COMPANY PRESENTATION A P R I L 2 0 2 0
Finclusion Pte Ltd | 1 www.finclusiongroup.com INTRODUCTION
Luxembourg Finance Awards
Winner 2018
Finclusion Pte Ltd | 2 www.finclusiongroup.com INTRODUCING FINCLUSION GROUP FINCLUSION HIGHLIGHTS
Our vision is creating and supporting the development of financial inclusion ecosystems in developing 240k clients markets in Africa Our portfolio companies have serviced 240k clients in Africa since inception Our mission is to enhance financial inclusion in African markets through the delivery of technology- enabled financial services through investing in special situations and implementing methodical 1.2m loans turnarounds underpinned by talent, capital and technology Over 1m loans granted in Africa across our portfolio
Close to $300mn of disbursements Who? What? Total disbursements of USD290m until 31 December 2019 (of Seasoned team of professionals – Finclusion uses in-house, proven which USD90m payroll, USD200m consumer) all directly involved in portfolio successful, advanced proprietary operations and behind the technology platforms that enhance USD20m Gross Loan Book successful turnaround and the ease, speed and cost efficiency Gross Loan Book of USD20m across the portfolio as of 31 subsequent exit of assets in Africa of delivering financial products to December 2019 the underserved How? USD20m of Assets and USD10m of Equity Full deployment of our The platform technology is further Strong equity capitalization, with balance sheet 50% technology stack and relevant enhanced by back office technology equity financed external technology to optimize like A.I. algorithms for credit granting processes and enhance delivery and fraud prevention, limiting 7.1% Default Rate channels human intervention and error Consistent over an eight-year history of credit across fifteen markets in three continents Implementation of best-practice governance structures appointed Where? Direct employment of 386 experienced non-executives and Finclusion invests in special Consisting of employees and agents, with indirect executives situation opportunities in Africa – employment through impact loans estimated at over 5 Lending only with a clear turnaround opportunity 100,000 operations Immediate streamlining of cost structures, and a reassessment of Currently invested in a portfolio of Invested >20 million in digital platform portfolio mix to correct cashflow five microfinance institutions Technology spin-off from the former MyBucks Group, and operational performance trading since 2011 benefiting from knowledge generated through historic investment in excess of EUR20m
Finclusion Pte Ltd | 3 www.finclusiongroup.comwww.finclusion.club OUR STRATEGIC INITIATIVES ENABLED US TO PREPARE FOR COVID-19 Being technology, data and experience led has allowed consumers continued access to our financial solutions
Voice Contracting Where customers have relied on traditional application processes and face-to-face service, implemented simple and easy to understand voice contracting to reduce time spent on the application processes, reducing turn around, resulting in quicker payout to clients requiring emergency funds.
Remote Contact centre Adopted AI driven Zailab contact centre and customer care platform that can be accessed from any device with internet access. Allows for real time and accurate reporting as well as improved customer experience. Implementation of API platforms and activation of multiple Microsoft services enable staff across all departments to continue daily operations from home. Voice and video platforms allowed meetings with internal and external stakeholders to continue, as well as the servicing of clients online, telephonically and through other platforms such as social media, WhatsApp and online chats.
Adapted lending criteria In efforts to reduce irresponsible borrowing during the Covid pandemic and over indebting consumers, criteria to apply for a personal loan was tightened to deal with the shift in data points available and to make effective credit decisions, including introducing psychometric scores. This mad have reduced the quantity of applications however maintained the quality of clients that upholds credit agreements on a monthly basis.
Collection and payment innovation Implemented payment arrangements for customers that have had a loss of income and created innovative alternative payment solutions. To maintain a high collection rate, customers are rewarded for good payment behavior, with monetary vouchers that fulfil a need during difficult times.
Finclusion Pte Ltd | 44 www.finclusiongroup.com WHAT WE HAVE BEEN DOING LENDING Building a cohesive eco system to create more financial • Technology driven short term lending inclusion in a time of social distancing • Website and App • Digital wallet for saving, transfers and payments • Customer-centric financial eco-system. • Non traditional credit scoring: customer data, financial history & psychometrics. • Enhancing good payment behaviour through rewards
REHABILITATION • Give clients access to their financial data • Provide relieve to those in financial distress • Help customers understand their credit status • Support through financial education • Empower clients to make financially sound decisions
INSURANCE • Fully digital and automated platform • Sign up, add/remove beneficiaries and claim online • Innovative claim benefits on the funeral plan product such as grocery and airtime vouchers • Tenant insurance to cover for retrenchment, disability or death • Reduced turnaround time and human interaction
Finclusion Pte Ltd | 55 www.finclusiongroup.com WHAT IS THE WORLD LIKE AS WE EMERGE FROM COVID 19 Pivoted the business to include transactional solutions to provide customers a holistic digital eco system.
Digitised credit scoring and payment solutions Using artificial intelligence models, customers have access to credit from any smart device, anywhere, anytime, in a safe and regulated environment. Through the GetBucks digital wallet, customers will have the ability to save, transfer funds and make payments instantly at a lower cost to traditional banks.
Digital wallet A cashless payment and saving solutions that can accessed through smartphones as well as USSD platforms, empowering people to control their finances and enabling small business to continue operations and grow from wherever they are.
Customer care and well-being for the long term Provide thoughtful pay-out options for insurance claims allow a value-added offering that keep customers sustained for a longer term. Give customers pay-out options for grocery and airtime vouchers as a portion of an insurance claim that will keep families going for longer.
Finclusion Pte Ltd | 66 www.finclusiongroup.com HOW WE ARE EMPOWERING AFRICANS Pivoted the business to include transactional solutions to provide customers a holistic digital eco system.
Access to medical card Empower through technology Through a partnership with Oyi Medical card, Through a partnership with MaraPhones, thousands of people that may not afford medical aid people have access to smart devices that can or medical insurance have access to a medical card to be purchased via an affordable monthly pay for day to day medical expenses, with the option to instalment. apply for credit when needed. The card can only be used at medical outlets, reducing reckless spending. Credit rehabilitation Provide and platform and service to clients Empowering small businesses: that have found themselves in financial Providing a digital platform for small businesses to difficulty. Assist customers with removal of display products, enabling exposure to a larger market judgements, blacklisting and over and safe payment solutions. Product delivery is fulfilled indebtedness by providing a financial solution by a partnership with Drivers Club which works with they can afford. personal transport and taxi services nationally. Funeral Cover Financial education Include the options for customers to obtain Provide the tools and platforms to educate clients on funeral cover for there families that will ease financial basics, enabling them to make better financial financial stress in the case of a loved one. solutions for the future. Funeral cover that is tailored to suit family and financial needs. Educational Loans Offering educational loans at a lower interest rate to those that wish to further their education.
Finclusion Pte Ltd | 77 www.finclusiongroup.com OUR CORPORATE STRUCTURE Controlling four regulated banks and six micro-finance institutions across Africa
Finclusion Pte Ltd | 8 www.finclusiongroup.com THE OPPORTUNITY
Luxembourg Finance Awards
Winner 2018
Finclusion Pte Ltd | 9 www.finclusiongroup.com OUR VIEW OF THE MARKET DigitalDigital around around the world the World vs Africa vs Africa- Jan 2020 - Jan 2020 World Africa
Total population Internet users Social media users Unique mobile users 7.75 billion 4.54 billion 3.80 billion 5.19 billion
55% 59% 49% 67% Urbanisatoin Penetration Penetration Penetration
Mobile connections 1.32 billion 453.2 million 217.5 million 1,08 billion
43% 34% 16% 81% Urbanisatoin Penetration Penetration Penetration
Finclusion Pte Ltd | 10 https://datareportal.com/reports/digital-2020-global-digital-overview www.finclusiongroup.com FINANCIAL INCLUSION IN AFRICA Key trends (1/2)
Africa is the fastest growing continent in the world and has the best growth prospects:
4,0%
3,0% 3,0%
Africa the young 2,0% 2,0% 2,0% 2,0% 2,0% continent
The 2nd largest and 2nd
Sub-Saharan Africa Latin America & Caribbean European Union United States most populous continent
F2018 F2020 c.41% of the population Return on equity in the banking sector 1 are under the age of 15
22% 21% 19% 19% 18% 17% 17% 17% 17% 15% 15% 13% 12%12% 12% 12% 10% 9% 8% 8% 5%
South Asia Europe & Central Middle East & Latin America & East Asia & Pacific North America Sub-Saharan Asia North Africa Caribbean Africa
2006 2011 2016
Finclusion Pte Ltd | 11 1. Median – World Bank – Financial Structure Data Set July 2018 www.finclusiongroup.com FINANCIAL INCLUSION IN AFRICA Key trends (2/2)
Cell phone ownership
Smartphone Basic Phone No phone
Tanzania
Kenya
South Africa
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Source: GeoPoll.com
Mobile subscriptions
Namibia Eswatini 2,75 million 1,10 million 105% of population 78% of population
Source: Digital 2020
https://www.africanbusinesscentral.com/2014/11/22/africa-a-21st-century-view-the-deloitte-consumer-review-report/#prettyPhoto
Finclusion Pte Ltd | 12 www.finclusiongroup.com WHAT DRIVES FINCLUSION Finclusion has signed up to the SMART campaign responsible lending principles
Disbursements: Employment: USD300m > 5 000 Free Credit Report
Enhance financial inclusion Direct and indirect • Feedback on credit scores, financial history through data driven lending employment opportunities and spending habits created • Assist clients to improve their financial status.
Finance Guide 10k • Available to download from the website or 26m on request
Refugees included into the Loan applications, and financial financial systems and provided education offered adhering to Finclusion believes in responsible with economic opportunities responsible lending standards (Malawi) lending – to look after its clients and employees, and generating sustainable healthy financial returns
Caring Souls Partnership in Eswatini
Supporting the Ministry of Education’s initiative to provide school shoes, jerseys, sanitary products and school stationary to impoverished schools and communities in Eswatini
Finclusion Pte Ltd | 13 www.finclusiongroup.com PRODUCTS IN SOUTHERN AFRICA
Loan Portfolio Online Payroll Portfolio Term Mix
Months Value Volume <=6 months 15% 29% 7-12 months 27% 32% 22% 50% 13-18 months 3% 2% Value Volume Value Volume 19-24 months 35% 30% 78% 50% 25-36 months 2% 1% 37-48 months 3% 1% 49-60 months 8% 5% >60 months 7% 0%
Sales 2020 Online Payroll Sales Term Mix
Months Value Volume <=6 months 21% 34% 7-12 months 14% 17% 27% 50% 13-18 months 2% 2% Value Volume Value Volume 19-24 months 42% 37% 73% 50% 25-36 months 2% 4% 37-48 months 4% 2% 49-60 months 9% 3% >60 months 6% 1%
Product description Online Payroll Clients can apply for a loan via the website. Loans up to a maximum of This is a term loan offered to employees. Loans go up to a maximum of R20 R8000, the loan term can be stipulated by the client (up to 6 months). 0000 over 24 months and are tailor made for each company. Approval is based on a credit assessment and affordability of the client.
Finclusion Pte Ltd | 14 www.finclusiongroup.com Product description PRODUCTS IN EAST AFRICA Habari This is a one month loan offered to private sector employers’ minimum and maximum loan amount is USD .47 to 1,864 respectively.
Portfolio size and distribution by product type (USD) Haraka This is a one month mobile app loan offered to clients above 18 years. The Product Portfolio Size (USD) minimum and maximum loan amount is USD 4.6 to 47 respectively.
83.97% Payroll 6,654,834.33 Payroll 13.41% OI Kenya GetBucks 1,062,676.68 This is a term loan offered to Government employees. The loan tenor is 1.33% Habari 105,612.68 between 1 to 72 months with minimum and maximum loan amount being 1.29% Haraka 102,567.27 USD 47 to 9,320.
Total 7,925,690.96 VLB Offered to clients both employed and self employed with vehicle collateral. The Payroll OI Kenya GB Habari Haraka USD rate=107.29 loan tenor is 3 to 12 months with minimum and maximum loan amount being USD 466 to 23,301.
2020 sales by product type (USD) Average USD rate=100.91
Product July 2019 Aug 2019 Sep 2019 Oct 2019 Nov 2019 Dec 2019 Jan 2020 Feb 2020 Mar 2020 April 2020
Payroll 548,845.51 566,068.77 593,094.24 451,996.83 449,093.25 264,810.23 538,826.68 286,483.00 336,970.57 174,363.29
VLB 164,998.51 164,304.83 198,890.10 287,285.70 228,996.14 260,687.74 146,268.95 103,161.23 45,238.33 24,477.26
Haraka 139,133.88 132,197.01 129,194.33 130,115.94 113,517.00 91,873.95 82,875.83 68,853.43 53,899.51 -
Habari 100,981.07 89,683.88 93,826.18 97,116.24 85,521.75 90,020.81 69,210.19 80,229.91 73,838.07 54,801.31
Total sales 953,958.97 952,254.48 961,004.86 966,514.72 877,128.13 707,392.73 837,181.65 538,727.58 539,946.49 253,641.86
Finclusion Pte Ltd | 15 www.finclusiongroup.com CAPTURING THE OPPORTUNITY ON OUR PLATFORMS
Luxembourg Finance Awards
Winner 2018
Finclusion Pte Ltd | 16 www.finclusiongroup.com FRACTAL LABS – OUR TECHNOLOGY ENGINE Turning data into measurable and scalable financial and risk tools enabling business to run faster and overcome regulatory, financial and fraud challenges.
26m loan applications assessed Former MyBucks Team Fractal Labs has processed over [26]m loan applications through its Team previously responsible for winning numerous awards, and being cited current technology or predecessor versions in publications such as American Banker for revolutionary technology
4 Senior Data Scientists 7.1% Default Rate With a proven track record in data driven lending Consistent over an eight-year history of credit across fifteen markets in three continents
14 financial institutions Over 30% Improvement in Default Rate Technology deployed in fourteen financial institutions, of which ten are Consistent over an eight-year history of credit across fifteen markets in three within the Finclusion Group of Companies continents
Successfully implemented with Significant improvement in Provisioning models fully Fixed and variable Platform agnostic – our solutions can multiple in-house and proprietary credit performance – with compliant with IFRS9 pricing available both consume and deploy data into banking back-end system real-time credit assessment any existing operational solution
Finclusion Pte Ltd | 17 www.finclusiongroup.com FRACTAL LABS – AI SOLUTIONS
Supervised machine learning to make predictions within seconds. Using financial and psychometric data allows Scrutinisation of clients’ personal data to optimise faster more accurate decision making, greatly improving leads and define quality and well as which clients the speed of loan application processes as well as user are more likely qualify and convert into a sale. experience.
Transactional behaviour modelling creates opportunity to up-sell, cross sell and identify where improvements can be made on spending Seamless provisioning modelling allowing inputs habits with product expansion possibilities. from all other modules delivering IFRS9 compliant models with scenario analytics for macro-economic and SIC-R impact assessments and implementations
Reduce risk, eliminate human error, improve turnaround time and improve over all customer experience.
Identify organized groups of fraudsters, synthetic identities, stolen identities, compromised networks and hijacked devices.
Finclusion Pte Ltd | 18 www.finclusiongroup.com FINCLUSION CREDIT EAST AFRICA Key trends
Macro Business overview
• According to the EIA, Kenya is expected to grow at rates above 5% over the next 5 years • GetBucks Kenya was incorporated in June 1993 solely offering Check-off loans facilities to Civil driving consumer buying power upward. servants. • The local currency has generally been stable against all major currencies, however, has • GetBucks has since grown from 1 small branch in 2012 to 7 fully fledged Branches and 18 experienced volatility in recent times. satellite offices spread across the country with a work force of 56 staff complemented by 200 • It is expected that these factors will drive consumer loan demand up in the medium term, sales agents. whilst providing good returns for investors • The company has leveraged on technology and has diversified its loan products to include • The Covid-19 pandemic has slowed and will keep slowing the economy in the short term; • Vehicle loan book loans; however, the full effects of the pandemic will only be fully measured later in the year. • Salary advance loans to persons employed in the private sector; • A fully automated digital loan product (the Haraka app) (Awards - runner up for the best local instant mobi-loans app category at the 2nd Digital inclusion award); and • Clearing finance – an import finance product Key financials • Finclusion currently owns 49% of the businesses with the balance of 51% owned by management NAV KES 111.4m
Finclusion impact and outlook Loan book as of 31 December 2019 KES 676.3m
Non-performing loans (NPL 33.2% • New management team with aligned interests. • Capital increase of KES119m (loan conversions) to KES231m (31 March) Collection rates 85%+ • Reactivation of Board of Directors, which was dormant, complimented by revised management structure to improve operational effectiveness Provisions 21.9% • Enhanced focus on collections and general credit management • Migrating to fully digital processes to enhance loan origination, credit assessment, NPL coverage: 66.0% disbursements & overall client experience (ongoing)
Finclusion Pte Ltd | 19 www.finclusiongroup.com FINCLUSION CREDIT SOUTHERN AFRICA Key trends
Macro Business overview
• Recent corrections in macro environment putting stress on exposures, but will drive loan • Distribution capability that has been constructed from a channel agnostic perspective; demand • SA 50/50 (online/payroll – volume); 34/66 (online/payroll – value) • FX has some inherent volatility due to Covid-19, but seems to be within its new range • Eswatini 90/10 (branch/online); 66/34 (payroll/direct debit) • Covid-19 impact on employment levels still to be fully understood, but credit life insurance • Namibia 100/0 branch in each loan, reduces the businesses risk • Distribution growth to emerge via partner enablement strategy Key financials • HollardMoney online (www.hollardmoney.co.za) live in Dec 2019 • Van Schaik student finance live Jan 2020 NAV ZAR 100m • Cell C online and branch distribution live in late Q2 2020 • Mara Phone in-store finance Q2 2020 Loan book as of 31 March 2020 ZAR 153m • OnePlan for insurance excess shortfall financing in Q3 2020 Non-performing loans (NPL) 11.6% • Digital payment and collection channels launched in Q1 2020 – growing by 40% per week
Collection rates 85%+ over the first three weeks since implementation • Credit rehabilitation partnership Provisions 11.8% launched with leading listed group – NPL coverage: 184% refinance at a discount to face value supported by customer education Finclusion impact and outlook • Launch of informal savings product in SA market in Q3 • Retrenchment exercise reducing employment count 188 to 68 • Insurance business continues to show • Appointment of non-executive directors creating a King compliant Board and sub- solid growth – 5% monthly customer committee structure • Establishment of short and long-term incentive schemes to align management growth in funeral insurance. Legal • Recapitalisation by R300m to R100m insurance and crime and injury cover • Comprehensive overhaul of acquisition, credit granting and collection processes launching in H2 2020
Finclusion Pte Ltd | 20 www.finclusiongroup.com LEADERSHIP
Luxembourg Finance Awards
Winner 2018
Finclusion Pte Ltd | 21 www.finclusiongroup.com FINCLUSION TEAM Over six decades combined banking, microfinance and technology experience
Timothy Nuy Tamuka Mpofu Gunther Marais Tonderai Mutesva Mark Young Leilanie Uys Founder and CEO Chief Financial Officer Chief Risk Officer Chief Investment Officer Chief Digital Officer Chief Data Officer Dutch Zimbabwean South African Zimbabwean South African South African
• >10 years financial • >10 years financial • >10 years financial • >10 years financial • Founder and CEO of • She holds a master’s services experience of services experience services experience services experience Ideation, a specialist degree in Computer and which 8 in Sub-Saharan lending consulting Electronic Engineering Africa • Completed articles with • Formerly a Senior • Formerly, corporate company with clients in which was focused on KPMG with a specialty in Quantitative Analyst at finance executive with South Africa, Nigeria, the automatic • Formerly, Investment banking and investments Nedbank and a financial MyBucks, BancABC and Kenya and Malawi classification of digital Director at ADC African risk advisor at KPMG Atlas Mara signals. Development • Head of Internal Audit of • Previously the Deputy Corporation AG GetBucks Zimbabwe • MSC Cqf • CFA Charterholder CEO and CRO for Bayport • She completed her successfully sold to Atlas SA and the CRO of Old master’s degree at the Mara • Certified Expert in • Financial Risk Manger Mutual Finance. He has CSIR’s electronic warfare Microfinance from the served as the chair of the unit where she gained • Trained with KPMG Frankfurt School of credit committee of experience in machine Restructuring in Finance and these organisations. learning, radar, signal Hamburg, Germany Management processing, and software and firmware • CFA Charterholder engineering.
Finclusion Pte Ltd | 22 www.finclusiongroup.com TRACK RECORD
Luxembourg Finance Awards
Winner 2018
Finclusion Pte Ltd | 23 www.finclusiongroup.com TEAM TRACK RECORD (1/5) – MyBucks Successful turnaround of MyBucks through financial and operational restructuring measures
Before 31st of March 2019 Action Taken Post 31 March 2019 To Date
• Founder (Dave van Niekerk) chaired board • Dismissal of Dave van Niekerk and his key staff and management team (about 100 individuals) • No separation of duties, no compliance with • Implementation of new Board Charter Governance board charter • Appointment of professional management (CEO and CFO) • No appointed CFO on Board • Appointment of Non-Executive Chairman
• Large and expensive support structure (Head • Retrenchment of over 100 staff resulting in (including select new hires) a lean head-office of 10 office) with c. 108 staff members established staff by former Chairman • South African office park disposed for c. EUR10m, and management services entity closed to HQ Cost • Large HQ constructed in SA avoid excessive spending • Ancillary costs curtailed significantly and reduced to bare minimum
• No clear strategic focus with global operations • Divestment from non-core markets (Poland, Australia) and focus on Africa, with application of Strategy • Significant innovation expenses without focus proceeds to debt reduction on financial return • Divestment from lending-only operation with no outlook to upgrading to a deposit-taking • Continuous losses as a tech business license (South Africa, Swaziland, Kenya and Tanzania) through a structured disposal considered acceptable in trying to build a • Building a digital bank offering basic financial services with technology subject to unicorn consolidated supervision
Capital • Negative parent equity of (+/-)EUR46m • Converted EUR63.9m of claims into equity leading to positive pro forma parent equity of c. • EUR95.5m net holding co debt at annual cost of EUR18m c. EUR16.5m • Remaining net holding co debt of c. EUR39m at annual cost of c. EUR7m, for which a shareholder approval is in place to issue sufficient shares at EUR1 per share to achieve repayment of conversion
MyBucks has retained: • Profitable banking and Deposit taking operations in key growth markets in Africa • Ability to utilize the Group’s digital tech ahead of the competition Finclusion Pte Ltd | 24 www.finclusiongroup.com TEAM TRACK RECORD (2/5) – GBSA Successful turnaround of GBSA through financial and operational restructuring measures
Before 31st of March 2019 Action Taken Post 31 March 2019 To Date
• No governance structures present • Appointment of professional CEO & CFO Governance • No appointed CFO • Appointment of independent Directors to the Board in line with King • Implementation of new Board Charter and Policies
• Significant HQ structure • Significant staff retrenched, down to 71 staff HQ Cost • Large HQ • Ancillary costs curtailed significantly and reduced to bare minimum
• Growth of lending as sole objective without • Focus on building an inclusive lending play in Southern Africa Strategy quality control • Introduction of ancillary services like medical , financial wellness and other components • Significant spent on non-core technology
Capital • Negative equity • Converted over c. EUR20m of claims into equity, to return the business to positive equity and • Significant related party receivables capital ratios in excess of fifty percent • External funding costs in excess of net lending • Reduced average funding cost from 28% p.a. to c. 18% p.a. rates
Credit • Large bad debt portfolio • Recalibrated all AI models, and launched the use of bank account scanning technologies • Poor first strike performance • Established an online self-help collection model for clients to add voluntary repayments • Poor arrears collections • Sold off the non-performing book to EDC
GBSA now has: • Strong credit payroll and online book with good performance • Team running on minimum required operating cost structures • Focus on scaling up the business to drive profitability Finclusion Pte Ltd | 25 www.finclusiongroup.com TEAM TRACK RECORD (3/5) – GBK Successful turnaround of GBK through financial and operational restructuring measures
Challenges Achieved
• Weak capital structure • KES119m capital injection • No governance structures • Board reengaged, charters being drafted, and additional independent directors are being secured. • No management information reports • New management structure and functional committees focused on enhancing operational • Significant cash bleed in procurement processes efficiency • Poor collections performance with organisational design focused on • Cash flow planning and better management reporting have seen the business start building up a sales cash buffer • No cash flow planning, or commitment to a budget • Better collections have seen efficiency improvements, and less negative loan transitions.
Next steps
The business is focusing on the following key areas: • Enhancing sustainability: The business has recruited a Head of Risk, an is also be looking to recruit a Head of Internal Audit. This will ensure that we have staff • Enhancing customer experience: Customer experiences are being remapped to dedicated to constantly improving risk management thereby leading to sustainable ensure that turn around time (TAT) is reduced significantly, and to allow customers business growth. to have a more digital experience. • Building a community: Board (New charter under review), Staff (Process of re- • Improving operational efficiency: Enhanced reporting combined with the aligning incentives has commenced), Suppliers (all contracts are being reviewed and deployment of enabling technology will allow the business to better allocate renegotiated to ensure that the business achieved costs savings, or that SLAs are resources. New management structure is removing red tape and resulted in better defined), Community (we continue to sponsor worthwhile causes in the significant TAT improvements. community were resources permit)
Finclusion Pte Ltd | 26 www.finclusiongroup.com TEAM TRACK RECORD (4/5) – African Sun / Dawn Successful turnaround of GBK through financial and operational restructuring measures African Sun Limited Profit After Tax (US$)
15 000 000 • Acquisition of African Sun Limited and Dawn Properties Limited (publicly listed and traded on the Zimbabwe Stock Exchange) took place over a period of 2 years 10 000 000
• Control position established in 2015 5 000 000
Opportunity Identified - • Attractive hospitality and property development platform 2013 2014 2015 2016 2017 2018
• Easy quick wins through restructuring of the Group and bringing in new Management -5 000 000
Challenges -10 000 000 • Broken cost structures • Inadequate management teams • Hotels not up to standard with poor occupancy ratios • Overindebted Dawn Properties Profit After Tax (US$) • African expansion not backed by adequate capital 4 000 000
Achieved – 2015 to 2018 3 000 000
• Significantly reduced cost structures 2 000 000 • Paid of indebtedness 1 000 000 • Appointed a professional manager (Legacy) • Commenced residential property development in 2016 - 2013 2014 2015 2016 2017 2018 -1 000 000
Conclusion -2 000 000
• Profitable hotel group handed to Brainworks (owners) -3 000 000
-4 000 000
-5 000 000
Finclusion Pte Ltd | 27 www.finclusiongroup.com TEAM TRACK RECORD (5/5) – ADC/ABC Combination of operational and financial measures leading to good financial return for investors
Challenges Achieved
• ADC had a subscale private equity portfolio, unable to support the • Concluded a EUR40m bond raise with Trafigura, allowing a USD50m recapitalization of BancABC in financial infrastructure created 2012 with the transformation of ADC into an emerging banking group • European listing came at significant cost, with limited primary • Corrected cost structures, and disposes of non-core insurance and payment assets at double-digit additional capital provided internal rates of return (significantly ahead of peer group returns in this time period) • Diversified portfolio of payment, insurance and banking assets – • Raised EUR10m of capital from Bob Diamond in 2013 – and took a strategic stake in Union Bank of leading to a lack of focus Nigeria • Key asset – BancABC required additional capital • Successfully disposed ADC and minorities in banking Group ABC at a total transaction size > USD350m at a premium to market price • One of the few significant exits in African banking Opportunities
• Strong shareholder base, particularly with amongst others Trafigura backing the management • Strong leadership and board members with deep Africa experience • Good banking portfolio with BancABC in Southern Africa and Union Bank of Nigeria in West-Africa
Finclusion Pte Ltd | 28 www.finclusiongroup.com FINANCIALS AND OUTLOOK
Luxembourg Finance Awards
Winner 2018
Finclusion Pte Ltd | 29 www.finclusiongroup.com BALANCE SHEET AS OF 31 MARCH 2020 WITH OUTLOOK Recent operational and financial restructuring measures leave clean platform for growth
BalanceHigh Level Sheet Financials Commentary
Finclusion - Consolidated Pro Forma Financials USD March 2020 • Group records profitability in first quarter, predominantly as a result Net trading income 2.5 m of strong performance in Kenya and Swaziland Loan book impairment charges (.5 m) • South Africa standalone continues to record a small loss, as it cannot Operating expenses (1.6 m) grow lending volumes given the current Covid restrictions Profit before tax .4 m • Management anticipates South Africa returning to monthly profitability in the second half, as economic circumstances allow a Cash and cash equivalents .8 m growing of credit volumes Loan book advance 14.5 m • Business has significant equity reserves, and continues to have a Intangibles and goodwill 1.1 m Other assets 3.4 m healthy cashflow pattern Total Assets 19.7 m • Credit performance have stayed within expectations to date, with Financial debt 9.7 m the Group continuing to careful monitor any Covid-19 related Other liabilties 1.7 m impacts 11.4 m Total Equity 8.3 m Key ratios: Equity / Debt Ratio 85% Loan book / Assets Ratio 73% Cash to financial debt ratio 8%
Finclusion Pte Ltd | 30 www.finclusiongroup.com KEY DIFFERENTIATORS TOWARDS SUCCESS Significant turn around experience leads to risk focused approach Lessons learnt
Risk and Mitigants • Strong, independent governance channels form the baseline of success
Liquidity Risk Credit Risk • Trade receivables and related party transactions form the We are a permanent capital vehicle – Real-time credit monitoring will allow us to basis of future losses allowing us to sit-out a liquidity crisis identify red-flags in fully IFRS9 compliant statistical models • Statistical provisioning and lending assessment critical Continuous risk management and data management of underlying portfolio Clear credit policies in place, with appropriate company maintaining strong governance structures for enforcement. • Budgets and forecasts to be driven cost firsts, with a relationships with all lenders to overcome liability driven approach to growth liquidity challenges. Governance • No backing of celebrity entrepreneurs or empire builders, Geo-Political Risk Professional management teams and no but reliance on trained professionals celebrity entrepreneurs / empire builders Significant diversification in portfolio • Mission aligned long-term investors to ensure a diligent, foreseen limiting individual risks Monthly management accounting and responsible growth strategy implemented meetings Local partners identified or in process of identification in all markets Hands-on group team able to step into management if required
Deep operational experience combined with data driven approach allows us to identify red flags before others – and our operational experience allows us, if required, to step into daily management role to protect our investment
Finclusion Pte Ltd | 31 www.finclusiongroup.com APPENDIX
Luxembourg Finance Awards
Winner 2018
Finclusion Pte Ltd | 32 www.finclusiongroup.com Case Study – OBUL Successful turnaround of GBK through financial and operational restructuring measures
Challenges Post turnaround
• Opportunity Bank Uganda, Ltd, was a microfinance institution that started operations • Appointed new CEO with subsequent overhaul of management in 1995, but only became a banking institution in 2008, as part of American NGO • Optimized cost structures Opportunity International • Changed culture to be performance driven with clear accountability of staff • The bank had 20 branches and c. 300 employees at the time of acquisition and had • The bank became profitable just 3 months after being acquired by MyBucks. never delivered profit in its history • Introduced payroll lending to boost revenue streams • Bank suffered from a rogue CEO who was dismissed upon acquisition • Upgraded status to tier one banking to allow transaction banking • MyBucks received the Central Bank of Uganda’s Approval letter on the 20th September • Upgraded banking system to introduce mobile and transaction banking 2016 to acquire a 49% (controlling) equity stake.
Next steps Opportunity Bank Uganda The operating efficiencies implemented by historically lost money due MyBucks have improved the bank’s • Further improve cost structures to operating costs that performance, and the bank is now profitable • Introduce transaction banking exceeded 100% of income and exceeding sales targets every month
Net profit (EUR) Net loan book (EUR) Deposits (EUR)
1.2
0.3 0.4
2016 2017 2018 HY2019 2016 2017 2018 HY2019 2016 2017 2018 HY2019 -0.4
Finclusion Pte Ltd | 33 www.finclusiongroup.com Case Study– MBC Malawi Successful turnaround of GBK through financial and operational restructuring measures
Challenges Achieved
• NFB launched operations in Malawi in 2015 and had since established itself • Appointed new CEO, CFO and COO recruited by MBC as a niche corporate banking business. • Introduced payroll lending, Introduced mobile banking • NFB had six branches, 11 ATMs and 96 employees at the time of acquisition. • By the end of November 2017 (i.e. 4 months after the • As of December 2016, the business had losses of c.MWK 2bn. acquisition), NFB started delivering profits. • No independent CEO and Chairman present at the point of investment • Number of branches increased to 13, and headcount • On 24 July 2017, MyBucks completed the acquisition of 50% of NFB, taking to 154 employees. over control of the entity. • New world-leading initiatives were implemented, such • On 5th January 2019, MyBucks took 100% control of the bank. as opening the first bank branch ever in a refugee Next steps camp in April 2018, at the Dzaleka Camp.
• On 9th July 2018, NFB issued the first corporate bond • Ensure a better matched ever at the Malawi Stock Exchange. asset / liability profile New Finance Bank A change in the operating model implemented by • Rebranding and removed negative association of past historically lost money due MyBucks has improved the bank’s performance • Drive retail offering forward to high fixed costs and low since it was acquired on 24 July 2017. The bank • Raised over EUR50m of customer deposits business volumes returned to profitability at the turn of that year. • Profitability
Net profit (EUR millions) Net loan book (EUR millions) Deposits (EUR millions)
0.2 50.2 0.0 19.2 15.2 38.5 2016 2017 2018 HY2019
4.3 8.2 -1.4 1.4 5.0
-2.5 2016 2017 2018 HY2019 2016 2017 2018 HY2019
Finclusion Pte Ltd | 34 www.finclusiongroup.com Case Study– MBC Mozambique Successful turnaround of GBK through financial and operational restructuring measures
Pre turnaround Post turnaround
• Banco Oportunidade de Mocambique, S.A. (BOM) was the smallest • After 10 years of consecutive losses, • In November 2017, BOM started to banking institution in Mozambique and was part of the network of MyBucks turned BOM profitable shortly after successfully issue and list bonds at the American NGO Opportunity International, working to promote financial take-over Mozambique Stock Exchange, becoming the inclusion. • The re-engineering of the BOM loan process largest issuer by June 2018. • Having been founded in 2005, at the time of acquisition it had 13 reduced loan TAT from 21 to 5 days. • In October 2018, BOM was rebranded as branches and c.300 employees and had been losing money since • In September 2017, BOM obtained a MBC with a loan book exceeding MZN1bn. inception. Government payroll deduction code, and by • Appointed new CEO with overhaul of • No professional CEO present, no board structures in place June 2018 it was already the second largest management and appointed non-executive provider of payroll loans in Mozambique. directors in line with King Standards
Banco Oportunidade Despite the challenging macro-economic environment historically lost money in Mozambique since 2016, the operating efficiencies due to operating costs implemented by MyBucks have drastically improved Next steps that typically exceeded the bank’s performance, and the bank is now profitable 100% of revenue and exceeding sales targets every month • Ensure a better matched asset / liability profile • Drive retail offering forward
Net profit (EUR millions) Net loan book (EUR millions) 2.2 Deposits (EUR millions) 22.7 14.0
5.2 4.1 3.3 3.7 2016 2017 2018
-0.7 2016 2017 2018 -0.9 2016 2017 2018
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