With an asset base of more than $3 billion and growing demand from the Jamaican market, microcredit firm Dolla Financial Services Limited will be approaching the capital markets for another $2 billion in financing for its ambitious growth plans.

This was revealed at the company’s May 31 annual general meeting (AGM) where the Dolla principals telegraphed their plans to achieve $2 billion in revenue and expand its local presence into underserved communities and towns.

Prior to listing in June 2022 on the Junior Market of the Jamaica Stock Exchange (JSE), Dolla’s consolidated asset base in December 2021 was $861.09 million with its loan portfolio at $750.50 million. This portfolio was responsible for delivering annualised total income of $395.28 million and profit before tax (PBT) of $167.80 million.

Fast-forward to December 2023 and that asset base had reached $2.99 billion composing of $2.45 billion in loans. This contributed to the company reaching $1.18 billion in total income and PBT of $444.88 million. By the end of Q1 2024, Dolla’s asset base had reached $3.23 billion with loans totalling $2.82 billion.

“In terms of the fund raise, we are currently exploring just about $2 billion in terms of this year’s capital raise. We believe that based on our ratios and where we are and the numbers, we’re planning to achieve this year, that’s the maximum that we’re able to accommodate at this time. However, we’re also looking at other opportunities in terms of the stock market and those changes that were announced this year,” said Trevene McKenzie, Dolla’s chief financial officer (CFO) on the current fund-raising plans in 2024.

However, the way in which this capital raise will be manifested is still a question to be answered. Dolla raised a net amount of $221.80 million in fresh equity from its June 2022 initial public offering (IPO) and $1.17 billion in debt from its October 2022 bond raise. Dolla then received $70 million from Optimum Distributors Limited, $300 million from Mayberry Investments Limited and $300 million from the Development Bank of Jamaica (DBJ) microcredit facility, which was on-lent from Mayberry Investments, in December 2023.

While Minister of Finance Dr Nigel Clarke announced the intention to raise the Junior Market threshold from $500 million to $750 million, that has yet to take place. Dolla’s current share capital is $462.15 million which leaves them with literally no space for raising any additional equity capital unless they will consider migrating to the Main Market. However, the constraint of such a move is that Dolla would now be subject to paying income tax at 33.3 per cent due to it being a licensed microcredit entity. It would also constrain its ability to list any subsidiaries on the Junior Market due to JSE rules.

This opened up the question by some shareholders at the AGM on the possibility of listing Dolla’s high-flying subsidiary Ultra Financier Limited on the JSE. Ultra currently has a share capital of $1 million and is taxed at 25 per cent due to it falling outside of the remit of the Microcredit Act.

Apart from its current capital structure, Ultra Financier brought in $331 million in interest income and had a PBT of $141 million in 2023. The firm began in November 2022 to service high net worth clients by securitising their luxury assets to secure private financing. Ultra’s loan book had swelled to $847 million in 2023 and has ambitions to grow the portfolio to $1 billion this year. This business is led by David Henriques.

“Before we go ahead and do any capital raise or debt raise, we ensure to do our analysis of how those numbers will impact our ratios and the numbers on a whole. What we’re doing now is doing our evaluations to see how an APO versus an IPO for Ultra and a debt raise will impact the numbers for this year and for next year. So, we are currently undergoing that process and as soon as we’re complete, we’ll be able to make a prudent decision and move forward with what’s best for the company,” McKenzie added, regarding the possibility of returning to the equity markets.

Dolla Chief Executive Officer Kenroy Kerr also noted that they’re in dialogue with Mayberry Investments on the most appropriate route to source funding going forward.

Dolla is currently one of 52 approved licensed microcredit firms which are regulated by the Bank of Jamaica. Other listed microcredit players include Access Financial Services Limited and ISP Finance Limited while other subsidiary or associate microcredit firms include Lasco Microfinance Limited, McKayla Financial Services Limited, Eppley Consumer Finance Limited and Mundo Finance Limited.

Dolla is currently the second-largest listed microcredit player behind Access Financial Services which had $7.22 billion in consolidated assets and $5.66 billion in loans and advances.

While Dolla has announced its intention to wind up its Guyanese subsidiary by March 2025, it has doubled down on its Jamaica focus. Due to the lengthy timelines that can occur for regional expansion, Dolla has not reiterated interest in St Lucia and Barbados following last year’s announcements. It will instead be looking to grow its customer base which grew by 36 per cent to 8,500 persons in 2023 and deliberating on how to grow with their 10 branches.

“We are actually looking for areas where there are high demands and making the necessary provisions, whether to open a physical location or just capitalise on having a representative placed in those locations. As soon as we are able to announce the opening of a new branch, then we will do so. You can appreciate that as a regulated entity, we have to follow certain procedures before we can come to the public to make announcements,” Kerr explained, regarding the local branch push.

Dolla’s first-quarter report showed its total interest income rising by 23 per cent to $365.49 million while growing PBT 22 per cent to $152.35 million. Net profit rose 13 per cent to $139.99 million with earnings per share (EPS) at $0.06. The trailing 12-month EPS is $0.18.

Dolla’s share price closed Friday at 2.51 which left it down seven per cent in 2024 with a market capitalisation of $6.28 billion. Although three directors were elected at Dolla’s AGM, Walter Scott, KC and Xesus Johnston are yet to join the board due to BOJ’s fit and proper approval. Tricia Nicholas, Dolla’s compliance and governance manager and nominated officer, resigned on May 30 with head of legal Chad Wynter to become the new nominated officer pending BOJ approval.

FirstRock Private Equity Limited (FRPE) has made a significant return in the three years since it acquired a 75 per cent stake in Dolla for US$1.1 million (J$158.88 million). It sold 15 per cent of Dolla for $187.50 million at its IPO, 24 per cent to Mayberry Jamaican Equities Limited and Supreme Ventures Limited for $1.02 billion at $1.70 and ten per cent to Widebase for more than an estimated $300 million. This is on top of collecting $132.55 million in dividends and $35 million in management fees from Dolla.

FRPE was co-founder by Ryan Reid and Dr Michael Banbury. Reid currently chairs Dolla’s board.