2020: The Year in Review

Most of us would like to forget 2020 and erase it from our memories.  The year has brought about untold hardships to billions and spread much misery around.  However, amongst all the upheavals, we at Agora managed to take some important strides during the year.  In time we will look back to 2020 as a pivotal year for the next phase of our evolution, even though much of the year was spent in firefighting and in responding to the new normal of doing business. 

During the year, our group of companies comprised of AMNV in the Netherlands as the main investing company, Moringaway in Mauritius as our new debt facility, Agora Microfinance Partners LLP in the UK as the financial advisor, and three retail microfinance operations: AMZ in Zambia, AMIL in India and AMK MFI Plc in Cambodia. 

The year started with a memorable team get together in Zambia in January.  During two weeks in the month, shareholders and Directors, senior management, and other colleagues from our investment management companies (AMNV, Moringaway and Agora LLP) came together in Zambia to better understand and appreciate the work of our affiliate Agora Microfinance Zambia (AMZ).  We travelled far and wide to some of the remote branches of AMZ, observed the work of our colleagues in the branches and attended village meetings to interact with clients and observe the field operations. 

The unanimous sentiment in the travelling party was of deep admiration and even awe for the work of our colleagues at AMZ, for how well they manage the tough terrain and reach remote areas of the country every day and bring financial services to the doorsteps of our clients.  In doing so in a financially viable manner, AMZ demonstrates the yet-unrealised potential of financial inclusion in Zambia.  Their progressive use of digitisation and technology means that operations are more and more efficient with every passing year. 

At the beginning of 2020, all Agora investees were serving 863,902 active clients.  At the end of the year, this had grown to 1,250,871, a credible result for a year that presented such difficult circumstances.

The remainder of the year got duly mired in the pandemic, with stoppages in operations, severely reduced mobility and above all, the health and financial impact on our clients.  Nevertheless, when we look back at 2020, we can say with satisfaction that despite all the challenges and setbacks, Agora made substantial progress towards its longer-term goals.  Some of the highlights of the year for us are discussed below.

AMK MFI Plc:  The final chapter in our success story

Agora exited its shareholding in AMK during 2020, a phased transaction that culminated at the end of August.  AMK has been our flagship investment for almost 10 years, and an association that stretches back 17 years, since AMK began operating in 2003.  It is heartening to see the new shareholders of AMK – the Shanghai Commercial and Savings Bank – already working to take AMK to a new level of financial service delivery focused on technology and agriculture.  Many great possibilities remain for AMK and we know that these will be realised well, given the strength of the management and the commitment of the new shareholders.

As we turn the final page of this success story, our exit from AMK MFI Plc now enables us to pivot to Sub-Saharan Africa with an enhanced focus and to begin work towards expanding our operations beyond Zambia.

We can look back proudly at our time with AMK especially during the first ten years where we were the principal shareholder of the company.  During this time AMK has grown 10 times in size (total assets), reduced its lending interest rates by 80%, increased its outreach to over a million active customers, and most importantly remains committed to string social performance alongside financial stability.  

AMIL, India: In recovery we showed our resilience

We have discussed the impact of the pandemic and the response of AMIL in more detail here – https://agoramirofinance.com/agora-microfinance-india-resilience-in-the-face-of-covid.  While AMIL bore the brunt of being in the epicentre of the pandemic in India, it has recovered in a remarkable fashion, and with confidence that much of the losses of 2020 will be recouped in 2021, assuming the pandemic continues to slow down as it has been over the past few months.  The recovery and resurgence of AMIL will have been achieved without any staff lay-offs, an important factor in its successful recovery later in the year.  The recovery in our operations, wherein our regular loan collections reached 80% of normal levels by December (from down to 2% in April, and only 25% in August), speaks of the relationship that AMIL has established with its clients, and their trust in the institution.  We were not just relieved but heartened to see the recovery trend in the second half of the year and are confident of AMIL’s continued growth and progress during 2021 and beyond.

Despite the pandemic, AMIL’s Assets under Management increased marginally from $6.1m to $6.4m from Dec 2019 to Dec 2020, and client numbers from 24,941 to 25,109.  AMIL expects to recover the lost ground during 2021, assuming the effects of the pandemic subside.  It is also actively expanding its operations beyond Mumbai in Nashik as well as in the Goa-North Karnataka regions.  This will enable further growth in operations to take place in a more diversified manner.

Moringaway:  A new debt facility takes shape and is ready to go

After a few years of planning, Moringaway finally began offering debt to promising financial intermediaries in Africa and Asia.  As with other parts of our business, progress was sometimes halted and often delayed due to the pandemic, yet we made enough progress to be satisfied with the results by the end of the year.  We hired our first member of staff, our first Investment Analyst, at the end of 2019 as part of our overall expansion plans.  Moringaway also received its license as a Credit Finance Provider by the Financial Services Commission of Mauritius during the year, clearing the regulatory path for the conduct of the debt business.  Despite the challenges of the pandemic, Moringaway was able to carry out due diligences as well as new transactions during the year, including its first new loan in Nigeria to a deposit taking financial institution and repeat loans to group affiliates.

Moringaway’s soft launch during 2020 prepares us for the scaling up during the coming year.  Whilst its loan book grew from $3m in 2019 to $4m in 2020, the growth was severely impacted by the pandemic and related restrictions on movement.  Once travel restrictions are eased around the globe, we expect to add new clients to our portfolio, and grow about $10m in total assets in the next 12-18 months. 

AMZ, Zambia: Emergence as the largest rural finance service provider in Zambia

Meanwhile, the impact of the pandemic in Zambia was more limited.  AMZ’s operations slowed down substantially for about 2 months during April-May, and the economy was also impacted by lockdowns, but slowdown did not last too long after and we could see more normalcy begin to return by the time we got to the second half of the year.  As a result, AMZ was able to catch up with its annual plans by the close of the year and finished strongly with good growth alongside a stable financial performance.  Amongst its new initiatives during the year, the most notable was its migration to a new core-banking system with an eye for further digitisation of processes as well as greater integration within information systems.  These allowed for AMZ to move to a completely digital process for client on-boarding, which paves the way for greater efficiencies in its service delivery. 

During 2020, AMZ increased its client outreach to over 80,000 clients from 52,000 at the beginning of the year.  In addition, it added over 6,000 clients to its health insurance offer and facilitated about $6m in mobile money transactions during the year.  AMZ established operations in 4 new locations during the year, bringing the total number of branches to 20, and a nationwide outreach barring one province.  Its loan book increased from $5.1m to $5.5m in USD terms, and 65% in Zambian Kwacha terms, the growth rate in USD terms having been impacted by large currency devaluation during the year.  It remained financially stable with a respectable Return on Equity of over 12% for the year despite the many challenges posed by COVID as well as the currency devaluation.

Agora Group: preparations underway for expansion to new markets

At the group level, we moved forward with our plans for further expansion in Sub-Saharan Africa.  The first step for this was to identify a suitable person to lead this initiative, and we were delighted to be able to welcome Wanjiku Wanyeki to the team https://agoramicrofinance.com/management-team-cuws.  Wanjiku comes with substantial fintech expertise and will be an asset to Agora in the years to come.  She took up her position as the Senior Portfolio Manager based in Lusaka in December, and we cannot wait to get started with our next steps during 2021.

Towards the end of 2020 we began engaging with shareholders of financial institutions in the region to identify opportunities for such partnerships or acquisitions.  As many as 3-4 such conversations are currently underway, and while they are still at an early stage, we see some promise in these conversations and will know during 2021 if some of these will crystallize.

In its new phase of evolution, the Agora Group is looking to continue to create long-term impact, now with a renewed focus in Sub-Saharan Africa.  We will achieve this through creating and supporting high quality financial institutions that serve the less reached/banked populations in a sustainable manner.  Through a mix of acquisitions, partnerships, and greenfield operations, we will look to expand our operations and reach multiple markets in the coming years.  Partnerships will prioritise institutions that share some of the same principles of financial inclusion with us, and where new capital and expertise holds promise to propel them forward in a substantive way.