ASA International Group PLC (ASAI) Earnings Call Transcript & Summary

Welcome to the 2019 Full Year Results Investor and Analysts Call for the ASA International Group plc. [Operator Instructions] I would now like to hand you over to the CEO of ASA International, Mr. Dirk Brouwer. Please go ahead.

Thank you very much. Welcome for attending this full year results call, which will obviously talk about the full year as well as all the things which have been happening since COVID-19. 2019 has been a good year, although we had some challenging market circumstances, particularly in the -- particularly in some specific markets in Asia and Africa. But overall, solid growth and the operational financial performance has been good. Q1, also for the first 2 months was actually a very good performance, just in line with expectations. Weakened, obviously, in the second half of March, very sluggish when these lockdown started to come in effect. But overall, we saw the performance was operationally and actually quite good. Now the disruption, which is caused by COVID-19 is truly, obviously, a challenge. But at the same time, we are quite confident with what we see now from the field activities that we will come out of this stronger once the business environment has normalized. What we have seen since the lockdown started, that's the health impact on our clients and our staff has been quite small, which, in fact, no staff and only 2 of our clients who have been confirmed to be -- have been affected by COVID-19. These are 2 clients who are actually both live in Tanzania, and they're also part of one group. So -- but other than that, out of our 2.5 million staff, no one has been affected. And out of our 2.5 million clients, excuse me, and our 12,500 staff, no one has been affected and only 2 out of 2.5 million clients have had an infection of COVID-19. And we have also not known or not known of any casualties amongst our clients and clearly, certainly not amongst our staff. Now what we have done immediately after we noticed or we were -- became aware that these lockdowns were going to be instituted that we were focused immediately to ensure that we had enough cash on our balance sheet to ensure that we could weather the storm because at the time, we obviously didn't know how long these lockdowns would stay in place. We also immediately instituted various cost reduction and cost preservation measures, which could over a period of 3 months during the lockdown basically save us $6 million over that period. But that would only gradually be instituted because some of those savings could potentially harm the business once we actually would restart. So in fact, we have had those reductions in deferrals of income of salaries in place for the first and the second months. And we were planning to institute it possibly for the third month to our field stuff, but we're not going to get to that luckily, fortunately, because all our operations are now back into business, and we are doing our normal work. And clearly, we don't want to demotivate our staff in what are most definitely challenging circumstances. We are well capitalized as a company. Yes, you probably know from our balance sheet, but we also have, as part of that, about almost $92 million of available unrestricted cash since 28th of May this year. Now that gives us, fortunately, a lot of flexibility. This also allows us to sit out these lockdowns over that period, because clearly, we would have -- we still have operating cost to pay, rents on our branches and also interest on our loans. And that is all -- we've all been stayed very current on that. And we have no particularly difficulty on the liquidity front. And in fact, we have, in our view, plenty. Also, once the markets normalize to add to basically finance our clients going forward with the funds we have in hand at the moment. Now once this lockdown started, we have looked very carefully to try to understand what the impact could be on our business. On this particular, what we consider to be very disruptive events, which effectively within 10 days covered all our countries where we were operating. As you know, we're operating in 13 countries across the world. These lockdown started actually in the East, in the Philippines. And then they gradually but very quickly actually extended themselves all the way to the west, to Ghana, but it took about 10 days. Now during that period, obviously, we were -- fortunately that helped us to also ensure that each of the entities in Africa were well prepared. And also in short that they were preserving cash at the time during that 10-day period. So that kept -- that helped us to ensure that we have always enough liquidity available. Now we've looked at what this now could mean during this lockdown, what could it mean for our business? Clearly, our clients were going to be disrupted for at least -- well, most countries, the minimum was 3 weeks in Ghana. And some countries are just only now actually emerging from the lockdowns, and they basically, after 8 weeks of lockdown, and that's in the Philippines. Now we looked at all kind of previous credit events, which we have had of the whole life of the company. And we started in 2007 with ASA International and try to determine what could be the worst possible situation. Now only once in our lifetime -- as you may know, we have about -- our total write-offs over the whole period from 2007 to last year has actually been 0.22% on average per year, write-off of our portfolio. Our portfolio quality traditionally is very strong, very high. It was very, very few true write-off. But there's 1 year, in 2012, where we did write-off about 2% of our portfolio. And this was caused by an event in India, which, at the time, our biggest market, as well as an event -- a natural calamity event in the Philippines. And in India, it was because there was a big regulatory change taking place where the Andra Pradesh government actually banned microfinance in their particular state, and there was a view that this could be extended in other states in India and also including West Bengal, where all our branches were at the time. So at the time, we basically were forced, well, we actually decided to instead of when the banks got very jittery at that point in India to -- they basically withdrew funding from the companies to microfinance institutions. And at the time, we basically said, well, we're not going to replace it with equity. So we reduced the size of our portfolio within a period of 2 years by about 70%. We closed 2/3 of our branches. Those were very disruptive events. And that ultimately led, together with this big natural calamity in Manila, where many of our clients' businesses were wiped out during that situation, the total write-off over those -- over -- due to those 2 events concurring almost at the same time, was about 2%. And this was when about these 2 countries represented about 67% or 2/3 of our business of our total portfolio at the time. So this was very -- quite a big event for us. But since that time, we have never really experienced any major write-offs. The only situation, which looks somewhat similar, in our view, at this point was the -- which looks similar to the COVID-19 lockdowns is basically demonetization in India, where in 2016, the government actually banned or basically demonetized and made them envelope. The most commonly used bank notes in India, the [ INR 500 ] and [ INR 1,000 ] notes, and we were not able to replace them for a period of about 6 weeks. So they were overnight invalidated. It took 6 weeks or so before actually, the new bank notes were in sufficient amounts in circulation that clients could actually pay our loans or repay our loans to us and actually transact with their businesses. Because without cash, they literally couldn't do their business and don't run their shops. So it was quite disruptive, and in a sense, somewhat similar to this disruption in our view, because in this particular case, also, our clients are not truly affected by anything other than the lockdown but their businesses are hurt or many of them -- their businesses are hurt because they cannot do their trading. There's lots of restrictions of movements of people, which doesn't allow them to do their normal type of businesses. But from that particular event, we learned and we have experienced that, yes, the -- our portfolio quality deteriorated very quickly because clients couldn't pay us anything at the time. And so our PAR>30, which is a particularly important, which means that 1 or more installments for -- within a 30-day period are overdue actually spiked close to 20% in about 6 to 8 weeks. But then within about 3 months, all that was had disappeared, all that overdue and an actual true write-off of our portfolio, of course, by this event was actually about 0.5%. So just to give you a bit of perspective, what kinds of situation we are in now? And how does that compare? So we basically said, look, this is obviously somewhat different again. It's -- we don't know how long it's going to last. At least this was the situation when we started, and we started to evaluate what could be the potential impact on our portfolio. And we said, look, the worst situation we've ever had was 2%. Well, let's say, if it would ever be more, well, that it might be 2% to 3%. But it's hard for us to believe looking at all those previous experience that as a result of COVID-19, the disruption caused by COVID-19, that our write-offs would, in fact, exceed 2% to 3% of our loan portfolio. Nevertheless, 2% or 3% is a substantial sum of money on a loan portfolio of $450 million as of 31st of March 2020. And clearly, it's going to be our intention. And it's what our job is, to try to minimize that and actually do better than that 2% to 3%. And that's what we're working very hard on to try to ensure that we actually will try to minimize any losses and then our clients will actually not get damaged by this and actually has to default as a result of the disruption caused by COVID-19. Now we have seen from the recent past, since we have been able to restart/resume our operations in the various countries. And at this time, we actually have resumed collections in all countries with the exception of India. Although in India, we started yesterday. We don't have the data yet from that. And we -- and the other country where we're not operating yet is Uganda. But all other countries, we actually have gradually been able to resume business. And we have already quite a lot of data from what kind of collections they do relative to the collections they expected for every single day. And what we've seen is the collection efficiency has been quite strong, and it's gradually increasing in all the countries that now have emerged from those lockouts. So that gives us quite a bit of confidence. We still have a long road to go, but it gives us quite a bit of confidence that actually the ultimate write-offs on our portfolio will be quite limited. Now as a result, also with other developments we have seen over the last year with the regulatory situation where we basically now got the merger done from ASA NGO and ASA MFB, which is very important. Because now the NGO activities have been absorbed by the microfinance bank that increases the capitalization of the bank, which is good. It also allows us to start dividending or declare dividends over time from that larger base of capital. But it also allows us to grow the business in a more efficient manner. Secondly, we got the NOC granted. That's a no objection certificate by the State Bank of Pakistan for ASA Pakistan transform into an MFB. Again, this is very important because this will allow us to start mobilizing deposits once we have this license, and we hope to get that in the third quarter of this year. Once that we have that license, we can start mobilizing deposits from our clients in the broader public. We also got the provision granted to collect deposits in Myanmar, which would be very helpful. And we got also earlier last year, the deposit-taking license granted in Sri Lanka. So that's all very useful, a very important development, which we are very pleased with at the time, and that will bring us -- actually will provide us with low-cost funding for our operations and a very steady source of low-cost funding going forward. Secondly, what we have been able to do is to roll out the real-time ASA Microfinance Banking System, we call it, real-time AMBS, which will be completed by the end of June. We only have a couple of countries to finalize the rollout. This is our core banking system. And this allows us actually to do true digital finance using real-time AMBS, because [ with ] real-time AMBS, we can actually connect to any digital payment platform or any mobile phone payment platform anywhere in the world. So we see this, and we've always said that before in the communication to our investors, it's a very important development because it's truly a precursor to gradual introduction of digital financial services benefiting our clients. And in fact, we believe that as a result of this crisis, we anticipate to see an acceleration broadly amongst our client groups, but broadly about lower income population in Africa and Asia to see this transformation in this increased use of digital financial services. Clearly, there's always a certain risk with having too many bank notes. And now with the infections and all those things, of course, by COVID-19, there is -- it's obviously touching less cash is obviously useful in that regard. So we kind of see that the costs -- the traditional cost for our clients in using digital financial services may -- the issues, the risks and the health issues regarding using cash for all our transactions, the benefits of digital financial services will outweigh the transaction costs, which are currently incurred. And in fact, we have already seen in some countries like Kenya, where actually the government required the transaction cost, which were for low ticket payments of low ticket sums of money through say M-Pesa, they basically said -- they basically ensured that the cost for all people using M-Pesa and low ticket sizes actually will be very low, almost 0 and that suddenly makes it very available. And that also, we've seen that immediately in Kenya, where clients are now actually have started to repay loan installments, individual loan installments to us by M-Pesa. So the interest is there. The demand is there. And I think it will now also get more regulatory drive and government support to try to keep the cost down for the low-income population for using these type of services. Now the third point on this slide, we have very strong and established long-term relationships with major lenders, including many development finance institute which are basically the OpEx, all kind of development banks across the world. We have good relationship. Many of them have been lending money to our group. And also microfinance investment vehicles. And these microfinance investment vehicles are quite large. It's a large pool of money. They're quite a large number of them, and they actually are sourcing these funds from pension funds around the world as well as private wealth networks, banks and things like -- and institutions like that, who basically like the yields you can get from lending to -- from lending to microfinance institutions, and at the same time, supporting financial inclusion. So these parties truly are equally -- as equally committed as we are to increasing financial inclusion. So from their point of view, they're very supportive to what we do. And we are very close with them, and there's an ongoing interest to continue to fund our operations going forward. What we also expect -- final point, is that we expect demand for loans by clients emerging from the lockdowns to increase because they -- essentially, some of these clients will have -- they need to recapitalize their businesses after lockdowns, particularly if these lockdowns have been long-lasting, longer than 4 weeks, we kind of feel that there will be quite a need to that they -- basically, during that period of lockdown, they may have had to eat basically and drink and use some of their stock in their shops or sell the stock to basically use for private consumption. So they may have to -- they may need to recapitalize those businesses. So we expect -- we have already seen that in the market, when we talk to our clients now that there's quite a lot of demand for larger loans or more loans going forward. Now the highlights for 2019 and the first quarter 2020 -- for 2019, trading financial performance has been broadly aligned with expectation. OLP growth has been 24% year-on-year. If you look at it on a constant currency basis, it was 28%. We have seen strong branch and client growth in key markets, particularly South Asia, Southeast Asia and the also very strong growth in East Africa, where actually the -- both the size of the business as well as the profitability increased very substantially. The OLP per client averaged about $184, which is up 6% year-on-year. This is despite the substantial currency depreciation, which we faced in Pakistan and Ghana. If you would have adjusted for that, the OLP per client would actually have grown by about 10% year-on-year. So that's quite a strong performance, which we were ultimately quite pleased with because we did actually face some specific challenges in a couple of markets during the year, but we feel that we've managed that so far quite well. Regionally, I mentioned it already, good strong growth in clients, particularly in South Asia. Depreciation in Pakistan helped us back a bit, somewhat slower expected growth in India. But it had to do, particularly because there was a -- we felt some overleveraging in certain parts of India, particularly in Assam, which is in north of India -- northeast of India, and we basically decided to be a bit more cautious and not grow as fast as we initially intended to do to ensure that the quality of the performance and the quality of our portfolio would stay high, as high as possible. Southeast Asia, strong performance. Particularly Myanmar has seen strong growth and also the Philippines contributed to higher net profit. West Africa has a more complex situation. The situation in Nigeria, we had some -- to make some one-off provisions also for a couple of years past. With regard to gratuity provisions, which we have not taken before. We thought we had not -- did not have to do that for the whole group. We did it for the bank, but not for the NGO, and we extended that on backward basis also for the NGO activities. And then also, what we noticed that the economy as a result of the economy -- the sluggish economy in Nigeria that also our clients' demand for loans was actually reducing on a relative scale. So that meant that actually the portfolio didn't grow as much as we had expected. The performance in East Africa was very high. This is truly, as I mentioned before, very strong, both operational and financial performance. Actually, you've got now doubled -- more than double digit profit actually during the year. Now in the first quarter, [ as ] already mentioned, we've added 42 branches, brought us up to 1,937, and we still serve about 2.5 million clients. So client growth was not particularly gross. It never is high actually or there's not much client growth in the first quarter. That's normally the most sluggish quarter of the year. And also, obviously, we were affected in the last 2 weeks in March, particularly profits were hit during that period of the -- because we just didn't disburse any loans in that period of time anymore. So that had some impact on our operations as well. So next slide, you see the numbers. I won't go through them. I think I discussed most of them. Clearly, but just a couple of highlights, 17% year-on-year growth in clients; branches, 14% up; OLP/client, 6%; net profits, up year-to-year, on a normalized basis, 7%. That was a little less than what we initially expected. Although we already reported that in the trading update earlier this year and earlier before that in 2019. But on a constant currency basis, it was still actually quite respectable from our point of view, 12%. And then we've seen -- you can see, obviously, also the growth in our OLP assets, client deposits as well as the equity, which has quite a large growth in retained earnings. Q1 operational progress, you can see as well. Just ongoing growth, if you look at it on a year-on-year basis, has been actually -- continues to be quite strong. Now I won't go through all the slides in detail going forward. On Page 6, you can see the performance from branches, clients, OLP and normalized net profit, showing the growth we have achieved over the period. ROE stayed about the same. ROA has come down a bit. It has to do for a couple of things, some additional costs, which we incurred but also very importantly, some movements in the sizing of the different businesses because different company, different entities of ours in terms of size, actually have different type of ROAs. So for example, if India grows really fast, India have a much lower ROA in our countries and, say, in West Africa or in the whole of Africa. So if they grow really fast on a relative basis, our ROA will come down a bit. The asset quality and margins still stayed pretty high, seen a bit of the spike in the PAR>30, that has to do, in particular, with the situation in India in the Northeast and also a big spike in our portfolio quality in Sri Lanka. Although it's a small market, the portfolio quality deteriorated quite rapidly because of some external events, including the Easter Sunday Bombings as well as debt relief program, which kind of -- it was only limited to 2 or 3 districts in -- provinces in Sri Lanka but then by political activism spread around the country, and that led to the deterioration of the credit discipline of the whole -- all clients of all micro finance institutions across the country, but also that also affected us. So that was primarily. And then we had one -- we had to take some provisions also for some branches in Pakistan, which we were restricted to operate at the time. So that had some impact on the quality. But overall, that's -- yes, we feel still very confident that we can bring that back to lower -- below 1%. And frankly, even at 1.5%, that still is pretty close to best-in-class in the microfinance sector globally. You can see the gross yields, funding as well as interest margin. Gross yields spiked up a bit. Overall, then we have interest margins stay pretty much the same and the cost of funding stayed pretty much the same, and the net interest margin as a result as well. Next slide, on Page 8, strong funding profile with disciplined ALM. You can see that our portfolio or funding actually increased quite a bit. We still have, obviously, the equities got up from $88.4 million to $111 million. And then we have a lot of funding -- wholesale funding from various different parties. On the one hand, it's obviously the local deposits for $78 million. And then we have from loans from financial institutions, these are the loans which primarily are raised in the local operating entities and then some holding loans for microfinance loan funds as well as from development banks and foundation at the level of the holding. Our maturity profile stays the same. Our loans have an average tenure of about 6 to 12 months at issuance. And we borrow generally at least 2 to 3 years. Actually, many loans nowadays even are somewhat longer, and they get up sometimes 3 to 5 years. So that means that if we ever enter into a crisis, and we can still continue to do our business, we can actually adjust quite quickly because we can shrink our operations quite easily by just disbursing less than what we collect so that kind of always gives us the safety that if there's issues with wholesale lenders withdrawing funds from the market that we can adjust the operations quite quickly. Global MIVs and DFIs now actually represent quite a substantial parts, as I mentioned before, 60% of our third-party funding and most of the balance is actually provided by lenders, banks in India and the Philippines, only in those specific markets. So the bulk of funding for all other markets actually is provided by those MIVs and DFI, besides, obviously, the funding we provide ourselves through equity as well as the savings which our clients provide as well. So it's a big chunk. Now we have a very strict policy that every foreign exchange we borrow and foreign exchange would be, say, dollars, we borrow at the holding or we borrow for a subsidiary in dollars. And dollars that we always will hedge that. So these are generally just simple hedges, forward hedges. It's not like a very sophisticated kind of swaps or anything like that, but it's very simple. We buy it forward for the period of time when we have to repay the principal. That's the cheapest way to do it, and it covers most of our risk. And we also ensure that we try to extract any excess capital, which any of the countries have in place through dividends to the holding, then thereby we reduced local currency exposure. Now we have a target to obtain more and more deposit taking license. Well, I mentioned already the deposit take license, which we secured over the last year. And this policy was taking place, although we have only a few more countries where we can improve, primarily in East Africa, where we actually still are -- we are operating as non-deposits taking microfinance institutions. And over time, we hope to also be able to transform those into microfinance banks to basically strengthen the deposit taking capacity in these entities. Now you can see that we have had a very diversified portfolio. Diversification obviously improved to an extent. Although South Asia is still a very large chunk. But clearly, over the period of time, you've seen East Africa actually growing, both in clients and OLP quite substantially, it almost doubled relative from 2017 to 2019. And now we have done this very intentionally. Clearly, we try to support as many clients across Asia and Africa and have a broad portfolio. We also felt always that with -- the diversification would basically mitigate all kind of risks, although -- and I think that's still the case. Although we were not fully prepared that there would be 1 specific event like COVID-19, which would in one go, actually affect all our countries' operations within 10 days, basically. So effectively, that means that there was a new -- that's a new development, but we have, I think, taken all the right actions to try to reduce the risks of -- try to reduce the risk as well as we can. The regulatory update, I already mentioned all the points there. I will not go through that, a bit of it in the summary. We also discussed the financial measures taken in response to COVID-19, clearly, big focus on liquidity, which we did immediately once these lockdowns put in place. We immediately established or within a week or 10 days, cash preservation and cost reduction program. But very importantly, since that time, since March 1, but it's also since March 15, actually, when these lockdowns started, we secured well over $25 million of new loans. These loans have been disbursed since that time. And we have about $108 million of funding deals actually under active negotiation in the pipeline. So that shows that the interest and the commitments from our lenders to our operations and to our clients has not diminished. So that gives us a good feeling going forward. Now we can benefit in some countries, and this is particularly in Pakistan and in India, we can benefit from a moratorium on the repayment of principal, and we only will do that if there's not a real other option available because our preference would be to basically repay all the loans in time and actually attract new loans at new terms, whatever it is, but not to disturb the wholesale markets, which we rely upon for our funding by actually trying to benefit from a moratorium. We basically prefer that clients of our lenders are with us because they want to be with us instead of that we force them to stay with us. Now there is a lot of change on our operations on Page 12, operational measures. We had to do a lot of things on the health and safety front. I mean we show you just some pictures here for Myanmar. Myanmar, we had to do a lot of things. This also had to be approved by the local authorities. But you can see in these pictures that obviously, we try to ensure within the branch that we are -- maintain all the social distancing that we have that in place and that it is properly respected and in a disciplined manner. All our staff across the world wear facemasks to prevent infection from others, but also to prevent themselves to be becoming infected. We also will not -- we have -- there will not be more than 2 or 3 clients in the branch for disbursement. So any client who comes for disbursement, we basically -- they wait outside. And you can see on the picture on the right, the clients who are actually waiting to get their new loans disbursed, and they sit in front of the branch within the prescribed distances using wearing face masks. Now also in many countries, we already -- we also have established the temperature meters. There are no client who come into a branch before the temperature is measured. And so to ensure we have clearly also all the sanitary equipment as well as soaps available for clients as well as staff to wash their hands whenever they come into a branch and for all our staff to wash their hands very regularly to prevent infection. Now this is taking place across the world. It's the -- how it's basically done varies per country. There's a lot of local regulation in place, but we comply, obviously, immediately with whatever regulation is there. And if the regulation is not there, we established it in accordance to our own standards. And we try to have the standards to be as high and also consistent as possible across the world. Now what you -- on the slide with operational measures, you also can see, we are restructuring some of our group maintenance and compliance with this new normal. Because it's -- there's a lot of restrictions and rightly so, in our opinion, from having large group meetings. Normally, our groups can be between 10, 12 to 25 women in 1 group. They normally don't go over 25. Now clearly, it's the situation where we are now, it's not particularly smart to basically congregate 25 women in one place. And so we don't do that. So we now restructured our groups into smaller groups. These groups can be about up to 4 to 5 women in 1 group. These are -- and they come to the group center where they normally congregate and then pay their installment and then they move on. And then the next group -- part of the group, 1 or 4 or 5 women come as well. And so effectively, instead of having 1 group meeting -- a larger group meeting, we have essentially 4 or 5 shorter -- smaller ones. And that works perfectly fine. At least at this point, it's not ideal. Clearly, there's certain reasons we have larger group sizes. But the primary reason for us to have large group sizes is actually to have high collection efficiency. So that we can basically have all those women in 1 go, and they all pay their installments. Now in this way, effectively, what happens is they come. The loan officer is there. They look -- take the passbook, they look whether they have enough cash in their passbook, then they basically -- the loan officer looks at the loan book, basically adds up how much money the clients has given. If it's exactly in line with the installments, you basically marks that in the loan book, and she marks it basically -- she marks it in the tablet she has that actually the installment has been fully paid. And that goes client by client. So [ to by ] 4 clients at the same time. And then the next group comes in, the next group of 4 or 5 women, and they sit and they basically goes through the same process. Now while that might appear to be possibly take more time, in reality, it doesn't because these actions, the action of the loan officer of recording the payment of the installment, counting the money and then actually recording that, takes more time and effectively the whole -- whether it's in 1 group or whether it's in 4 or 5 groups, that doesn't really matter. They just they come and they go and the next group comes straight away. In fact, when I spoke to our CEO in Tanzania and I asked him specifically this question. He said, look, at this point, what his experience was that it actually goes even a bit faster because there's a little less discussion. It's much more focused on purely the collection of the installment, and there's not so much discussion amongst the group about other matters. But that's, at least in the short term, it's an advantage. In the long term, we still believe it's very important to have this group kind of cohesiveness because they know a lot from each other. They can give us guidance about which clients have difficulty with their businesses and things like that. So there's a reason why we have those bigger groups. For the time being, that works perfectly fine. There's no disruption caused by having these smaller type of groups. And it's also helpful in this regard that we do not have joint liability groups because if you would have many other MFIs basically of joint liability groups where, say, 8 women in 1 group can actually all are liable for the same -- for the loans, which they've all received. So it's a joint liability. Now clearly, that's -- if you then start breaking those groups, that has a much bigger impact. And we do not have that because in our model, all clients are individually liable for repaying the loan, their own loans. Now on the next slide, 14, talk a bit about digital financial services. As mentioned already in the summary that we have this AMBS, our proprietary core banking system. Now it is very important for us, a very important development. AMBS is a Microsoft platform based core banking system. And we have SQL server database only for the specialist amongst us, but this is pretty much state of the art as it is. And we believe that this will provide us with a competitive advantage to many of our competitors who will not have the ability to have their own core banking system developed and be able to maintain it themselves, manage it and also update it. And that's really important because if you cannot update it, these systems will never stay the same for longer than 6 months. There's continuous updates. So you need to be -- and you need to want to have the updates developed, which you really need. So our system because the in-house system, we can actually update things, truly supporting our own needs. And we believe that provides with a competitive advantage, and it's also -- we fully control it. And all these changes can be made very fast. So for instance, in this particular environment, we have made already many changes in the new environment post lockdowns, how we're going to manage our businesses, so we can actually do certain things faster. For instance, right now, as I mentioned before, we're connecting them the systems already to M-Pesa in Tanzania and to Kenya, and we are planning to roll that out in other markets. So that actually, clients can actually start paying digitally via mobile network supported or managed payment platform or from an online payment -- via an online payment platform directly into our accounts. Now in Kenya, we do that. Tanzania -- in India, we have -- we also do some other things. We already have all our clients. We disburse all loans to our client's bank accounts, and we're now also planning to enter into direct debit arrangements for collections as well. It is also very efficient because if our clients, clearly, they need to have a lot of money to pay the installment in their bank accounts, but it's a very efficient, a very low-cost way to actually do that. And what we anticipate, as mentioned, that as a result of COVID-19, there will be a much bigger drive to get those digital financial services implemented and in place for the lower income groups of society. And right now, the cost has always been the big hurdle. But we truly believe that as a result of COVID-19 and all the restrictions and all the health issues, we're potentially touching too much cash all the time. Actually, there's a real benefit for using digital financial services, which, in our opinion, will outweigh the somewhat higher cost, the initially somewhat higher cost. Now as a result of that, we believe we're strategically well positioned to become one of the leading participants in doing this in our markets and basically serving these low-income female micro entrepreneurs. So hopefully, over time, it will strengthen our business and it will also enable us to reach out to more clients faster. Now at the final slide, which is an important slide, is -- I mentioned already what we've seen since the countries where we operate, started to emerge from the lockdowns. Now the good thing is, and you can see this that on the first -- on the initial couple of weeks when we started, and in Pakistan, we started first in April as well as in Ghana. And in Sierra Leone -- and Zambia haven't had a true lockdowns. I mean they had all kinds of restrictions imposed on them. But these were not true lockdowns where nothing could take place. So we have those 2 countries, where new countries, small countries. They have actually been operational for the duration of the whole period, although as all kind of restrictions, which didn't allow them to fully have full recovery of all the loans. But nevertheless, the performance has been quite good. But for instance, country like Ghana, which is one of our major operating countries, as you know, in terms of profitability, once they started on the 19th of April, during that week, their hope -- the collection has been 100% of what they expected to collect. And over the whole period, since that time, it dropped briefly to 95%, and it's gone up even collecting overdue for the last couple of weeks to 1% or 2%. Pakistan also had a nice trend line. In Pakistan, we do monthly recovery. So therefore, also steps can be somewhat bigger in terms of where you can see the recovery schedules the -- in April, the first week, they reopened, it was already 55%, which we thought was actually a very good start. And they have been able to grow it to 90% over a period of 5 weeks -- of 6 weeks. So that's been very good. You can see in other country where we started also quite early or a little early was Kenya. Kenya started was 27%. That was lower and what are some specific reasons for that in Kenya. In Kenya, actually, many of our clients have to do their trading at regulated markets, so they cannot all have their shops at their homes. So -- and these regulated markets at the time when this could start doing -- resume their operations and starts start getting collections from loan collections from our clients. Actually, only about 30% of the markets were open. So that reopened. And that meant that the earning capacity of our clients were still quite hampered by not being able to clearly trade, and they couldn't just trade easily somewhere else. I'm sure that many of them might have tried to do some street [ holding ], just be on the street with their goods and sell on regulated basis, but that's not exactly the same as what they're used to. And clearly, that hasn't impacted them. Now nevertheless, now these markets are reopening, and you can also see that very quickly, the collection efficiency is already increasing. It's about 77% last week. And if I talk to -- I've spoken to our Managing Director there, and he believes it's going to be within the next months, should reach also close to 100%. Nigeria had a good start as well. They started 3 weeks ago. So [ game up ] started with 85%, grown to 91% in the [ Eat ] holiday last week, they couldn't, but they restarted already now. I haven't seen the numbers yet from yesterday. But based on 85% in the first week, we're very confident that they will get close to the 95%, 100% within a couple of weeks. Myanmar, good performance as well. Philippines just started. They had 28% in the first couple of days of last week, in the week of 25th to 30, they didn't collect for the whole week, but only for a couple of days. But I know that last -- that on Monday, that had already increased to 50%. So this was also quite promising and very positive from -- we perceive it as being very positive. Rwanda started at 49%, it's gone up to 66%. So the trend lines are all very good. A country which faces more difficulty is Sri Lanka. Sri Lanka is a problem -- a bit of a problem country. I mean they really have had so much hardship with these 3 events, which I referred to before. And they do need some extra funding and that's basically in the hands of ourselves, the holding, to provide them with some extra funding to strengthen their business, to strengthen their balance sheet and to enable them to actually provide more loans because at this point, they're primarily collecting. And if you only collect that ultimately means that some of the clients will -- if they don't think that you will ever provide it as a new loan, that doesn't help your collection efficiency. So this -- we're looking at it very carefully. With the 40%, that also gives us confidence that if we provide them with some more capital that actually this country will also be able to recover its business properly. But that's totally separate from the COVID-19 or they are clearly also very much affected, but they have other issues, which they were facing, which we have reported on already numerous time over the last couple of announcements. So all in, we feel pretty confident that our business will gradually normalize. And assuming that the -- assuming that there will not be a second wave of infections or that's the infection rate in our countries where we operate is going to accelerate to an extent that it exponentially grows, like we've seen in Europe and the United States. And that the casualty rate starts to increase, if all those things are not happening, we're very confident that the business will actually recover well. That over a period of time, late in this year, we would say, look, our clients are doing well, our business is doing well, and we can look positively forward to the future. So I close it with that and opening it up for any questions.

So I have questions here, which were asked on the webcast and to start with Hugo Cruz from KBW. He asks on the dividend policy, considering the COVID-19 situation, both from the holding to shareholders but also from subsidiaries to the holding.

Yes. I'll start with the second one. I mean our normal policy is with regard to subsidiaries that we actually want to ensure that the subsidiary has the right amount of capital for its operations. So we don't want them to have too little, so then we will put some extra capital in. If the business, from a capitalization perspective requires that. And clearly, obviously, the business also has to do well enough to justify the capital injection. But we also -- but importantly, we don't want them to have too much capital because that will -- if these currencies go down relative to the U.S. dollar, which traditionally, most of our currencies do go down, varies per percentage rise, obviously, every year. But generally, on the longer-term trend line, they generally go down vis-à-vis the dollar. So we don't want to have too much capital locked up in each of the countries, which they don't really need. So that's the policy with the subsidiaries. And the same applies as well to the holding. And then we don't want to have too much capital or not too much capital as a group. So that's why we also have been paying always dividend. We think, frankly, it's a good discipline. Despite the fact that we have high growth of our operations that we also actually pay our shareholders a dividend every year. And we have been paying dividends since 2014 every year, and it has been 30% dividend policy of the profits every year. Now in this particular -- yes, we obviously -- when this crisis started to happen, we were actually in the process of also determining the dividend, which is going to be most likely just a normal 30% but then upon reflection, when we actually thought, well, this is a very uncertain situation now. There was obviously lockdowns. We saw actually the impact COVID-19 has also from a health perspective in the whole of Europe and also in the United States, came in a little later, but also at that time, was getting drastically a very extensive growth of infections and also casualties, we said let's be more conservative, be very careful. Because although nothing was really happening in our own markets at the time, we said, look, we probably have to be very careful. Then when the lockdowns came, we said, look, we shouldn't just now, at this point, actually pay dividends because, in fact, it's the other way around, we need to preserve cash and ensure that whatever happens, we can always pay our liabilities, at least all the interest we can pay. We can pay our operating cost for as long as possible. So that even if lockdowns take place for longer than 4 months, even 6 months, that we could still survive that situation. So we decided to defer the decision on the dividend. It will come back on the agenda later in the year. And I would say not before Q4, I would imagine. And it really truly depends what the situation is on the ground at that point in time. If our business has completely normalized, if we are doing well in the form that we can actually -- we may have some write offs, but that it's very -- it's controlled. It is below 2% to 3% than -- and we have enough capital. And also, our lenders are pleased about the performance of our portfolio at that point in time. And we're all basically going concerned. Business has normalized. The COVID-19 is not disrupting our clients, neither our staff, nor the economies where we are operating in, then I think it's very likely that we will then consider possibly declaring a dividend at that point in time. But I think it's truly completely dependent on all those points I just made and how those things develop. So that will not be an agenda item actually until late September at the level of the Board.

Okay. Then we can move on to the next question. Various people have asked about the PAR>30 as per end of Q1, which is stated on Page 5 of the slides. And the development after Q1. Can you tell us about that, Dirk?

Yes. Well, PAR>30, I mean, in Q1, basically, you've seen the PAR>30 number. In Q1, it's 2%. That had some impact. It has some impact of various things that's gone up a bit. Nothing much to worry about. I mean we feel other than the situation in Sri Lanka. And these are -- I wouldn't say blips, but there are -- there's very specific reasons why they've gone up, and we feel we're very much in control of those. Since Q1, actually, because we have basically have a payment holiday for our clients during the period of the lockdowns, we are not counting that as PAR. So we basically said, look, if the lockdown is 3 or 4 weeks, then you have a payment holiday for the clients. We accrue interest for the period, but we don't demand you once those lockdowns end to pay all those overdue installments. If it's a 4-week lockdown, that maybe the client would otherwise have to pay 4 weeks installments in 1 go. We said, look, what we effectively do is we extend the loan for the period of the lockdown. So you basically pay us -- we accrue the interest, which you pay. Accrued interest over the period will be paid at the end of the loan cycle. Because although we want to ensure that they pay us, but at the same time, we don't want to make it -- provide them too much hardships straight out of -- when we come out of -- emerge out of these lockdowns. So they basically pay their normal installments now. And then at the end of the loan cycle, we'll add some incremental interest, which is effectively for the availability of funds during the lockdown. So that varies a bit per client, how much interest they have to pay. But we think that's a very fair and very client friendly way for dealing with it. So -- but effectively, after the end of the lockdowns, we actually are -- provision for our -- for any overdue. But you will see that PAR>30, actually only after 30 days after the end of the lock down, actually, you will see it appear in our accounts because at that point, they will have missed -- if they will have missed 1 or more installments during that 30-day period that will then be applied in the PAR>30 covenant.

Okay. We also clarified, we are in discussions with lenders on potential covenant breaches. Can you give an update what is the status of those discussions and when you expect those to be finalized?

Yes. First of all, I mean, we've had extensive discussions, we had lenders' meeting, which we explained the whole situation, which was well received by all lenders. Actually, during that meeting, we expect a situation that we were forecasting that we were going to have some PAR>30 breaches. Now normally, as I said, look, now we also want to ask you already for waving that PAR>30 covenants for a period of time. Before actually the event has happened. Now that's only quite unusual because normally, you start talking to your lenders once you have actually breached the PAR>30 covenant. PAR>30 covenant is what they call a monitoring covenant. You basically have -- it's an important one for the lenders that, oh, you cross your PAR>30 or we need to give this client more attention from a lender's point of view because, clearly, their portfolio quality is deteriorating. So then you get into a discussion whether it can be waived and for what period and things like that. But we decided well, we don't have any component breaches now. But based on our previous prior year experience with events like this, we anticipate that clients will be struggling for a little while. So we're going to opt for a waiver on that particular covenant for say next 6 months or the next of the next -- the rest of the year or whatever we feel appropriate for that particular situation. And it depends a bit per country because different countries have slightly different structures in that sense. So we basically ask for that. And we got very good positive response. We have quite a large number of lenders who already we have agreements with. A number of them have already been signed. Another number, basically, we have the agreement in place. It has to go through their internal committees before it's been finalized and their signature can be on it. But we have no doubt that this will happen in a positive way.

Okay. Thank you, Dirk. Then Paul Kloppenberg has 3 questions. First one is, your $6 million cash preservation is equal to how many months of monthly cash burn?

Yes. It's basically the cash burn situation. It's basically, -- it's a process where we said, look, we need to make a plan. Immediately, once these lockdowns happened, actually, within a couple of weeks, we have this plan developed. We, first of all, looked for maximizing our liquidity and said, but we have to go beyond that. How can we basically increase our runway if we are not going to have any cash income. And the longer the runway, less exposed we are that we are going to have all kinds of difficulties. So I said, look, what else can we do? So we, first of all, we assured we had maximum amount of liquidity. So that's we worked hard on. And then the second thing we did is basically said, look, what else can we do? So we said there's 2 major cost items in this company. One is staff cost, and it's the biggest. Then we have cost in travel costs, and that travel cost is particularly travel cost from our loan officers being in the field. These costs are not that high, but if you have 12,500 loan officers or 12 -- well it's not 12,500 loan officers, but say, 11,000 loan officers being in the field using all kind of public transport or also their own motor bikes or our motor bikes, which we lease to them, there's quite a bit of cost. So actually, it's the highest non-personnel costs, other costs, OpEx costs, effectively, it's actually travel cost. Well, the travel cost immediately stopped when these lockdowns were enforced. So that already helped us to save that. But then we said, look, we need to [ this ] big chunk, which is personnel expenses. We need to ensure that we can also create some cost savings or at least preserve cash. So we went into in a deferral program for all our staff, which applied to all our staff to defer a certain proportion of their salaries. And it's essentially meant that the first step was for all head office staff, they would have to go down after defer their salaries by 25%. The first step, the first months of the first months of lockdown. And we said, if there's going to be a second months of lockdown, we increase it to 35%. And if there's going to be a third months of lockdown, we increase it to 45%. And so that was for the head office staff, and we said, look, and then the next layer below, the head of the staff is basically all senior operational managers, we said we do to 25% for them in the second months and then growing to 35% in the third months, no actually to 45% in the third month. And then we said, in case we have to go even as -- last 3 months those lockdowns, then at some point, we also need to basically also have our loan officers, our branch staff effectively be part of that, and they would be coming in at the third month. And actually, that would be a bit harsh because we would basically have to cut -- defer their salaries by 45% across the board. So then the whole cost preservation or cash preservation program would basically on personnel expenses, would be -- we have -- we basically would defer 45% of the salaries. Now we always hope that we never get to phase #3 because we would start cutting into the muscle of the operation and also the muscle, which you need most, once the markets reopen. And that's essentially when we can start doing our field activities are -- it's very important that our loan officers, branch managers, area managers are ultimately motivated to go back into the field and start collecting the installments. And potentially quite difficult and changing circumstances, particularly with all the COVID-19 health issues, social distancing, the risk of infection and things like that. So fortunately, never got to that. The longest lockdown we've had in any country has been 8 weeks. And in some countries, we already emerged after 3 weeks. So that's been positive. So the deferral program is now also on hold. The top senior management is still actually as a deferral of 25%, and we'll keep that intact. But over time, we would hope that also that when the business is running properly again that actually, we will -- that deferral will then be reversed. And we have some other cost reductions, and that's a different level at basically some cost items, which we identified projects, which we just said, look, we can postpone these projects. This had to do with different type of projects, some IT projects, which were less urgent IT things, some other things, which we said, look, we can just postpone them for a period of time. So we don't make the expense. And we stopped hiring clearly at many different levels around the organization. So there was just a hiring freeze straight away of things which we had budgeted to actually to hire certain staff for certain functions. So we basically delayed all that as well. And that's our true cost reduction, so to speak. Although, obviously, once things normalize, we will review it again and may actually make those appointments subsequently, but that would not be a deferral. It's really a cost reduction for the period.

Dirk, this is Tanwir. Just to add to that, the $6 million would equate to 1.5 months of our personnel expense.

What's the question? Sorry, Tanwir, what did you say?

The $6 million savings would equate to 1.5 months of personnel expenses.

Yes.

Okay. Then there is another question on Ghana. Where we had a potential tax claim. What is the status of that nonresidential capital gains tax?

No, there's no news, really. Yes, it's under review. It is not active. We -- yes, we kind of been advised not to take any actions ourselves, but let it possibly now run out its time -- its statutory time. I'm not exactly sure how long the statutory time is, it's still a little while. But it's -- it goes in the way we kind of expected a bit it's going to go -- the decision to wave it would not be made, but the decision to charge it would probably also not be made and that we may have to sit out the term limit, which I think is 6 years, right? 6 years. So we are -- yes, we're going to be 2 years in now.

Okay. Then there are a couple of questions from [ Romain Keller ] from [ Keller ] Digital. He asks what is the average collection efficiency since January 1, since we provided the schedule in the presentation? How does that compare to the pre-COVID situation?

Yes. No, the general collection efficiency was little hiccups here and there. It should be close to 100%, ultimately. I mean we expect to collect certain amounts. And what the actual collection is. Normally, if your portfolio quality is high, then it should be close to 100%. It's very common for us. Once you come out of a holiday period, the clients sometimes have a little bit more difficulty paying. So you can see collection efficiency for a couple of weeks after some of longer holiday that they will be the collection efficiency is a little lower. And then the clients catch up. And this particular situation, we've seen that as well. And particularly in this -- because in this environment, we also were not able to actually physically meet our clients actually during the lockdowns. I mean our staff were instructed to talk to them. I'd call them on the phone basically and ask them how they're doing and said that clearly, we're hoping that they're all safe and healthy. And just ask them how their businesses are doing, but it's still somewhat different than next year, if you need it. So it will take a little bit of time, and this is experience from the past that you will not start in an event where you have a disruptive event, you will see the buildup of the collection efficiency go up. But it should be in the 90s and in the high 90s over a period of time.

Okay. Then he also asks about your guidance for 2020.

Yes. I think that's probably extremely difficult to give. We do know what we did last year in terms of profitability. And we do say, okay, well, the write-offs ultimately might be 2% to 3% of our portfolio. Well, if our portfolio or OLP is at $450 million. And now you have a write-off 2%, but it will be $9 million. If about 3%, it's going to be $13.5 million. That's pretax. So on a pretax basis, our profit before tax is more like last year, it was more like $54 million. So you then take that off from that. And then you apply the tax rate, which is a little almost 30 and a bit percent. So -- but effectively, if we're going to have a 3% write-off, then the effect will be that on an after-tax basis, our profitability might go down from $34 million to $25 million. I would be somewhat disappointed, actually, if it will be much worse, in fact. I just -- at the moment, on the basis of what we're seeing in the field and the activities which are taking place, and it will be all different in all markets, we do think that we have a very good shot at actually that the writers will not go up that high.

Okay. Then we move to a question from Manya from Arisaig Partners. And the question is on what proportion of the portfolio has availed moratorium facilities if offered in those respective geographies? And how are we incorporating those in our expected potential NPL numbers?

Yes. Well, it's basically the moratorium applies primarily in India, and we just don't have the numbers yet because we only started collections this week. So effectively, a client in India has 2 options. Either they pay installment, and some of them do. And some of them pay more than 1 installment, actually, also of the -- of, what they call, overdue installments, although we don't treat it as such. And it depends. Some might actually avail them with moratorium. It really depends a bit -- we have 2 categories. Some of the clients have only a couple of installments left, say, 2 or 3 installments there in the end of the loan cycle, it can be in their interest to repay those loans -- these installments all in one go. Sometimes clients asked if they're allowed to do that. And then once they've repaid it, they're eligible for a new loan. So then we'll provide them a new loan. So if they only have a few installments outstanding, then they prefer sometimes to repay it, and they get the full loan and that provides them with more capital for their business. So clients who are in the end of the loan cycle have more of an incentive to do that on clients who just received the loan prior, say, to the lockdown. Because they still have the full availability, and they might say, well, we'll just keep that availability at the end of the lockdown for the whole moratorium period. Now we talk to those clients as well, and say, look, you could do that. Of course, it's your right, you've full entitlement. But keep in mind that at the end, yes, you keep the funds available now. You still have to pay the interest on it, though. And at the end, you have to pay the whole amount at that point in time. So you potentially have a problem, if you cannot do that. And you effectively, you stopped by not repaying some of your lenders, including us, might be less inclined to give you a new loan. So we basically do talk to them in a sense like, well, your option is just to do it, but you don't have to do it. So we do collect in India. So some clients already pay, some -- based on what I just mentioned, the 2 reasons why we give either the ends that they can pay that they can get a new loan. Same applies for even the ones who got the loan and say, if you don't pay your ongoing installments, you might be less eligible for a new loan when it comes down to it. But ultimately, you still have to pay. Now the benefit we have in India, where this applies, is that they have a very well-functioning credit bureau and they can only take a certain number of loans in amounts as well as a number of lenders. So by using the moratorium, they use more of that capacity but if they fail to pay, their credit history is really affected. And actually, we're not even allowed to actually lend more to 1 client than if there's already 3 providers, things like that. And if clients start to fail, then they will --they won't qualify and it's only very difficult to actually get new loans.

Okay. Paul Kloppenberg asked on the competitive advantage of AMBS functionality, so that apply both for the loans and for the deposits?

That's a good question. We have not focused that much on deposits. I mean, maybe -- Aminur, can you answer that question? I think, ultimately, yes, although we're not focusing -- it's our deposit base, as you know, a very small percentage. I mean, our free deposit base, it's going to increase now once we have also the license in Pakistan, which is a big market. In India, we cannot take any deposits, and that's probably going to stay like that. But most of our deposits in our business are actually our security collateral. So it's tied to the loan. And it basically access security against the outstanding amount of the loan. We pay a bit of interest in various bit per country. But on the deposit base -- but -- if we don't have it in AMBS at this point, I mean, we're focusing right now purely on the loans and the installment payments. That's the primary thing, which we'll be benefiting our clients at this point. If we want to extend it to deposits as well, the -- yes, we can just do that. It might require a little bit of extra work to develop that particular upgrade.

Okay. We have 2 questions on the business correspondence model in India that the order book loan, one is an update on the number of clients at the end of 2019, which is 162,000 and also end of March, so Q1 2020, that's 251,000. So basically, that's the answer, Dirk. So -- and the other question on the B.C. portfolio from [ ARPU ] of [ 330 ] from when capital is, what is the first loss amount for that portfolio?

For the IDFC first Bank, it's 5%.

Okay. Then a question from Mark Gordon James. Who wonders why there hasn't been an improvement in the collecting -- collection efficiency in Pakistan between the week of 18 May and 26th of May. Specifically on the collection schedule in the presentation?

Yes, it just depends. I mean, actually, we give you here even the data per week. For the country as a whole, but in reality, actually, we do it for district problems in Pakistan. But in Pakistan, the collections are -- in many of the countries where you see the collection efficiency, we see the same clients the next week because we do weekly installments. We don't pay the installments weekly. Now in Pakistan, they pay installments actually monthly. But every month, every week, there's a new -- a group of clients who repays. But that might -- that can be -- obviously, spreads across the country. But it's a new group of clients. So for instance, if we do in 19th to 26th of April, that's a different group of clients than the week thereafter from 27th of April to 3rd of March -- to 3rd of May. So many other countries -- actually, in Ghana, we go from [ 100 ], then we go to [ 95 ], but it's still the same group of clients because they pay during that week, their 1 installment. But in Pakistan, it's not the case. So it's a different group of clients during that week. So that client from 55% actually comes back in in 18th of May, the group of clients because 1 month later, we basically collect from that same group of clients. And you can see it goes -- well, it's got up from 55% to 90% during that period where we actually collect the same clients. Now it has a lot to do with basically -- things are basically ramping up. I mean that's how I best describe it. It's the ramping up of getting back into the habit of paying your installments regularly and having the cash flow to do so.

Okay. Another question relates to what we discussed earlier on the PAR, but then actually, how that works out on the loan loss provision during the first and second quarter, like was there an impact of that in the first quarter? And how will that look like in the second quarter and the second half year?

Yes. I think the PAR>30, for instance, right? Yes. The PAR>30 in the first months of the first quarter...

Basically the impact of the -- on the loan loss provision.

Yes. From -- by COVID-19, right, presumably. Yes. Now COVID-19 would not have appeared in our PAR>30 as of March because there's lockdowns. Well, first of all, during the lockdowns, we don't even provide for it. But even if the impact was big, it was already there before the lockdowns, just to the disruption of the infection and all this whatever fear might have been creeping up in our clients' circumstances. We would not have seen that because you need to have missed one or more installments for longer than 30 days. So the first installment you miss will actually appear in PAR>30 days later. So -- and then we actually take a provision for it. And it's 5% for the first 30 days. Then we go to 90 days, 25%. Then we go from 90 to 180, that's 50%, and then we go to 100% provisioning. Okay? So once the client is overdue more than 30 days, we basically start providing for that loan, and that will be 5% of that loan. So -- and that will be then the percentage of debt PAR will be -- of all those clients who are missed 1 installment for longer than 30 days, they will all be basically part of that overdue amounts and that will be divided by the outstanding loan portfolio effectively to get to your PAR>30 amount. Now during the lockdowns because it's being treated as a holiday, there's no PAR>30 accrual either. So now to PAR>30, once the country emerges out of lockdown, the PAR>30 count starts. So if you miss your first installments immediately after the end of the lockdown and you don't catch up, then we will see that PAR>30 popping up 4 weeks later, actually, 1 month later, it will pop up. And that the amount of money will then be basically counted against your -- 5% of your loan will be accounted for as overdue and will appear in your PAR>30. And that's why we anticipate also that we will see PAR>30 to go up during that period, straight after the lockdowns because collection efficiency is that -- well, it's never going to be 100% when they come out of the lockdowns. That's just not reasonable so able to anticipate. So you have to anticipate that it will be somewhat lower. So -- and it appears in our systems based on that. So we will see PAR>30 somewhere in June. We will see it go up, and it will probably continue to go up through the -- by the end of June, I mean. So middle of June in some countries and then some other countries, the PAR>30 will basically start to appear by the end of June, and we expect it to peak somewhere by the end of June, middle of July. And then from that point or maybe end of July, it depends a bit in certain countries. Also with those moratoriums in India might have some impact. And then it will gradually come down.

Okay. And then going forward, what would you say is a normalized level of the annual cost of risk for your business model? So basically, post-COVID-19?

Yes. I mean, it's difficult to say, I would say, at this time. But if you just look at the history, we know it's always been very low. I mean, as I mentioned before, average write-off, we -- since we started, we've disbursed $4.5 billion of loans. Our write-off basically has been 0.22%. It's actually just less after the recovery of even written of loans, we have basically written off $10 million out of $4.5 billion. So that's 2.2% -- sorry, 0.22%. Now that's the track record. What does it mean in new environments? We think it shoots over time. Go below our write-off ratio, we think will stay below 1%. It probably should stay below 0.5%. We don't actually see a real reason why it should not ultimately go back to the levels of the historical write-offs, although that's really low. It's not necessarily always a necessity to have such a low write-off. Some people will argue with us, well, why do you probably -- you take very little risk. If your write-offs are that low, why didn't you just drive your business forward with higher growth and you have a write-off of 1%. I mean you would probably increase your profitability and all those things. That's probably -- you could argue like that. But traditionally, we've been very focused on keeping the portfolio quality as high as we can. And our staff are truly instructed that way. They grew up, having been with us and being employed by us and doing their work, the portfolio quality is probably the most critical component. And it's also the component, if it goes down, portfolio quality, they're immediately affected because they need to work a lot harder for trying to collect overdue. I mean it's -- if you go to a group meeting, traditional 20 women, I say, you do 4 of those mini group meetings. And you collect all the installments. And you've done that for 3 of those group meetings, or in this case, maybe then 12 group meetings, right, during the day. And there's no overdue, then your day is done. It's -- they have no problems, and they can do the disbursements. But then it's -- but once you get out of that -- out of those number of clients you've seen during the day, say, 60 clients and 4 or 5 actually have not paid during that day, you need to actually go to the loan officer, has to visit that client's house and actually start arguing that maybe she should better pay. And if she can't pay, and then you have to talk to the guarantor. So it's a whole process. And that creates a lot of extra work. So our loan officers by design are actually strongly incentivized to ensure that they don't overleverage our clients and are very cautious. That's good for the company, but clearly, it means that our clients are at ease because they don't have big overdues, which they're being hassled to repay. And at the same time, our branches are at peace. So it's the way we work. I mean, yes, we can probably take a bit more risk, but we don't do it necessarily voluntarily. So yes, I mean, if it's -- if we have write-offs in this particular situation of 2%, it would be quite painful for us because we would not have those write-offs for 2% without a lot of effort. I will tell you that our staff needs to work really hard to try to minimize it to as low as possible. And if then the ultimate outcome might be 2%, then they battled really hard, and they've done a lot of overdue collection to get there. And clearly, we will try to attempt to get the overdue actually as low as possible. And like demonetization, it was 0.5%. Many other events, it's been almost 0 but that requires a lot of extra work for our loan officers. And now this is for us, really for senior management, to manage that very carefully because we don't want to get them exhausted from the work to the extent that from all that extra work that we can see suddenly larger staff attrition, basically, more staff leaving the company because they don't like the job as much because they have to work harder. Now it's [ obviously ] spreads a [ little longer ] a whole army of 11,000 staff members. It's not actually so -- and it will -- it's not going to be -- it's not going to be all the same. Some countries will be more affected. Some client groups will be more affected. But so -- but it will require more work from all our staff to get down to the lowest level. And that lowest level, we hope is going to be below 2% to 3% write-off.

Okay. Another question from [indiscernible] of Moon Capital. What is the proportion of loans to customers who are engaged in the so-called essential services or activities that were not less impacted by the lockdowns in India, but also in other markets?

Yes, it's -- we have a lot of traders. And we have a lot of women who basically sell fruits, vegetables or little shops selling essential items, also including drinks. I mean water and all kinds of things. So I -- those have been essential goods. I know from talking with our country heads and managers that there's a big difference between certain type of activities that will be more or less affected by COVID-19 in terms of the earning capacity. And clearly, the women who actually were running shops in the communities itself have been least effected. They needed to clearly get their supplies. If they got their supplies and they could basically trade, and there was plenty of people in those communities who basically had to rely on their shops. So their shops could have [ run ] actually quite well, and we've heard that. At the same time, we've heard that other clients -- to give you an example, it's just an example, which I thought was very interesting because I didn't immediately fully understand it myself. So as -- but this was in Pakistan, where our Managing Director said, look, we have a lot of fisherman, and this is in Karachi. And there's a lot of clients we have, who actually go fishing. They go fishing on bigger boats. They don't own the boat, but they rent the spot on the boat and then go fishing. And they catch, they get -- they basically bring to the marketplace and they sell, and that's what their income streams is. But what happened because of social distancing restrictions, they couldn't have the same number of people on those ships. So some of the ships apparently could take less than half or even less than 30% or so on the ships, while maintaining the levels of social distancing. So a lot of those men or women or basically could not do the fishing. And as a result, at less catch and therefore, had no income. So just to give you an example, how that -- each type of activity, a different type of different impact. Now some of our clients, their husbands, for instance, they drive little motor bikes, which other people -- the transporters, basically either taxi riders that -- so that family income might have been affected, if there was less people on the road, if there's lots of curfews, restrictions of movements of people, things like that, their income of the family would have been affected as well. So it varies a lot. We actually haven't done a proper full analysis on it because it was very difficult to do during the lockdown. But clearly, we get the data out of the field right now.

Okay. Then we have a question from Neil Colman from Deutsche Bank. What will be the median to long-term impact of real-time AMBS and will we see you increase market share within existing geographies? And will it allow you to enter into new geographies?

Well, we think, a, first of all, foremost, I think it's inevitable that this will happen. It's more a timing issue. When more and more digital money will come into play and will start to gradually push out all these cash transactions. So we think that ultimately, our clients will benefit, and we all want to offer them service to them so that they can actually do that. And if they find it convenient, that they -- we have the systems in place to facilitate them. It's, from our point of view, better that we're -- we shouldn't necessarily be the absolute innovator, but we should also not be a laggard because otherwise, we might start losing clients to other, more innovative institutions who do this and clients like it, and they prefer to stay previous those more innovative microfinance institutions. So we want to be on the forefront and be one of the first to kind of do it when it's -- when there's real demand for it as well. Now we see that real demand in certain countries already. It's very big in East Africa, at least in Kenya and Tanzania. Clients really like it. The only thing there was the cost issue. And also, it's getting increasingly bigger in India as well. Although still large, large amounts is still paid. The installments are paid in cash. But we expect that it will, at some point, it will really make a turning point. And we want to be part of that wave. And that once we have it, that we can actually potentially scale up, a, we have a better service offering in our opinion. So this might attract also more clients to come from other MFIs who just cannot afford to have a proper setup themselves. There will obviously be service providers who will try to provide mobile money or digital finance type of solutions for smaller MFIs. But the upfront cost generally is still quite high. And it really depends on what systems they already have are easily -- that can be integrated in their systems. So I do think we have a true competitive advantage as a result of our reach and the size of our operations to introduce these type of services somewhat faster in a very cost-efficient manner than some of our peers.

Okay. Thank you, Dirk. These were the questions we got on the webcast. We now move on to questions we have from people who have dialed in.

[Operator Instructions] Okay. It seems we have no further questions. So I will hand the call back to the speakers for any closing comments.

Okay. Well, I would like to thank all the attendees to this full year earnings announcement. Obviously, we spoke more about the future in the past, which is good. But at the same time, I hope that you also appreciate the last year's performance. We're working very hard to ensure that our business is going to come out stronger. Instead of weaker out of this whole COVID-19 crisis. We have many challenges ahead. I think we have taken a lot of very rapid actions and made a lot of decisions over the last couple of months, how to deal with the situation. Hopefully, all those decisions turn out to have been the right ones. And now it's really up over the next couple of months for our field staff to show that we can actually bring the portfolio quality at the levels where we were used to and that we didn't, hopefully, without any further disruption because of COVID-19 and any associated lockdowns can actually continue to do our business. Under the new circumstances was all the restrictions, which will probably take -- stay in place for quite some while, all the health and social distancing rules and potential curfews about certain restrictions or which area you can be and then not. But that's -- it will be almost as usual business as usual with all those new restrictions in place. And that -- our clients can benefit from the service we provide. And we, as a company, can benefit from what they pay us in fees for what we do. And that ultimately, our shareholders can benefit from that as well. So we'll commit to you that we will do our best to get our portfolio at the best potential possible level over the next coming months. And then we will report again properly once we have announced our half year results, we can give you the full base of information about where we are. I'm sure that, one, anything which will happen in between, we will announce via RNS of real relevance as well, and we'll try to keep you posted on developments in the field, particularly if it's approval -- if we see some slowdowns of collection efficiency, and we want to revise what we have said before in terms of what we believe might be the ultimate write-off. So if it's going to be a lot better, we'll let you know if we feel that it might be worse, then we'll let you know as well.

This now concludes today's call. Thank you all for joining. You may now disconnect your lines.

Thank you very much. Bye-bye.

Thank you.