increased from 0.1% to 2.0%
-- Up to USD 267k in moratoriums granted to up to 5k clients between March and June 2020
Uganda
ASA Uganda saw a reduction in operations in 2020 but growth
overall YoY in terms of branches and clients while maintaining a
high-quality loan portfolio:
-- Number of clients up from 87k to 96k (up 10% YoY)
-- Number of branches up from 83 to 96 (up 16% YoY)
-- OLP down from UGX 31.4bn (USD 8.5m) to UGX 30.5bn (USD 8.2m) (down 3% YoY in UGX)
-- OLP/Client down from UGX 395K (USD 97) to UGX 351K (USD 94)
(down 11% YoY in UGX), which is expected to remain lower than in
Kenya and Tanzania due to generally lower income levels in
Uganda
-- PAR>30 increased slightly from 0.1% to 0.4%
-- Up to USD 1.8m in moratoriums granted between March and June 2020 to up to 75k clients
Rwanda
ASA Rwanda increased its operations YoY:
-- Number of clients up from 18k to 20k (up 11% YoY)
-- Number of branches maintained at 30
-- OLP up from RWF 2.2bn (USD 2.4m) to RWF 2.6bn (USD 2.6m) (up 22% YoY in RWF)
-- OLP/Client up from RWF 128K (USD 134) to RWF 135K (USD 142) (up 6% YoY in RWF)
-- PAR>30 increased from 0.6% to 1.5%
-- Up to USD 393k in moratoriums granted to 7.8k clients between March and June 2020
Zambia
ASA Zambia managed to keep expanding its operations in H1
2020:
-- Number of clients reached 3k
-- Number of branches maintained at 6
-- Realized OLP of ZMW 3.6m (USD 197k)
-- OLP/Client reached ZMW 1.3k (USD 70)
-- PAR>30 increased to 22.6%, primarily due to a substantial fraud in one of its branches
-- No moratoriums granted to clients during the period
Regulatory Environment
ASA International operates in a wide range of jurisdictions each
with their own regulatory regimes applicable to microfinance
institutions. At this time, the Company continues to pursue
deposit-taking licenses in countries such as Pakistan and
Tanzania.
Lockdowns in Pakistan, Ghana, Kenya, Nigeria, Myanmar, Rwanda,
Sri Lanka, Sierra Leone, Tanzania and the Philippines have ended or
relaxed, which enabled the Group to re-open branches and resume
field activities prior to the end of H1 2020. India started
collections after the end of the lockdown, but clients could
request a moratorium instituted by the Government of India until 30
August 2020 and Uganda only fully resumed operations by mid-June. U
p to 30 September, collection efficiency across the Group continued
to strengthen with eight out of thirteen countries reporting
collections in the mid to high nineties.
Key Events
Pakistan
-- On 3 January 2020 ASA Pakistan received a no-objection
certificate ("NOC") by the State Bank of Pakistan for transforming
ASA Pakistan (non-deposit taking) into ASA Microfinance Bank (MFB),
subject to meeting certain requirements set by the central bank. It
is the expectation that the license will be granted during the
second half of 2020.
Sri Lanka
-- The market in Sri Lanka faced three major challenges in the
past two years: (i) following the introduction of a debt relief
program for microfinance loans in drought affected districts of Sri
Lanka in 2018, the repayment discipline of clients across the
country was eroded, which after-effects still persisted in 2019,
(ii) the Easter Sunday bomb attack and the knock on effect on the
economy, and (iii) the spread of COVID-19. The microfinance sector
has not yet fully recovered from these shocks.
-- In addition, due to overall interest rate cuts by the
government in the financial sector following the economic downturn
due to COVID-19, there is concern that the interest rate cap of 35%
introduced last year may be further reduced.
-- In April 2019, Lak Jaya received the deposit-taking license under the Microfinance Act.
Myanmar
-- ASA Myanmar secured the approval of the Central Bank of
Myanmar for taking deposits in January of 2020.
-- The Central Bank of Myanmar cut the maximum lending rate on
microfinance loans from 30% to 28% per annum.
Nigeria
-- The Central Bank approved the merger between ASHA Nigeria and
ASIEA , which was completed by 1 April 2020.
Tanzania
-- ASA Tanzania submitted application for non-deposit taking
microfinance institution under the new Microfinance Act.
Key events after 30 June 2020
-- On 9 July 2020, State Bank of Pakistan granted extension of
the NOC to ASA Pakistan up to 31 December 2020.
-- On 20 July 2020, ASA Tanzania submitted the application to
carry on business as non-deposit taking MFI to the Bank of
Tanzania.
Regulatory Capital
Many of the Group's operating subsidiaries are regulated and
subject to minimum regulatory capital requirements. As of 30 June
2020, the Group and its subsidiaries were in full compliance with
minimum regulatory capital requirements.
Asset/Liability and Risk Management
ASA International has strict policies and procedures for the
management of its assets and liabilities as well as various
non-operational risks to ensure that:
-- The average tenor of loans to customers is substantially
shorter than the average tenor of debt provided by third party
banks and other third-party lenders to the Group and any of its
subsidiaries
-- Foreign exchange losses are minimized by having all loans to
any of the Group's operating subsidiaries denominated or duly
hedged in the local operating currency and all loans to any of the
Group's subsidiaries denominated in local currency are hedged in US
dollars
-- Foreign translation losses affecting the Group's balance sheet are minimised by preventing over-capitalisation of any of the Group's subsidiaries by distributing dividends and/or repaying capital as soon as reasonably possible
Nevertheless, the Group will always remain exposed to currency
movements in both (i) the profit & loss statement, which will
be affected by the translation of profits in local currencies into
USD, and (ii) the balance sheet, due to the erosion of capital of
each of its operating subsidiaries in local currency when
translated in USD, in case the US dollar strengthens against the
currency of any of its operating subsidiaries.
Funding
The funding profile of the Group has not materially changed
during the first half of 2020:
In USD millions
30 Jun
20 31 Dec 19 30 Jun 19
Local Deposits 74.5 78.0 69.4
Loans from Financial Institutions 232.8 260.6 243.1
Microfinance Loan Funds 28.3 27.2 15.0
Loans from Dev. Banks & Foundations 40.0 30.0 40.0
Equity 104.1 111.2 92.9
Total Funding 479.7 507.0 460.4
The Group maintains a favourable maturity profile with the
average tenor of all funding from third parties being substantially
longer than the average tenor at issuance of loans to customers
which ranges from 6-12 months.
The Group and its subsidiaries have existing credit
relationships with more than 50 lenders throughout the world, which
has provided reliable access to competitively-priced funding for
the growth of its loan portfolio.
Some subsidiaries did not fulfil some of the ratios as required
in contracts for credit lines amounting to 54.2 million. Due to
these breaches of covenant clauses, the lenders are contractually
entitled to request for immediate repayment of the outstanding loan
amounts. The Group already received waivers against all breaches
except for USD 15.2 million from its lenders. The balance is
presented as on demand as at 30 June 2020. The lenders have not
requested any early repayment of the loan as of date.
In view of potential temporary portfolio quality covenant
breaches from increased overdue by some of the Company's operating
subsidiaries due to the disruption caused by COVID-19, the Company
secured temporary waivers, no action and/or comfort letters from
almost all its major lenders for the remainder of 2020.
Key events after 30 June 2020
-- ASA International Holding signed a loan facility agreement
for USD 10 million with Citibank N.A., Jersey on 2 October 2020.
The term of the loan is three years.
Impact of foreign exchange rates
As a USD reporting company with operations in thirteen different
currencies, currency movements can have a major effect on the
Group's USD financial performance and reporting.
The effect of this is that (i) existing and future local
currency earnings translate into less US dollar earnings, and (ii)
local currency capital of any of the operating subsidiaries will
translate into less US dollar capital.
Countries H12020 FY2019 H12019 <DELTA> <DELTA>
H12019 - FY2019 -
H12020 H12020
Pakistan
(PKR) 168.0 154.8 163.1 (3%) (9%)
India (INR) 75.3 71.3 69.0 (9%) (6%)
Sri Lanka
(LKR) 186.4 181.4 176.5 (6%) (3%)
The Philippines
(PHP) 49.8 50.7 51.2 3% 2%
Myanmar (MMK) 1382.2 1487.0 1516.8 9% 7%
Nigeria (NGN) 387.7 362.5 360.0 (8%) (7%)
Ghana (GHS) 5.8 5.7 5.4 (7%) (2%)
Sierra Leone
(SLL) 9748.9 9782.7 8925.0 (9%) 0%
Kenya (KES) 106.6 101.4 102.3 (4%) (5%)
Uganda (UGX) 3733.5 3665.4 3693.3 (1%) (2%)
Tanzania
(TZS) 2316.7 2298.0 2299.3 (1%) (1%)
Rwanda (RWF) 954.2 943.2 911.0 (5%) (1%)
Zambia (ZMW) 18.2 14.1 12.8 (41%) (29%)
During H1 2020, the US dollar particularly strengthened against
PKR +9%, INR +6% and NGN +7% as a result of the impact of COVID-19
on the individual countries' and global economy. This had an
additional negative impact on the USD earnings contribution of
these subsidiaries to the Group and also contributed to an increase
in foreign exchange translation losses, particularly due to ASA
Pakistan's continued relatively high capital base related to its
planned transformation into a microfinance bank. The total
contribution to the foreign exchange translation loss reserve
during H1 2020 amounted to USD 4.9m of which USD 2.1m related to
the depreciation of the PKR and USD 1.6m to depreciation of the
INR.
Forward Looking Statement and Disclaimers
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END
IR FFUFADESSEIS
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