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

Okay. Thank you very much. Hi, my name is Dirk Brouwer. I'm the CEO of ASA International. We are, today, announcing our full year results for the year 2020. And we have a brief presentation, which we would like you to -- to present to you and explain a little bit what we have experienced last year, which was an extremely unusual year for our company and for most people in the world. And just show you what our performance has been in this new environment, which we have been living in. Clearly, it was very challenging. It's challenging primarily for our clients, first, who were very much disrupted by the COVID crisis by many -- in fact, many lockdowns, which affected their ability to do their business. And as a result, because of their inability to do business, they've also -- were less able to earn more income or the income streams at which they were used to, which also ultimately triggered them to -- some of them to not be able to repay their loans on time, et cetera, which then created overdue and that is one thing which we have been -- have to deal with over the last 12 months till the end of the year and actually is still a process which continues as we speak. By itself, I think, I would say that our clients have shown an enormous amount of resilience in actually dealing with the crisis and being able to come out of it actually quite strong. And we see already major changes -- positive changes in the environment -- business environment for our clients in many of the -- with many of our clients still affected by mini lockdowns, curfews, which in our place, in certain countries, obviously, many of you will have heard about this second wave or third wave in India, which triggered a large amount of infections as well as quite a lot of death, and also in the regions where we are operating. Now just to go quickly through the operating environment and what we actually achieved for last year, I mean, we have started with 2.5 million clients. We dropped down by year-end -- or by midyear to 2.3 million for the simple reason that many of our countries were locked down for quite a number of times, so we just were not able to disburse any loans. And we've been rebuilding our loan portfolio since then. Till the year-end, it was 2.4 million. And now by the end of April, it's about 2.5 million. So we're basically back to in terms of number of clients to where we were at the end of 2019. Now a number of branches have been quite steady. As you can see in the slide, we were at 1,956 at the first half. These branches were all opened in the first 3 months of 2020, so that was not affected yet by COVID. And then we kept it basically like that. We added only some branches in Zambia and Sierra Leone since that time. Size of the average clients' loan portfolio has been pretty steady in dollar terms. Obviously, that can vary a lot a bit over different countries. But I would say that also the currencies have held quite steady, unusually steady actually, relative to the U.S. dollar throughout the year. Now what is obviously the impact of the crisis, you can see very much in the portfolio quality, which was traditionally always around 1% to 2% PAR>30. That means that clients have not paid 1 or more installments 30 days when they were due. And that has now come up to 13.1%. So that's a big step-up, unusual big step-up actually, not surprising actually in many ways. And I can explain a little bit more the causes of it later on and also the consequences. As a result of the extra costs, particularly the credit costs we have incurred during the year 2020, our cost-to-income ratio has actually come up quite a bit. It's because our cost has gone up and our income actually has come down, so it's a bit of a double whammy while we were at a cost-to-income ratio of 60%, it's gone up all the way to 98%, which has clearly a big impact on our profitability with our return on average assets going down from 6.7% to pretty much flat, minus 0.2%, and our RoAE is going down to 1.3%. Profits have gone is basically down to $1.4 million, as you can see. And if you look at the loan portfolio on the balance sheet, we now -- we were at $467 million, ended up by year at this $415 million. But actually, you see a good rebound now coming through. There's a lot of demand for loans in pretty much all our countries as we speak. It's now gone up to $445 million. And when you would look at actually the documentation, which you will get as well, it's actually up about from -- on a gross level from -- from 470 -- from $445 million to $482 million, that's a $37 million increase over the last 4 months. So the situation is clearly improving. Clients have high demand for loans. They -- their businesses are doing better. But we still have to deal with quite a bit of overhang of the issues, which our clients faced in the -- particularly, in the first half of last year. And that's -- we made -- we had to make quite a number of provisions for that, what we call our credit losses and that process is still ongoing. We have made a lot of provisions this year, and that's really the cause that our profitability has come down to 0 compared to about $30 million -- $34 million, $35 million in 2019. And we anticipate that this year, there will still be some further credit losses, which will materialize and that will have some impact on the profitability for this year, although we don't expect it to be to the same extent as last year. Legacy client deposits stay the same. Equity levels have also stayed the same, which is important. So we have actually -- while we had some losses in various countries, the total equity on a consolidated level actually has stayed quite stable. We did not pay dividend last year because of the circumstances, and that obviously also helps the deeper equity levels at the right level. Now as mentioned, yes, I think that's basically on the first slide, then we move on to the next slide. This is quite an interesting slide, which is the diversified portfolio. What you can see there is that there's quite a big differential between the performance of our business in various markets. And if you look at it from a regional perspective, you can see that South Asia has had a pretty hard time as well as Southeast Asia. So the whole Asian block has actually done -- had more difficulties dealing with COVID than the African countries. Where West Africa almost performed as if nothing has happened, particularly Ghana has done extremely well. The RoAA of Ghana has been -- of the West African countries has been a total of 13.2%, and that was led really by very strong performance by Ghana. Nigeria has done quite well, not as well as Ghana, particularly also that was already a bit the case beforehand because the economic circumstances in Nigeria are just simply weaker. So the demand for loans and the ability for our clients to support and manage these loans is just a little lower. So the overdue is a little higher or has been a little higher over the last couple of years. East Africa actually has done reasonably well, very -- a bit more mixed. And the reason for that is that actually we've seen some overdue, particularly in Kenya and Uganda straight away after when the lockdown started. We saw quite a number of our clients moving away from the big cities to the rural areas where their parents live or where they have a house as well. They're in the rural communities. And that's basically created some distance between the client and ourselves. And also these clients were actually not actively doing their business during that period of time. And what that triggered ultimately is some overdue in these 2 countries, which is like what we call long overdue, means that your credit losses, which are going to be incurred over clients which borrowed from us primarily before the lockdowns started in the beginning of last year, so that has had some impact. That has impacted also the return on assets because we have made provisions for those potential losses in East Africa. On the other hand, a country like Tanzania, actually, the government there did not believe in the existence of COVID. You may have read about that. So actually business -- it was business as usual for our clients. Unfortunately, neither of our staff members across the world and neither of our clients have been really badly affected by COVID. Out of the 2.5 million clients we have, there's about 50 to 60 clients who died from COVID, so it's a fairly small percentage. And although it might still be somewhat understated, I can't say that it's not much understated because we provide credit loss insurance to all our clients, that's free of charge. So if a client die during -- when the loan is still outstanding, we erase the loan. So normally, when a client should die, we would find out quite quickly, but also the family will come quite quickly to us and tell us -- inform us about it, and then we basically write off the loan and they don't have any further obligation to us. So you can see that the impact for our clients in that regard has been quite low. And also for our staff members, many might have had COVID, but they're all quite young, and they have not been badly affected by it. So in that sense, the problems we face as a company were primarily related to all the disruption caused by COVID and not the direct effect of COVID. It's more indirect. Now on the South Asia side, just a couple of comments there. It is a bit of a mixed situation. India has really kind of struggled, I would say. That have been quite tough for them. The situation -- obviously, it's a very densely populated country. But the disruption was a very long lockdown period of 2 months and then also an additional 3 months moratorium, which the government granted to all our clients kind of really had a bad impact on the credit discipline of our clients. So many of our clients got a bit out of their normal regular installment paying -- regular installments. And if they didn't have that particular discipline anymore that was higher, they were at higher risk of not being able to manage the money to repay the money at the right time when they really had to do so. So many of these clients, particularly in India, who borrowed from us before these lockdowns, obviously, there are difficulty in running their businesses during that whole period, even subsequently when the moratoriums were still in place. But when the moratoriums ended, they just didn't have the income-generating capacity in their businesses anymore to really pay us on time. And so we have seen in India, as a result of this, that the quality of the portfolio has been more badly affected to the many other countries where we operate. And we can see that very clearly, particularly with clients who borrowed from us before the lockdown started in India because these clients have been most badly impacted by these lockdowns, because they just borrowed money prior to the lockdowns that were not able to really generate the associated income, which they would normally be able to do because of the fact that the marketplaces -- many of their marketplaces were closed down for such a long period. And while they still owe us money and had to pay interest on it as well, so it's -- those clients have been most badly hit, I would say. And that is still an issue currently in India, and we're still dealing with it. We've made many provisions for those particular clients already, but it's still possible we have to do some more during the course of this year. At least we expect that we'll have to do some more during the course of this year. Now Pakistan, on the other hand, although it's a neighboring country, it has had much less impact from COVID. And from an operational point of view, actually, the business has done very well. It's been growing. It's -- has peak loan -- OLP loan portfolio at the moment. It's bigger than it's ever been before. Portfolio quality has also been very good. So it's a completely different situation there than actually in India. In our Southeast Asia, Philippines has been struggling, also struggles by its long lockdowns, but also subsequent to those nationwide lockdowns. There has been a lot of regional lockdowns even at district level where 1 district closed the borders for a neighboring district when there's a flare up of infections, and that really impacted the ability for our clients to do their general business. So therefore, also in India, Philippines' profitability was -- incurred a loss last year. We made quite a lot of provisions for that already in the last year's financial statements -- of our 2020 financial statements, but we're still in the process of trying to normalize the business and get it up to the right standards and that will take some more time. Now Myanmar is in the Southeast Asia segment. It's very complex. The business has done actually quite well throughout the crisis. Clients continue to repay their loans in time. But the COO has really made a big impact on our business, very disruptive for our clients. Clearly, very discouraging for the country itself to have this happen. Their economy was growing very rapidly. It's now all in the standstill situation. Obviously, people have died, and it's a very unfortunate and quite sad situation. Situation is improving a bit for us at the moment. Reason for that is that there is a bit more calm on the streets in the major city. There's less demonstrations, less active activity from the military in the cities and it just kind of now moved more to the rural area. So that looks more like almost like a simple municipal war, which is quite disconcerting from our point of view, if that would really spread. At this point, it's not the case. So it's -- but -- so therefore, actually in Yangon and Bago and the bigger cities, actually, it's quite -- we can do our business reasonably well. So the -- that is positive. But it's still very uncertain and so we have to see how that's going to develop over the next coming months. And then we spoke already about East Africa, so -- and West Africa. So I'll move then to the next slide, the operational performance. Now just some -- just to show you a little bit about in some -- with regard to our branch numbers, how they've been actually growing. Not so -- but that our client base has shrunk, but it's now back to 2.5 million, so it's the same level as it was before by year-end 2019. OLP is also -- is getting there. It's not at the same level yet as in 2019, but we expect that it will continue to grow to that level, as mentioned before quite quickly for a simple reason that it's now already at 4 5 -- $450 million, $455 million, so that's -- there is a real good rebuilding of our portfolio. And that's obviously what will help us to generate more income, which will then also hopefully will end up though a portion in the bottom line. Now for the company itself, we made a small loss. This is all caused by credits -- expected credit losses, which we provided for. Some of them have already realized, but the large chunk is actually -- is expected credit losses. And that's had an impact as we had ultimately a bottom line, a bit below 1 point, from a small loss of $1.4 million. It's the first loss we actually ever made since 2012, so it's quite unusual situation. We had a very unusual situation at the time as well, although it was not a pandemic, but it was other kind of issues, which were not so dissimilar on what the impact was on our business. So it's not completely new. We also feel quite confident that this -- once our clients are going to be able to do their business more in a regular way that the profitability will return. This year will be a bit of a transition year. That's why if you look at the outlook statement we are making, it's fairly broad. We said, look, we don't actually know exactly at this point. It depends a bit, and I would say, it depends a bit what the situation in India is going to be over the next coming months. We have a fairly broad range of outcomes in India, which we could envisage. So it depends a bit on the circumstances and how able our clients would be to continue to do their normal business. So I would say that's the reason why we're a little hesitant to be very specific. But generally, we're quite confident that it will be an in-between year. And that if the situation continues to stabilize, that '19, 2020 -- 2021 would be more similar, will be more closer to what we performed -- our performance in 2019. Then I'll move to the next slide, assets and margin development. Well, I think I don't really want to go through this in too much detail. It's quite clear. Our OLP is rebuilding, but our PAR data or overdue data is still high and that now has to start to gradually come down. This has a real impact on our yields. Our yields -- our interest income yields, our gross yields has actually come down. That's primarily happened in 2020 because of the lockdowns. Because during the time of the lockdowns, actually we did from -- most of our countries, we were not able to charge interest income -- charge interest and, therefore, had no interest income for the periods of the lockdowns. So that had a direct impact during the year in 2020. Some of that's all recovered in 2021 via modification losses, but others -- another part is actually -- that's really -- it's not recovered. So it has an impact for 2020, but we would expect that the yields will come back to the levels where they were before because this modification loss, which is really caused by extension of loans, the loan terms which we have extended for a period of time to give our clients more time to be able to pay their installments to us. We kind of stopped that now, and we don't -- we barely provide any moratoriums, which also have an impact on this modification loss. And as a result, we think that this -- the yields will come back to the levels where they were before because the interest we charge is not much different than it was before in 2019. And as a result of lower income, clearly, our cost of funding has stayed quite stable and the net interest margin as a result has just tightened a bit. Now our funding profile, on the next slide, has been actually very good. I would say that we've been extremely pleased by the support we've received from our lenders across the world. We are dealing with lenders. Many of our lenders are -- we have a large number of lenders, local lenders and a lot of international lenders, I would say that international lenders, in particular, who are truly part of our own ecosystem, these are microfinance investment funds, which do loans to microfinance institutions and DFI, development finance institutions, which are owned by the governments in the West, in Europe, in the United States, in Japan, and these kind of development institutions have also been very supportive throughout the crisis. So while you may could have expected that some of our lenders would have withdrawn fronts from the markets, the immediate impact of the crisis actually did not stop them to continue to lend money to companies like ourselves. And in fact, actually, many of them were quite keen to increase their loans to us. Now probably they did that also to some other institutions, but they also told us that they prefer to lend to us because the high level of transparency we have. The very regular reporting made it easier for them to actually lend to us. And many of our loans are to local subsidiaries. And it was -- if they would have loaned -- lent to local companies in the various countries where we operate, one of -- some of our competitors, it was harder for them because they just didn't have the data set because they are generally dealing with us in many different countries at the same time. They know us so well that they can even lend us money without doing physical due diligence on-site. And that has helped us a lot. So we have been -- we had actually a funding pipeline throughout the year, which was bigger than we actually needed because our portfolio was actually not growing. It was initially shrinking a bit. So that's been a very positive experience. Now clearly, also very importantly, there was no doubt to us that when the crisis hit us, that it was going to have an impact on our loan -- quality of our loan portfolio that we would see potentially unusually high overdue amounts, credit loss -- potential credit losses in our portfolio. That was also known to our lenders, and we very quickly had discussions with them. Well, that clearly would mean that some of the covenants you have -- we have agreed with you with in terms of collections we're making, the overdue we might incur that these covenants do not necessarily keep them in place. And so many of the lenders are -- actually, pretty much all of them, have actually provided waivers or no action letters throughout the crisis. And that's been very positive from our point of view because obviously also our auditors will be looking at those things from just -- if the loans would disappear, that would obviously trigger problems for our company. So none of the lenders have requested any early payment of loans as of to date, so that's a positive thing. On the regulatory front, a couple of points. I mean we are making good progress with Pakistan to get the banking license. It's been -- we expected it to be a little sooner, but it's -- that has to do with the inspection by the Central Bank of our branches. It's harder for them to do. Actually, Central Bank has kind of worked a little bit. It's almost a 50% capacity in Pakistan over the -- during the crisis. So everything has gone a little slower. But all the process steps we are going through are in the right order. And it's -- we expect that we initially hoped by the end of June is more liking out probably in Q3, probably knowing how things go in Pakistan and these kind of narratives kind of expected by before the end of September. We would hope that we have been granted the banking -- microfinance banking license. It's an important license for us. Once we have that license, we can actually also start to take security deposits of our clients in Pakistan. And that will help support our quality of our portfolio. Because that's one of the things where you cannot take it, and the clients have more hardship. Once you have a bit of security deposits from the clients, then the pain for the company is much less because we can deduct the security deposit against the outstanding loan that client has with us. So that's important to recognize. Myanmar, we also have been able to get the savings license. So that's -- we are building gradually a savings base there in Myanmar, which is also very positive. In Ghana, that was initially the Bank of Ghana when the crisis hits, immediately took -- suspended the ability for all country -- companies in Ghana to pay dividends until further notice. Now just very recently, they actually removed that and dividends can now be declared again, which is very useful for us because Ghana is a big cash flow generator. They actually have more cash flow than they can really use in terms of growth of their business. So there have been a traditionally good dividend payer to the group. And that can now continue, while we still have to go through process. We have to do -- go through an approval process. It will take a bit of time, but there's no particular reason why the Bank of Ghana should deny us that because of the high quality of its balance sheet. In Nigeria, we had also a very important milestone by the completion of the transfer of the assets of ASIEA, which was our NGO activity into the ASHA Microfinance Bank and that has now been completed. I was already completed in April 2020. That's quite an important milestone because now all or the whole of our business is part of the Microfinance Bank, which is -- in one go, in terms of number of branches and clients, one of the largest in the country. In Tanzania, we also progressed. I mean we are having a nondeposit-taking license, which was one of the demands from the Tanzania Central Bank. And from there, we will be -- we're planning to upgrade it to a deposit-taking license as well, which then also will allow us to accept not only deposits, but also take some secured collateral, which supports the quality of our loan portfolio. Then on Slide 10, this is just to show you a little bit our collection efficiency and some of the ratios, which are relevant for the group. And we also show you actually what the situation is in 2 countries, which we are actually monitoring much more intensively than some of the other countries. And that's been India and the Philippines because, as mentioned, India has a pretty -- their clients have struggled. Same actually applies in the Philippines with those long lockdowns, low moratoriums. And as a result, the collection efficiency initially was very low in those countries. So you can see that in the Philippines, it was even up to December last year, it was -- it stayed up 67%. And India started in July with 45% because of the government-imposed -- government allowed moratorium of payments and has gradually come up. But as a result of that low start in July and it was even lower beforehand, the overdue has been building up. And that's where we now see those credit losses actually incurring, which we have made provisions for. And that is gradually, we expect that the portfolio quality. Well, the collections will continue to increase in these 2 countries and the portfolio quality will increase alongside with it. So this is the direction of trend we see. You can see already at the PAR data. This is very important the PAR>30 as well as PAR>90. But importantly, the PAR>30 data, you can see that India, which is a very large chunk of our portfolio, has gone down from December. It has already come down to 24% -- from 32% to 24%, that's a reduction of about 25%. In Philippines, actually it stepped up, but that's primarily because we actually stopped giving our clients any moratoriums. So the initial impact is that the portfolio quality deteriorates, but it was somewhat hidden by the moratoriums we granted. But also as a result of that, though, the collection efficiency also increased quite a bit because by year-end 2020, we were at 67%. And as a result of not granting any more moratoriums, our clients have become truly more disciplined and have started paying because the option of asking for a moratorium to a loan officer was no longer there. So they are now literally also at the mid-80s. That's not really the level where you want to be because we really want to be in the 90s in order to keep the portfolio quality at a good enough level. So it's still not there. So that also means that if it doesn't get to the levels over the next coming months where we want it to be, more in the mid-90s, that's -- that ultimately that we will have some further credit losses, which we may have to provide for. But the general direction of travel is quite good. What is actually going to have some impact, and we have made many provisions for it already, and that's the PAR>90 and beyond. We show here the PAR>90 data in the handouts of the -- what will listed, what will be published on the website, our presentation. We also have PAR>180 data in it. And there, you can see that both PAR>90, that many clients are really at long overdue. And this is what I mentioned before. These long lockdowns or these long moratorium periods have really impacted our clients in these 2 countries, the ability to have maintained credit discipline but also the ability to actually do their general income-generating activity, run their shops, run their business activities and actually generate a positive income from it. Now with the cash, they can't do that. They have the cash, and they basically will have to consume part of the cash just for their daily needs. And that's -- obviously, that's not good for them. It's not good for us if that is happening. So that's primarily the reason when we look at those portfolios in both India as well as in the Philippines, that there's a lot of that's all overdue, overdue, which was actually clients, which got loans before the moment -- before the lockdown started. And that is where our -- the problems primarily now are. The portfolio quality in both Philippines as well as in India, actually, if you look at everything which was disbursed after the end of the lockdowns in both countries, that portfolio quality is of good standard. So we just now have to deal with that old overdue. And in terms of the Philippines, it's very manageable because we also have security collateral from our clients there. And as a result, we will -- the actual provisioning we do in terms of credit losses is not so substantial. But in India, it is a much larger amount. A large proportion has already been taken. It really -- it has already been provided for, but there might be some more that depends really, as I mentioned before, what's going to happen over the next coming months in India in terms of the broader business environment for our clients. Now disbursements versus collections, you've seen. I'm not going to go through that in detail, but it's been -- generally, we've been growing. We've been rebuilding the portfolio. We peaked a bit in India by the end of March. It's very typical that you do as an institution. You actually try to have maximum amount of portfolio before the fiscal year end because that's also something which the banks look at in terms of the size of your business, et cetera, and what kind of lending they can do. But we kind of withdraw that in the next months, we kind of reduced that because of the situation is, in our opinion, not really stabilized yet. So we still have to be quite cautious in India, very much focused on ensuring that the clients have the opportunity to gradually rebuild their businesses and, therefore, also become current in terms of what they owe us, and that will take some more time. And so we want to make sure that we have a long enough runway to allow our clients to come back to the abnormality effectively. Now the development of clients, it's quite stable, as you can see. I won't go through that. But it's -- as we mentioned before, still close to 2.5 million. Loan portfolio, again, we already discussed this, I won't go through that. Moratoriums, I mentioned that we kind of stopped the moratoriums. By year-end, it was actually tended to be coming to 0. But because of the situation in Myanmar, we had to start giving some moratoriums to our clients there. So actually, that's all the moratorium, which we've granted in 2021. It's about -- the bulk is at the fast bulk of it. It's actually in Myanmar in terms of number of clients as well as moratorium amounts. It's not large sum. It's only up to $1.4 million. So it's not a very large sum compared to what we had in moratorium amounts in July of last year. So our growth strategy hasn't really changed. We continue to focus on financial inclusion through sustainable growth of our loan portfolio. It means that we try to increase our number of clients per branch. Obviously, the more clients we have in a branch, having high capacity, the better it is from an income-generating capacity of that branch. We gradually increased the volumes of the loans we provide to our clients. That's all dependent on the income-generating capacity of the clients. But clearly, if our clients do well with the loans we provide them, they generally increase their income-generating capacity throughout their loan cycle. And then at the next loan cycle, they often have desire to continue to build their business and they would like to have a bigger loan, in which we then -- based on our own credit assessment, we'll then provide. So it is, obviously, we work hand-in-hand with our clients in that regard. Clients do well, we can provide some of those bigger loans. And if we could provide some of those bigger loans, then they hopefully can do even better. And they can take a bigger loan again after the next loan cycle has ended and they go into a new loan cycle. Now other majors where common strategy clearly is we open new branches if and where we see opportunity to service clients. And we do that primarily in our existing countries, but we also have a strategy to continue to look to opportunities for expansion in new geographical areas. We stopped this during the COVID crisis, but we're now restarting the process of evaluating the opportunities in some countries. We're looking, for instance, Cameroon, we restarted the process. We're considering to look at the Madagascar. We still have further thoughts about Indonesia, it looks a little bit more crowded there, we have to be a bit cautious. But still, there might be some real opportunity. But this is all, at this point, still desk research and it's updating our existing guests for sure. So we've done it before. But if we feel the opportunity is good enough and the situation on the ground has improved that we can actually travel, we will send a team, a small team of specialists to each of those countries to evaluate really on-site whether the opportunity is there and whether our clients could benefit from the loans we might be able to provide to them. The other strategy is to gradually get deposit-taking licenses. It's important for us because then in some countries, we are not allowed to take any kind of security collateral against a loan like in India, that also exposes us more to risk. So where the deposit-taking licenses generally are allowed to actually provide -- get security collateral from applying, but also -- the client can actually benefit from taking -- basically having deposits with us. Now keep in mind that we are a microfinance institution. We are traditionally very focused on the lending side of the business and not so much on the deposit-taking side. And our clients traditionally don't have too much deposits. Most of the money they have, they reinvest in the business, so they don't have large cash resources. But the world is changing. Also, our clients are changing. We will see over the next 5 to 7 years, a real transformation with more and more client -- of our clients being interconnected and being online. And you see a lot of digital financial services propositions appearing in our countries and we want to be part of it. We do believe we have a real opportunity here because we have generally a large client base across the world, 2.5 million clients. It's maybe not that much, but it's a good stable core in each of the countries where we operate. And these clients are very homogeneous. Many of them have little shops. They have little businesses or they make things or they're in the service businesses. And they buy goods for their businesses, which they then actually work on and actually improve if they're sowing something and, therefore, then they sell it at a margin or they actually just trade, many of the little grocery shops, little restaurants, et cetera. All those activities require the working capital for them to buy the goods. Now there's a lot of opportunity for us once our clients are aligned to help them to aggregate orders, which they may make. It's all kind of large cash and carries or major providers of any of the goods they buy. Our clients are generally small business people. They only buy small amounts. So they don't get the discounts, the pricing discounts, which you could get if you buy a lot in bulk. And once our clients are online, we believe that we can help them to get much better terms with the suppliers by aggregating their orders. And that's currently just not really possible. It's very complex because we cannot actually communicate because our clients are on an active online basis, i.e., immediate. And therefore, that doesn't work yet, what we write cumbersome. But once our clients are all online with us, then -- and they have a bank account with us, they can basically pay to the merchants, which they buy their goods from via us. We can basically pass on the discounts to them. So it will be good for them. It will also be good for us because once they do well, we will do well. Plus it will inherently also benefit us from doing so, it will benefit us in actually increasing the stickiness of our clients. They will be less inclined to go to any other microfinance institution. And importantly, a lot of other microfinance clients or clients who would like to have a microfinance loan are more inclined to come to us by having a broader range of services. So this is just one example. We see a lot of other new examples, which other projects we're working on, actually, I won't go to too much detail now at this point where we feel that in the online environment, we have a real opportunity to make a real impact. I would say if we would be operating right now in the United States or any of the European countries, it will be more challenging. But in most parts of Africa and most parts of Asia, where we are, our clients are just coming online over the next coming years. We see the bigger cities that many of our clients have smartphones. Some of them have a laptop already or own PC or they go do their things. If they go online, they go to Internet cafes and things like that. But it is going to be a completely different world if they have a smartphone in their hand and they can actually transact. They can transfer money, they can pay people, they can save. They can order things with that smartphone. And we feel that if we are doing this properly, that we can help our clients to utilize that in the most effective way. And in the same way, we will benefit from that as well. So that's our plan. So it's really in the bottom part, the proprietary real-time banking platform, which will help us to build this digital potential solution. We're in a process right now where we hope by the beginning of the second -- first or second quarter of next year to start a pilot in one of the countries. And if that all works well, then the plan is to roll that out quite quickly. And this sort of ties in directly also with our deposit-taking license because once we have a deposit-taking license, we can take deposits from the public. But as we speak, it's not many. We don't really attract a lot of deposits from wealthier people in the country because that's not where our branches are. So if someone has to go to one of our branches to deposit some money and they collect the money, we don't have ATMs and things like that. That's all very costly. It's really not -- it's not within our business segment, a good strategy to go that way. But if it all goes online and they can transfer money into our account just for savings, basically use our current account, if they wish, then it becomes a completely different world. So then I think we can actually, with the number of clients we have in some of those countries, we can make quite a nice impact. We still -- probably still have low-income clients. That's clearly what our strength is, and that's what we want to continue to focus on. But we make things just really better for our clients in terms of introducing them to this whole new digital world, which is going to open up for them. Okay. So the final thing is the summary, the outlook. Yes, I think -- I don't think I want to go through this in detail. No, I think we've been pleased with the resilience of our business and particularly of our clients and also our local management. They've really been able to navigate ourselves through the crisis. In each of the countries has been different. There are some countries, as I mentioned, Tanzania, basically operators, there's nothing that happens. But other countries, the amount of disruption and how to deal with that and how to get staff through your clients and the clients being able to buy, sell peers and all those things. There has been a real challenge also for local management to make sure that we navigated those all around in accordance and compliance with these new restrictions properly so that we could still run our businesses in the most effective way. I think the good part is, we mentioned it before. We have a good balance sheet portfolio. We have a lot of cash in the bank at the moment, unrestricted which also allows us to invest. And we think that over the next 12 months, I think, it is depending a little bit how the crisis will develop, and actually things will gradually normalize in our operating countries. That is a good time to start really thinking about more investments in our businesses. And I think that we would then benefit -- that would be to our long-term benefit. But we should not forget that it is still a challenging environment. It's definitely -- there's a high chance that in some of the countries, we will have a new wave of COVID infections with, again, lots of disruption following that. And we obviously hope that over the next 2 years also, in our countries, in Asia as well as in Africa, that the vaccination rate will really start to go up. I mean, as we speak, it's very low. It's almost negligible in most parts of Africa. Luckily, the impact hasn't been particularly bad in Africa, but that can just change. So it's very important that also our clients get vaccinated as soon as physically possible. And we kind of anticipate that, that's not going to be done this year for certain and that probably will not be done either next year. It will be started properly, but it might take a couple of years before these countries will have all the benefits from the vaccines, which many people in the western world are starting to have. So I would like to thank you very much for your attention, and we will then open it up for questions.

Yes, Dirk. We have a couple of questions posted on the webcast. One question from Vikram Raghavan from Moon Capital is if you could give some more specific guidance for '21 on loan growth, margin and credit costs?

I mean, Vikram, I understand the question. It's just very difficult, as mentioned. That's why we are also -- the outlook is broad. We intentionally made it broad, it's not accidental. But because of the fact that we -- and it is all India related. India is big. We have no security collateral at India, so every rupee we have to provide for, there's nothing -- there's no security against that rupee by any clients. So effectively, the swings can be quite big. And it's a big portfolio. So we're going to be a little cautious. We've done a lot of scenario analysis, as you can imagine. And the scenario analysis really is quite a broad range. So it's going to be lower than what our base case is and it can be substantially better than our base case, so that makes the range quite broad. Generally, I would say that what meaningful -- we, obviously, had a long discussion, what does meaningful really mean. And it does exactly mean that we don't know exactly. I would say, though, it's going to be better, in my opinion, and that's why we say meaningfully better than last year. Last year, clearly, was a bad year. I mean we suddenly went from making more than $30 million in profit, we suddenly went to a loss. Now all those loss was incurred was all credit losses, right, and expected credit losses provisions, which haven't even materialized yet. And that's where the big debate is. And are some of those credit losses ultimately going to be credit provisions we made? Are they going to be all drawn? And if -- and does it -- and will there be more credit losses coming through this year, which also will -- haven't been provided for? And those 2 things, if you add the 2 up, that can make a big impact. Now on the other hand, it can be that many of our clients, and particularly in India, is big -- it's a big thing for clients to default because their credit history is really affected by it. So the clients -- I mean, we know that they're doing -- many of their clients do their -- they try really hard to pay so that they will gradually, gradually become current and that even loans which we have already been providing for will ultimately are going to be realized maybe in a much longer period than what is the current loan terms, but it will be realized. And at the same time, that some of the loans which we are expecting to see provisions for this year, that's in the environment -- if the environment improves that these clients will actually also try to get current over a period of time. So that's the reason why we feel that those 2 things together that we feel, if we say, we go on a positive side or the negative side, we come to quite a broad range. And I think we will know more by half year. And I'm not saying by the end of June, but when we were reporting our half year numbers, we will have a much better view on what the situation is going to be in India. Though there are some crisis, it's now behind us. It is not exactly clear yet how -- what is going to happen, but the most important part of it is the uncertainty and the political activism around that, which was created by the political activism. The uncertainty for the client, what actually they had to pay to any of their microfinance institutions because of potential prospective waivers, which some of the politicians suggested were forthcoming, that situation now has improved. And there might be some kind of waivers, but it is much more limited than what's initially was promoted by some of the politicians. So I think there will be more clarity there. And I think that still basically provides a better situation for us in that part of India. It doesn't represent a large chunk of our portfolio. It's about 13%, 1-3. But still, it has been quite disruptive because of the political situation in ASA. Now obviously, you do know about the cyclones, which have affected us last night. We don't know yet all the consequences, but that's happened very often, as you know, in that region of India. So we'll overcome it, but it obviously provides a little extra hardship to clients, which might already be struggling. So those things -- keeping all those things in mind, we are a little -- we're not particularly specific at this point. But I hope that at the next half year results, we will be able to be more specific of what we're going to be doing for the remaining part of the year as well as having a much -- hopefully, a more specific view on what 2022 may be like.

Okay, Dirk. We have 2 more questions from Abhijit Sarkar, and they're about India. And the first question is, if you can comment on how the competition has reacted in the markets where we operate? So I guess this is at a different markets within India. And since there are concerns on releveraging the borrower by giving fresh loans in order to show a lower part according to Abhijit. Could you comment on that?

Yes. Well, yes, we don't do that. I think we try to be as transparent as we can. We think it's very important, even if the news is not great, that we explain what the situation is. You may know we basically provide now a monthly business update, which is normally about 15 days after the closure of a month. We give a business update, which comes via RNS. So our shareholders, but also the lenders can see in the most transparent way how our operations are going. We show our collection efficiency, we show our overdue in the different buckets, we show the disbursements we're making. We have a little narrative, but very basic, nothing more than just a narrative about what actually the facts the operating data tell us in terms of what the other business is performing. We will keep that up. We've got a lot of good feedback from many of our investors as well as lenders who like the fact that there's so much transparency and there's so much information in which our investors can judge which direction of travel we currently have. So that is what we do. I know that some institutions are trying to find all kind of measures try to improve the portfolio quality by also adding more loans to existing loans. We don't do that. We try to avoid that in many ways. So the business stays in the same way with a very, very strong focus on working with our clients to enable them to repay the loans. Yes, and if they repay the loans, they can get a new loan. If they have to credit -- credibility of the creditworthiness in their business, then they get the bigger loans. We'd like that, clearly. But we don't want to -- or we try to avoid is that we provide new loans to replace all the loans, which actually are not doing so well. And obviously, we don't have the capacity like some organizations have and banking organizations where they can offset some of the deposit base, which the client has against the loan portfolio, the loans they have taken from that particular institution. We can't do that. We are an NBFC MFI. We are really -- that's quite exposed. If clients don't pay, we can't utilize any credit collateral like either savings or any security collateral to offset that, not in India. So that's -- well, that creates higher risk than some of the banks, like say, Bandhan, which operates in our region or the small finance banks. But also those institutions have their own challenges. So I don't think any of them would say business is easy right now because our loans are quite small, and there's definitely institutions in our region who provides loans double the size to some of our clients. And I don't think that those loans will -- so when we struggle that those loans will do suddenly very well. So it is a challenging environment, I think, for all of the microfinance institutions in the country. And I'm sure that any -- some will do really better than others. There's definitely a regional difference, which we've seen. The Northeast has been more affected by the COVID situation than the South. And that's not because of COVID, that's because of it became a little crowded in the Northeast. So there was more competition in the Northeast as a result. Some of the clients were probably overleveraging themselves just by having too much availability of funding. And when the crisis then hit, they have the funds, but not the business to basically generate the income associated with. Now immediate consequence -- well, they are not immediate, but the ultimate consequence of that is that, that money is basically yielding less than what the client owes us for that loan. Now then they have a loss on having that loan, in fact. And that's not our business. It's not their business model either. But they're stuck with it. Obviously, our clients then will hold on to it, which is probably not smarter. They should have probably then -- if they have too much money borrowed, they should try to repay it early. And frankly, every single microfinance institution would be generally very responsive to that. So that's how we see it. So we have -- yes, we do see there -- yes, it's a very dynamic market, remains a very dynamic market, very exciting market actually. India has a lot of innovation, but definitely more challenging markets to operate than some of the other markets where we are.

Yes. So Abhijit had a second question on India. And that is how is May looking in terms of collection efficiency? And thoughts on restructuring options available with lenders.

Well, yes, 2 questions, valid questions, I would say. Yes, May is -- I think we will be a little cautious. And the 2 things are little associated with you -- the question you asked. We've got to be a bit more cautious at the moment because we want to make sure that the business gradually improves. So we're not going to rebuild or we will actually -- for the time being, we will not disburse more than what we collect and we might actually reduce our disbursement a bit. In fact, in the months of April, we reduced the disbursements quite strongly after a big peak in March. And we will keep that a little lower because we want to ensure that we have all the cash flow necessary to take us through the next little challenge, which is basically making sure that the clients who are at longer-term overdue are gradually start repaying that and anticipate that the ones who cannot that we will have to incur some further credit losses. It's not a never-ending situation, I would say. This is not that it's going to impact the whole portfolio. It is just primarily these loans, which have been outstanding already since the start of COVID. Those where -- that's where the pain is. It's still a decent amount, which still has to be repaid out of that group of loans. But there are payments being made, they're just not paid always on time and there's a certain amount of overdue. So that's what our team is working on very hard to try to reduce. So that's the plan. On the restructuring side, I would say, clearly, India made a loss last year. That also means that the equity base is reduced. We are reviewing how much additional capital they will need. Our plan would be to review that. We have made -- are not making any decision at this point. There's no urgency, I would say, either. But we are also evaluating if any party wants to join us, we are happy to do that. We do see the Indian portfolio as a higher risk portfolio. There's a lot of investors who are very excited about India Microfinance. We are excited of India Microfinance, but we're also excited about our business in Pakistan and our business into different parts in Africa. We don't want to become overweight in India. We like being in India was a good business, a solid business, where we have no desire to become the biggest operator in India because that would actually change the complete risk profile of ASA International. So we don't want to go overweight in terms of capital allocation to India compared to some of the others. Now that's -- but that also means that, as a result, we may be holding up our local institution a bit in terms of the opportunities, which may lay ahead of them because now it's a difficult time, but there's also a lot of smaller microfinance institutions, which have a much, much harder time than we have had. It's almost the -- I know names and I'm not going to name it, but there's quite a number of microfinance institutions in the regions where we operate, who are, I wouldn't say, out of business, but they barely can actually disburse. And so that is -- there's an opportunity for some of bigger players who have a bit more financial capacity to increase their portfolios and reach out to a new set of clients who might have borrowed in the past from other institutions. So that is -- that opportunity is there. Obviously, you don't want to do that too early and actually end up with loans which are going to fail or are going to create overdue. But once the economic circumstances improve, these clients are there to service. So that opportunity will arise for us as well, we think. And that's why also having some more capital in the business will help us to -- obviously, will satisfy our lenders, and we'll give them more confidence to lend to us and to actually kickstart the growth phase, which we anticipate will come, and we just don't know exactly when, but it will come and that we can participate in that. And so that may mean that we have now, at this point, we have 1 shareholder with us, which is IDFC First Bank. They've been with us for a long time. They own 9.9% of the shares. And I would not exclude that over a period of -- at some point that we may see if we can find another good party who may want to join us in -- as a shareholder in the business -- in our Indian business.

Thank you very much, Dirk. This was the last question, so you can make a closing comment before we close this webcast.

Well, closing comments, thank you so much for participating in this webcast and giving us the opportunity to explain about the performance of our business and the challenges we have faced over the last year. We're all still here. We're still very focused. We're very keen, very excited, actually also about the broader opportunities, which we see ahead of us. COVID has not gone. It will continue to be challenging and this year, possibly the year thereafter and, hopefully, less and less served years thereafter. Our clients will continue to need new funds to run their businesses. We have a very specific client group in many different countries. It gives us, in our opinion, real good opportunity to provide them with much increasingly higher value-added services over and beyond our loans, which will continue to be core business for -- probably forever. But we also believe that we can do some additional things for them, which would be to the benefit of their businesses and, as a result, will be to the benefit of us. So thank you, again. I really very much appreciate your time. And please feel free to call Véronique if you want to have a special discussion at any time. We'd like to be as transparent and open to you about how our business is going and what plans we have for the future. So thank you very much.