Access Financial moves to stave off higher delinquency

Access Financial moves to stave off higher delinquency

Group credit monitoring enhanced as pandemic takes toll on economies

Observer Business writer

Sunday, September 20, 2020

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Microfinance provider Access Financial Services has taken a more direct and calculated approach to navigating their loan disbursements amid delinquency rates rising to 7.9 and 12 per cent for their Florida and Jamaican businesses, respectively.

With the COVID-19 pandemic decimating the livelihoods of many, Access has taken a direct hit on their bottom line based on measures taken by the governments in Jamaica and USA to control the pandemic.

This became more evident as the group's June financials revealed net profit shrinking by 80 per cent to $33 million as loan disbursement slowed during the height of the pandemic between April and May.

A major factor also influencing this reduction was the 32 per cent fall in the net fees and commissions on loans to $104 million combined with a 94 per cent increase in expected credit losses to $67 million.

There was also a decline in loan disbursement as loans and advances declined by 9 per cent since March to $4.1 billion as the company focuses on collections.

When questioned about the group's strategy towards navigating the current environment, founder and group Chief Executive Officer (CEO) Marcus James, who joined via video link, explained the rationale for the decline in loan activity.

“The fact that businesses would have been impacted by COVID-19 and had to close due to Government guidelines, there would have been an impact on our delinquency rates. We have implemented aggressive strategies to contain delinquency and they have been effective.

“We're always looking at methodologies to improve our underwriting. As technology evolves and becomes more acceptable and adaptable, we plan to use all resources available to help with loan analysis and loan monitoring,” James reported to shareholders.

New General Manager Frederick Williams shed further light on how Access clients especially in the small business segment were affected by the pandemic and how the group's local operations have adapted.

“Based off how the pandemic impacted certain sectors such as tourism and the services industry, those businesses weren't producing as there was no market to produce for. You will find some customers that are doing well in particular areas now, but it's just proper assessment and proper credit adjudication just to make sure we are finding the great quality clients wherever they are right now.”

“Our website is performing much better than our My Access app right now. From April to now, we have put a lot of work to our website getting it ready to take loan applications.

“That is working a lot better than our app and our customers are more interested in the website at this time,” Williams said.

Despite being the first company to list on the Jamaica Stock Exchange's (JSE) Junior Market in October 2009 for $100 million of equity capital, Access has not indicated a preference to move over to the main market of the JSE to bolster their capital base even though their tax break has expired.

James also reiterated that the company will continue to monitor and decide at their quarterly board meetings on whether or not a dividend will be appropriate at that time. Access had skipped a quarterly dividend payment in May and decreased its dividend pay-out by 83 per cent to only $0.05 for the quarter.

“We have adequate liquidity from internally generated funds.

“There is no benefit to moving from the junior market to the main market. That's something the board will have to consider as it's not on the table right now,” James said.

Former junior market company Key Insurance Limited migrated earlier this year to the main market as new owners GraceKennedy Limited look to use a rights issue to boost the company's capital base.

Part of the reason for this move comes as a result of the $500 million share capital limit imposed by the JSE's Junior market rules which would have limited Key's capital raise.

This comes in a time where there is additional public offering rush, which has seen several companies seek to generate billions of dollars in additional capital from shareholders and the public.

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