BUILDING A LEADING AFRICAN DIGITAL FINANCIAL SERVICES GROUP - COMPANY PRESENTATION | JULY 2020 - Mintos
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B U I L D I N G A L E A D I N G A F R I C A N D I G I TA L F I N A N C I A L S E R V I C E S G R O U P
C O M PA N Y P R E S E N TAT I O N | J U LY 2 0 2 0
Finclusion Pte Ltd | 1 www.finclusiongroup.com
SCALING PROFITABLE UNIT ECONOMICS THROUGH TECHNOLOGY >100k clients
Delivering sustainable social impact through financial inclusion implemented with financial excellence Served with over 1m loans in five markets in Africa
>5000 jobs
1 Our strategy is acquiring turnaround cases and transforming these into profitable Significant continued direct and indirect employment
digital lenders underpinned by talent, capital and technology creation
Finclusion Group acquired its initial footprint out of financial distress situation from Close to $300mn of disbursements
2 Until 31 December 2019 historic (of which USD90m
MyBucks S.A. in October 2019, with a successful turnaround resulting in a monthly payroll, USD200m consumer)
profit vis-à-vis historic losses of >US$500k a month within nine months
Fully digital lending model well suited post covid-19, particularly paired with proven USD20m Gross Loan Book
3 Across the portfolio as of 31 December 2019 with
alternative credit scoring models and partnership distribution models already in place USD10m of Equity
– provides ability to scale-up at highly profitable margin economics
7.1% Default Rate
Consistent over an eight-year history of credit
Significant future growth possible from emerging middle class and technology
4
adoption not currently factored in – unique risk/return through profitable baseline
economics whilst being positioned ideally to benefit from macroeconomics trends
Long term exit anticipated from regional trade sale (North/South-African banking
5
groups), African private equity growth investor or a public listing 2
Lending only Eastern Africa
operations Kenya | Tanzania
3 Southern Africa
Lending only South Africa | Eswatini
operations
Namibia
Finclusion Pte Ltd | 2 www.finclusiongroup.com
SIGNIFICANT AFRICAN GROWTH ANTICIPATED FROM INCREASED TECHNOLOGY ADOPTION
Continent perfectly set for digital financial inclusion, whilst banking penetration is currently still lagging
The middle class as a share of the total population,
according to AfDB criteria
Cell phone ownership
Africa 2020
Smartphone Basic Phone No phone
Population: 1 338 187 190 43,8% 19%
Upper Class >$20/Day
Upper-Middle Class
Between $10 and $20
person/day
Median Age: 19.7
Tanzania
Between $4 and $10 Urban Population Aged 15-24
person/day
Lower-Middle Class
Between $2 and $4
person/day Kenya
Floating Class
Africa 2050
PROVEN TECHNOLOGY NOW READY FOR MONETIZATION
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 Technology Team
Fractal Labs has processed over 26m loan applications through its current Team previously responsible for winning numerous awards, and being cited in
technology or predecessor versions 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 EUR20m technology investment
Technology deployed in fourteen financial institutions, of which five are within Benefiting from knowledge generated through historic investment in digital
the Finclusion Group of Companies platform in excess of EUR20m under previous ownership
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 any
banking back-end system real-time credit assessment existing operational solution
Finclusion Pte Ltd | 4 www.finclusiongroup.com
FINCLUSION TEAM
Over six decades combined banking, microfinance and technology experience with a track record of successful Africa-exits
Timothy Nuy Tamuka Mpofu Gunther Marais Tonderai Mutesva Mark Young Leilanie Uys
Founder / Chief Financial Officer Chief Risk Officer / CEO Eastern Africa / CEO Southern Africa / Chief Data Officer
Chief Executive Officer Zimbabwean Managing Director Fractal Labs Chief Investment Officer Chief Digital Officer South African
Dutch South African Zimbabwean South African
• >10 years financial services • >10 years financial • >10 years financial • >10 years financial • Founder and CEO of • She holds a master’s
experience of which 8 in Africa services experience services experience services experience Ideation, a specialist degree in Computer and
lending consulting Electronic Engineering
• Most recently completed the • Completed articles with • Formerly a Senior • Formerly, corporate company with clients in which was focused on the
successful turnaround and KPMG with a specialty in Quantitative Analyst at finance executive with South Africa, Nigeria, automatic classification of
debt recapitalization of banking and investments Nedbank and a financial MyBucks, BancABC and Kenya and Malawi digital signals.
MyBucks for >€100m risk advisor at KPMG Atlas Mara
• Head of Internal Audit of • Previously the Deputy CEO • She completed her
• Formerly, Investment Director GetBucks Zimbabwe • MSC Cqf • CFA Charterholder and CRO for Bayport SA master’s degree at the
at ADC African Development and the CRO of Old CSIR’s electronic warfare
Corporation AG sold to Atlas • Certified Expert in • Financial Risk Manger Mutual Finance. He has unit where she gained
Mara Microfinance from the served as the chair of the experience in machine
Frankfurt School of credit committee of these learning, radar, signal
• Trained with KPMG in Finance and Management organisations. processing, and software
Hamburg, Germany and firmware engineering.
• CFA Charterholder
Finclusion Pte Ltd | 5 www.finclusiongroup.com
KEY DIFFERENTIATORS TOWARDS SUCCESS
Significant turn around experience leads to risk focused approach
Risk and Mitigants Governance and Social Impact
Liquidity Risk Governance
• Continuous risk management and data management of underlying • Professional management teams in each operation
portfolio companies
• Best-practice board, majority independent for each local
• Strong relationship maintained with all lenders to overcome temporary operation with full committee structures
liquidity challenges, and currently on a low leverage ratio
• Monthly management accounting and meetings
Geo-Political Risk Shareholders
• Significant diversification in portfolio geographies to minimize individual • Mission and vision aligned shareholders
risk
• Focus on financial excellence to deliver socially impactful
• Focus on local currency funding, with continuous FX risk assessment and products in a profitable manner, in order to be able to do so
hedging where required continuously over a period of time
• Local partners identified or in process of identification in key markets
Social Impact
• Adherence to SMART principles of responsible lending
Credit Risk
• Financial wellness and education programmes to ensure
• Real-time credit monitoring allows us to identify red-flags early
sustainable growth of customers
• IFRS 9 compliant provision modelling with macroeconomic forward-
• Significant direct and indirect employment created
looking statistical inferencing
• Continued local community social initiatives
• Clear credit policies in place, with appropriate governance structures for
enforcement
Decade of hands-on African financial services experience demonstrates proven track record in successfully managing risks
Finclusion Pte Ltd | 6 www.finclusiongroup.com
APPENDIX I – DETAILS ON BUSINESS MODEL
Luxembourg Finance
Awards
Winner
2018
Finclusion Pte Ltd | 7 www.finclusiongroup.com
WHAT WILL THE WORLD BE LIKE WHEN WE EMERGE FROM COVID 19
Finclusion Group well positioned to benefit from digital-enhanced post Covid-19 world
Higher default rates and lower affordability of clients
Likely loss of income throughout the economy, with a requirement to rely on alternate credit
models to continue servicing customers without incurring excessive risk. Finclusion Group benefits
from its credit-tightening measures over the past twelve months, which paired with its credit
scoring technology, has allowed it to continue servicing its clients throughout the lock-down
Contactless delivery a must
Significant challenges for brick-and-mortar competitors and traditional
microfinance houses as social distancing rules will limit ability to assess and grant
credit, but most importantly to collect outstanding funds. Digital solutions will be
a pre-requisite
Customer care and well-being for the long term
Provide thoughtful pay-out options focused on long-term customer retention, with grocery and
airtime vouchers for example being allowed from insurance claims to keep families going for
longer. Expected focus on credit for education and productive purposes as the world has
permanently shifted to a more social equilibrium
Finclusion Pte Ltd | 8 8 www.finclusiongroup.com
WE ARE READY FOR A POST COVID-19 WORLD
Pivoted the business to include transactional solutions to provide customers a holistic digital eco system
Voice Contracting
LENDING Implemented simple and easy to understand voice contracting to reduce
time spent on application processes and reduce turnaround times,
• Technology driven short term lending resulting in quicker payout to clients requiring emergency funds
• Website and App
• Digital wallet for saving, transfers and payments
• Customer-centric financial eco-system. Remote Contact Center
• Non traditional credit scoring: customer data, financial history & psychometrics Adopted AI driven Zailab contact center and customer care platform that
• Enhancing good payment behaviour through rewards can be accessed from any device with internet access, allowing for
flawless servicing of customers despite remote working requirements
REHABILITATION Adapted lending criteria
Tightened credit criteria for personal loans to mitigate potentially
• Give clients access to their financial data irresponsible borrowing during the Covid-19 pandemic and over
• Provide relieve to those in financial distress indebting consumers, whilst maintaining credit quality and ensuring an
• Help customers understand their credit status ability to continue servicing good clients throughout the lock-down
• Support through financial education
• Empower clients to make financially sound decisions
Collection and payment innovation
Implemented payment arrangements for customers that have had a loss
INSURANCE of income and created innovative alternative payment solutions. To
maintain a high collection rate, customers are rewarded for good
• Fully digital and automated platform payment behavior, with monetary vouchers that fulfil a need during
• Sign up, add/remove beneficiaries and claim online difficult times
• 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 | 9 9 www.finclusiongroup.comHOW WE ARE EMPOWERING OUR COMMUNITIES
Strong focus on positively impacting our clients and ensuring customer loyalty
Access to medical card Empower through technology
Through a partnership with Oyi Medical card, thousands Through partnerships with MaraPhones and
of people that may not afford medical aid or medical PayJoy, people have access to smart devices that
insurance have access to a medical card to pay for day to can be purchased via an affordable monthly
day medical expenses, with the option to apply for credit instalment
when needed. The card can only be used at medical
outlets, reducing reckless spending
Credit rehabilitation
Provide a platform and service to clients that
Empowering small businesses: have found themselves in financial difficulty,
Providing a digital platform for small businesses to display preventing over-indebtedness and backlisting,
products, enabling exposure to a larger market and safe whilst assisting with removal of judgements
payment solutions. Product delivery is fulfilled by a through tailored financial products
partnership with Drivers Club which works with personal
transport and taxi services nationally
Funeral Cover
Financial education Include the option for customers to obtain
Provide the tools and platforms to educate clients on
funeral cover for their families that will ease
financial basics, enabling them to make better financial
financial stress in the case of demise of a loved
solutions for the future.
one. 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 | 1010 www.finclusiongroup.comLOAN APPLICATION PROCESS ADJUSTED BY MARKET
Focused on generating large scale volumes by optimizing user experience and business process Free Credit Report
flow
• Feedback on credit scores, financial history and
spending habits
• Assist clients to improve their financial status.
Finance Guide
• Available to download from the website or on request
The platform has been developed in a way that can be easily
adapted to different business requirements.
Design, flow and functionality can be tailored to market and customer experience.
Partners:
Finclusion Pte Ltd | 11 www.finclusiongroup.comSIX PROPRIETARY AI SOLUTIONS EXPECTED TO CONTROL CREDIT RISK WHILST GROWING PORTFOLIO
Over eight years of historical deployment across fourteen markets and three continents, responsible for close to $1bn of loans in predecessor entities
Supervised machine learning to make predictions within
seconds. Using financial and psychometric data allows
Scrutinization of clients’ personal data to optimize faster more accurate decision making, greatly improving
leads and define quality and well as which clients are the speed of loan application processes as well as user
more likely qualify and convert into a sale. experience.
Transactional behavior modelling creates
opportunity to up-sell, cross sell and identify where
Automated modelling of IFRS 9 compliant improvements can be made on spending habits
provisions and further risk analytics to inform with product expansion possibilities.
critical risk appetite and business decisioning
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 | 12 www.finclusiongroup.comAPPENDIX II – DETAILS ON OPERATIONS
Luxembourg Finance
Awards
Winner
2018
Finclusion Pte Ltd | 13 www.finclusiongroup.comTWO KEY LENDING PLATFORMS
Right-sized and prepared for a significant scaling up of opportunity arising from post Covid-19 economic growth
Southern Africa Eastern Africa
• Operational since 2011, fully digital with a strong retail focus across South Africa, Eswatini & Namibia • Operational since 1993 – currently 7 branches, 18 satellite offices, 56 staff and 200 agents
• Distribution growth to emerge via partner enablement strategy • The company has leveraged on technology and has diversified its loan products to include
• HollardMoney online (www.hollardmoney.co.za) live in Dec 2019 • Vehicle loan book loans;
• Van Schaik student finance live Jan 2020 • Salary advance loans to persons employed in the private sector;
• Cell C online and branch distribution live in late Q3 2020 • A fully automated digital loan product (the Haraka app) (Awards - runner up for the best
• Mara Phone in-store finance Q3 2020 local instant mobi-loans app category at the 2nd Digital inclusion award); and
• OnePlan for insurance excess shortfall financing in Q4 2020 • Clearing finance – an import finance product
• Digital payment and collection channels launched in Q1 2020 – growing by 40% per week over the first three • Currently strong drive to upgrade into a deposit taking license and launch SMME lending
weeks since implementation
Finclusion has
• Cleaned-up the balance sheet, optimized loan portfolio and reassessed all assets
Finclusion has
• Significantly reduced cost due to staff retrenchment and procurement policies
• Completely cleaned up the balance sheet through a reassessment of all assets and debt conversion
• Appointed new and aligned management – currently in the process of enhancing the Board of
• Significantly reduced cost due to staff retrenchment and procurement policies
Directors
• Realigned lending terms and optimized all credit modules
• Appointed aligned management and strengthened the Board of Directors
USD 30-Jun-19 31-Mar-20 USD 30-Jun-19 31-Mar-20
Shareholders equity (10.7 m) 5.0 m Shareholders equity 1.6 m 2.8 m
Debt 28.7 m 1.6 m Debt 4.0 m 5.1 m
Debt / Equity n.m. 0.3x Debt / Equity 2.5x 1.8x
Loan book 9.9 m 7.5 m Loan book 5.8 m 6.9 m
Bad debt ratio 50% 13% Bad debt ratio 21%
Default rate (CD1) 9% 4% Default rate (CD1) 9% 4%
Cost / Loan book p.a. 84% 12% Cost / Loan book p.a. 25% 9%
Finclusion Pte Ltd | 14 www.finclusiongroup.comPRODUCTS IN SOUTHERN AFRICA
Loan Portfolio Online Payroll Portfolio Term Mix
Months Value Volume
60 months 7% 0%
Sales 2020 Online Payroll Sales Term Mix
Months Value Volume
60 months 6% 1%
Product description Online Payroll
Clients can apply for a loan via the website. Loans up to a maximum of USD500, This is a term loan offered to employees. Loans go up to a maximum of
the loan term can be stipulated by the client (up to 6 months). Approval is based USD1,500 over 24 months and are tailor made for each company.
on a credit assessment and affordability of the client. SME / Order Finance
This product is expected to launch within the next six months, as the business
recovers from Covid-19
Finclusion Pte Ltd | 15 www.finclusiongroup.comPRODUCTS IN EAST AFRICA
Portfolio size and distribution by product type (USD)
Product description
Habari
This is a one-month loan offered to private sector employers’ minimum and
83.97% maximum loan amount is USD 50 to 2,000 respectively.
13.41%
Haraka
1.33% This is a one-month mobile app loan offered to clients above 18 years. The
1.29% minimum and maximum loan amount is USD 5 to 50 respectively.
Payroll
This is a term loan offered to Government employees. The loan tenor is between 1
to 72 months with minimum and maximum loan amount being USD 50 to 10,000.
Payroll OI Kenya GB Habari Haraka
VLB
Offered to clients both employed, and self employed with vehicle collateral. The
Product Portfolio Size (USD)
loan tenor is 3 to 12 months with minimum and maximum loan amount being USD
Payroll USD6.7m
500 to 25,000
OI Kenya GetBucks USD1.1m
Habari USD0.1m SME / Order Finance
This product is expected to launch within the next six months, as the business
Haraka USD0.1m
recovers from Covid-19
Total USD8.0m
USD rate=107.29
Finclusion Pte Ltd | 16 www.finclusiongroup.comAPPENDIX III – DETAILS ON FINANCIALS
Luxembourg Finance
Awards
Winner
2018
Finclusion Pte Ltd | 17 www.finclusiongroup.comKEY FINANCIAL INDICATORS SIGNIFICANTLY UP TO HISTORIC PERFORMANCE
Strong foundation for envisioned growth trajectory
High Level Financials Commentary
Finclusion - Consolidated Pro Forma Financials Restructuring
USD June 2020 December 2019 June 2019 • Equity recapitalization by c. EUR17m achieved through the restructuring,
6 Months 6 Months 12 Months
leading to a quasi unlevered balance sheet providing for significant growth
Actual Pro Forma Pro Forma
Net trading income
opportunities
3.8 m 3.6 m 7.6 m
Loan book impairment charges (1.1 m) (1.7 m) (13.1 m) • Operating expenses reduced substantially, whilst curtailing loan book
Operating expenses (3.2 m) (5.0 m) (9.7 m) impairments despite growing loan book revenue and keeping total size
Profit before tax .1 m (3.0 m) (15.2 m) constant
• Q2 equity reduction fully currency related
Cash and cash equivalents 2.6 m .9 m 1.1 m
Current Trading
Loan book advance 14.4 m 17.2 m 15.6 m
• Group records profitability in first two quarter despite Covid-19 challenges,
Intangibles and goodwill 1.1 m 1.3 m 1.4 m
Other assets
predominantly as a result of strong performance in Kenya and Swaziland
4.2 m 3.1 m 15.1 m
Total Assets 22.3 m 22.5 m 33.3 m • South Africa standalone continues to record a loss, as it cannot grow lending
Financial debt 9.3 m 8.7 m 32.7 m volumes given the current Covid restrictions
Other liabilties 2.4 m 2.5 m 9.1 m • Management anticipates South Africa returning to monthly profitability in the
11.7 m 11.2 m 41.8 m last quarter, as economic circumstances allow a growing of credit volumes
Total Equity 10.6 m 11.3 m (8.5 m)
• Business has significant equity reserves, and continues to have a healthy
Key ratios:
cashflow pattern
Equity / Debt Ratio 114% 130% -26%
Loan book / Assets Ratio
• Credit performance have stayed within expectations to date, with the Group
65% 76% 47%
Cash to financial debt ratio 27% 11% 3% continuing to careful monitor any Covid-19 related impacts
Finclusion Pte Ltd | 18 www.finclusiongroup.comThis document is strictly confidential and is not for publication or circulation. All information and ideas are strictly confidential and proprietary and may not be communicated, transmitted or distributed to any party in any form or for any purpose without the express prior written consent of Finclusion Limited (“Finclusion”). By accepting this document, the recipient both understands and accepts this confidentiality clause. This document does not constitute a formal proposal and is presented for discussion purposes only to enable the recipient to assess its feasibility. The information contained in this document remains the property of Finclusion and should be returned or destroyed in the event that the recipient does not intend to proceed further. Finclusion Pte Ltd | 19 www.finclusiongroup.com
Finclusion Pte Ltd South Africa eSwatini Kenya
151 Chin Swee Road 1st floor, The Wedge Office 117/8 1st Floor, Avocado Towers
#07-12 Manhattan House 43 Garsfontein Road Riverstone Mall Muthithi Road
Singapore, 169876 Waterkloof Manzini Westlands
Number: 201824790K Pretoria, 0145 Kingdom of eSwatini Nairobi, Kenya
Republic of South Africa
info@finclusiongroup.com
www.finclusiongroup.com
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