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

Good day, and welcome to the ASA International Holdings Half Year Results 2021 Conference Call. At this time, I would like to turn the conference over to Mr. Dirk Brouwer. Please go ahead, sir.

Good afternoon. This is Dirk Brouwer, CEO of ASA International. We would like to take you through our first half 2020 results. I will basically move to Slide 2, which summarizes our improving operational performance for the first half of 2021. Essentially, what we have seen over the last half year is that there's a gradual strengthening of our business, which also is reflected in the improving operational performance of the company. We have been gradually increasing some of our branches as well as our number of clients, which are now at the level of where they were in 2019. A number of branches have further increased, primarily in Pakistan, Tanzania and also some extra branches in Ghana. And you can also see that the OLP per client has increased a bit and getting closer to where we were in 2019 as well. PAR>30 clearly is still a difficult one. It's still an outlier. The PAR data with most of our entities has improved -- have improved substantially, but India is still quite problematic. The situation on the ground there was many of our clients having difficulties repaying our loans on time. So that's reflected in a fairly high PAR number and usually high for our experience as a company. Well, it was in 2019, 1.5%. It's now 12.3%. But we, as a company, with all our staff and field officers are very actively working on trying to reduce the PAR to more normal levels. But it's all still very dependent on the impacts we've seen of COVID in different regions and primarily India, the PAR has really gone up substantially since May, June this year as a result of the new Delta variant coming in. Cost-income ratio is still higher than what we like, but it's also going in the right direction now compared to where we were first half 2020, but also fiscal year 2020, there's a substantial improvement. And you can also see that the return on assets and return on average equity, although on a relative scale, obviously, not that great from what we have been able to do in the past, at least, we are starting to become profitable again as reflected in the profit before tax as well as net profit for the first half of the year. There's quite a difference in profit before tax and net profit, and that's why we also show specifically profit before tax because there are some extraordinary items in the net profit, which affects the net profit. And that has to do with the new rules that when we are planning to have a dividend declared that we already have to take it into our accounts. And that has quite some impact actually in the income statements for the first half because we are planning to have some dividend declared coming out of a couple of our entities. And therefore, we have to make already a withholding tax incorporated in our profits -- in our net profits, was deducted from our profit before tax. Other than that, I think the balance sheet is -- OLP is still a little lower, but we expect to consider -- to see further growth there, although it very much depends on the situation in India, I would say. And then you've seen the client deposits. And the total equity has been stable throughout the crisis. It's not -- it hasn't varied much clearly, because we haven't really been adding much profits, but also we haven't been losing much money during the whole COVID situation. So I'll go to the next slide, the highlights. Just very briefly, so operational performance pretax, $7.5 million, just mentioned that already, which is quite a big step-up compared to the fiscal year 2020, $2.6 million. We have seen this recovery of our operation being led by strong operational and financial performance in Ghana, Pakistan and Tanzania, which all 3 delivered substantial OLP growth. There's a PAR>30 of less than 2%. So high-quality loan portfolio and as a result, there's substantially increased profitability. Our operations in the Philippines, Nigeria and Kenya also made significant positive contributions to the group's net profitability. It was partially due in the Philippines because we have had quite some ECL, expected credit losses, which we had provided for. And if we deduct those from these losses having been incurred previously, then the contribution to net profitability actually has been increasing quite substantially in the first half of this year. And we've seen the same, but at a lesser extent, but also Nigeria and Kenya made a very substantial positive contribution. So they are all 3 countries, which are fairly sizable countries for us, have also been profitable. Where we see still problems is in India, as mentioned. We made additional ECL expenses of $15.3 million while it was in H1 2020, it was $3.8 million. And the other countries as a whole, actually for the first half, we had the ECL expenses of about $6.8 million, which was the year before was $4.5 million. Now this obviously has reduced pretax profitability. And the situation, clearly, the Indian amounts are big, and we are very carefully following debts and working very hard with our local management in India to try to reduce the overdue, which essentially triggers the ECL expenses and gradually and gradually getting our clients in a position that they are going to be able to start repaying our loans. Essentially, what happens now is that clients are struggling with the COVID situation. It was pre in April but then suddenly, the Delta variant started to hit our countries quite substantially. I think I might have -- okay. I hope you can still hear me. So in April, situation is still quite good. But then in May, actually, the Delta variant really has made a big impact on our -- on the quality of the portfolio. While just before that, we were quite positive about developments. Suddenly the Delta variant created a massive amount of havoc in the regions where we operate, made it much more difficult for our clients to continue to do their normal business. And as a result, they started to also -- that created also overdue because literally, they have no money to pay our installments. Now the situation is improving as we see it, but we haven't seen it yet in the numbers coming through. But we -- the environment is improving in the Northeast. We have had also the positive situation developing on the State of Assam, where there was some political involvement trying to argue for waivers -- of loan waivers by the government. That situation has now been resolved in favor of the microfinance institutions, which operate in Assam. So we expect to see collections to increase substantially in Assam. And also to gradually see it for the rest of our area in the Northeast of India. So that's still work in progress, I would say. The other situation is the lockdowns in our other operating countries, besides India, Sri Lanka, Philippines, Myanmar and Uganda. We've also provided some temporary moratoriums, and we did that in India recently. That was at the -- that was as the suggestion of the Central Bank after the Delta variant came in. And that's -- so we basically have been giving moratoriums to many of our clients in India, which added their moratorium numbers to about $48.3 million in June 2021 for 20 -- 237,000 clients benefiting from the moratorium. And this was primarily in India, we did a little bit at Sri Lanka and a little bit in Myanmar and a little bit in Uganda. PAR>30 decreased during the period from 13.1% to 12.3% after the restructuring of the loans in India, so that had a bit of a benefit from a PAR>30 perspective. Now the situation from a financial point of view, the company is still very strong with about $108 million of unrestricted cash and cash equivalents. And our funding pipeline is currently about $163 million of fresh loans, which we're in the process of negotiating with the various lenders. We received fresh loans of about $117 million during the first half of 2021. So we are continuing to repay that and attract new debts to fund our operations with no substantial difficulty at this point in time. As you can see on the next slide, number four, our portfolio diversification has not really changed that much with the exception that the South Asia has actually come down a bit in terms of size, and that has to do with the shrinking of our portfolio in India. On the other hand, our Pakistan portfolio is -- the growth of our Pakistan portfolio has been quite high. So that has been offsetting the reduction of our portfolio in India quite a bit, but it still has come down a bit in that region. Southeast Asia has been a little smaller, but West Africa has grown quite a bit with Ghana actually recording record growth as well as record profits in the first half of 2021. So the percentage as a whole, together with Nigeria and Sierra Leone gone up quite a bit. So I would go now -- yes, just briefly on the right-hand side, you can see the ROA. Now these are very different from the standards we normally have with the exception of West Africa, where our return on average assets is still about 20%. Also in East Africa, it's 4.4%. So positive numbers. Also in Southeast Asia with all the provisions we've made, actually, the situation right now is quite stable. It's about 2.5%. And the real laggard is in South Asia, but that's primarily -- it is actually India and to a lesser extent because of this much smaller size of our business there is in Sri Lanka. So I go to the next slide. Yes, this is just a quick highlight. I already discussed a couple of them. So our portfolio in Pakistan has done very well. Since the end of 2020, we very high-quality portfolio with high growth and high profitability. Profitability in Pakistan is higher than it's ever been. So that's been very good, despite all the challenges we faced with COVID. India and Sri Lanka very much disrupted, much more difficulties with the COVID situation and much more disturbances. It started already with a 2 months' lockdown and then also another couple of months of moratorium period, which was granted to our clients. So that really had an impact in 2020 already, and that's still -- while it was recovering, as mentioned early this year, but really after the Delta variant came in, that's really kind of -- there were more lockdowns and more disruption to our clients' businesses, which disabled them to repay their loan installments on time. Then we've also -- that we've seen the same a little bit in Sri Lanka, where it's also quite a difficult environment as mentioned before. Southeast Asia, we've been doing quite well. I mean we've made quite a lot of provisions. These are old overdue we've been fully providing for. As we speak now, the situation in the Philippines is actually quite good. The PAR performance, excluding the amounts of -- excluding the long overdue is actually -- the PAR>30 performance is actually in a very good shape. And that also means that we have been able to generate a reasonable amount of profits actually in the first half of this year. PAR -- as of August, the PAR>30 is about 1.9%, and that's a very good level from our point of view and particularly where it came from. We've seen Myanmar is a very difficult situation. It's not only difficult because of COVID, but although the Delta variant really hit it hard. I mean the number of deaths of our clients has been unprecedented relative to any of the other countries as well as that we lost some staff in Myanmar as well as a result of COVID. But besides the COVID, it was aggravated by the whole military takeover with many of the hospitals not being really functioning. So there was a real shortage of oxygen, no functioning hospitals with very little staff actually being and working in the hospital. So that's kind of quite a bad impact on the number of people who were able to recover in the sense that more people essentially died as a result of COVID. So the situation there is still uncertain, as we speak. In the whole month of August, we have not been able to do any collections for a simple reason that everything is closed in Myanmar for doing business at the moment. West Africa is a very different situation, as mentioned. Strong improvements despite still a challenging market environment as a result of COVID, but we've seen it in all 3 countries in West Africa. Ghana, record is -- recorded record profits in H1 2021, more than we ever have been able to achieve. Also, Nigeria has done well. It's -- the profitability of Nigeria exceeded the pre-COVID profitability in H1 2019. So that's a positive signal as well. And also, we've seen the profitability of Sierra Leone. Actually, they realized the first profit since we started the company a couple of years ago and the loan portfolio has essentially doubled from June 2020 to June 2021. So that's been a very good performance for Sierra Leone. We're very pleased about it. It's still a very small book market, but we are still -- we are quite happy that we now actually crossed the breakeven point in this country, which took us a little time -- a little extra time. The currencies have been holding out reasonably well with the exception of the Nigerian naira, which was 7% down in the first half of 2021. And that's impacted the U.S. dollar profitability and OLP growth during that period. East Africa improved operational performance and profitability, particularly supported by strong growth in Tanzania and also improvements in the operating environment in Kenya and Rwanda. Uganda is still very difficult. Uganda has had a very long lockdown again as a result of increased infections, but also a bit of the fear of the Delta variant coming into Uganda, and that has really impacted the ability for our clients to do their businesses. And as a result, the -- we have seen the PAR data -- the PAR>30 data actually increased quite a bit. Although we are quite confident that this will be temporary and that the company will be able to recover all that overdue within the next couple of months. ASA Tanzania did very well. It doubled its portfolio from June '20 to June 2021, and also reported record profits. So it's been -- that's been a good sign. So these are good signals, as mentioned, so where we can really focus on what the challenges -- where we face the biggest challenges. And at this point, we see those biggest challenges, as mentioned before, India, Myanmar for somewhat different reasons and also Sri Lanka as a much smaller market. So I'll move to the next slide, the operational and financial performance. As you can see, branches have been growing quite nicely. Clients have been growing to the levels where we were in 2019. OLP is still a bit behind, but we would expect to see that increase over the next coming -- over the next 6 to 12 months that we see further growth. And profitability, while it is obviously still very low at 1.4% on a net profit level, but keeping in mind that the pretax increase is already quite substantial, we're quite confident that the profit numbers will continue to improve. But having said that, subject to the situation, how the situation will develop in India. Because India is the biggest portfolio. In India, we've made already the biggest number of provisions. But it's still uncertain whether or not we still -- we have to take additional provisions over the next coming months. So I would say that's really the key determinant of how our development of the whole organization will be dependent on the situation in India. And of course, any other disruption, which we could still envisage or could still happen in any of our other operating countries. So I'll go to the next slide, asset quality and margin development. As you can see, OLP and PAR>30 increased quite a bit in the first half of 2021, 12.3%, primarily caused by the situation in India. It was about the same in fiscal year in 2020. That's coming obviously from PAR>30 levels, which were much more regular of 1.5%, 3% and even for fiscal year 2019 as well as first half 2020. OLP quite steady, not there at the level of 2019 yet, but we are -- as mentioned, it's quite positive that we will be able to further grow the business. The yield has been increasing as a result of the business normal -- gradually normalizing. Cost of funding hasn't really changed much as a result of the interest margin throughout the whole period. So as a result, the net interest margin has been increasing as well. And the margin has been benefiting from the fact that we have introduced the EIR method throughout the organization. This helps us because delays of repayments in the past and the way the loans were structured would not necessarily cause an accrual of interest. And now that through the EIR method, that actually is now established. So if a client pays late, then that client will have to pay a little extra interest over the periods that loan repayment has been deferred. So that's been introduced since October 2020 and is now in practice in most markets. And also, we've seen some release of modification losses accrued during fiscal year 2020, which has been reversed in fiscal year -- H1 2021. That also helped us to increase the operating margin -- the interest margin a bit. So then I go to the next slide, asset quality and development (sic) [ strong funding profile with disciplined ALM ]. As you can see, the funding profile by itself has not materially changed during H1 2021. As you can see, we have roughly the same amount of equity over the last 2 years. Loan funds -- microfinance loan funds, small percentage. Loans from development banks and foundations have stayed stable. And then loans from financial institutions have been basically besides the local deposits, they've funding their portfolio throughout. And as mentioned before, our lenders have been very supportive, and we're very grateful for that throughout the whole crisis. No one panicked. Everyone has been basically focused on how to make sure that our clients were able to repay their loans. That's obviously primarily the job of microfinance institution as ourselves, with our lenders have been very supportive in supporting any postponements of repayments, et cetera, if necessary, and also to be quite flexible with any covenant breaches, particularly the PAR>30 covenants, which is more or less a monetary covenant if you cross the PAR>30 over a certain percentage. Normally, it's about 5%. And generally, the lenders would care a little bit more about what situation is of your portfolio and spend a little bit more time with you. Now obviously, they have to do that with pretty much every single microfinance institution in the world over the last -- since the beginning of COVID. But there, all the lenders have been very supportive. And I'm trying to understand the situation on the ground of each of the entities, our entities, I'm sure for many other microfinance institutions and kept the flow of funds coming in, while clearly, we also basically repaid the loans -- outstanding loans. So that has been a good situation for the whole industry, I would say, and that also has helped us to continue to do our business properly. Now this is obviously helped by the fact that we have credit relationships with more than 4 -- 50 lenders throughout the world and have long-standing relationships with many of them. And that also enables us to not only get the funding in place, but also they generally can be quite competitively priced because we have a reasonable amount of various options and certain lenders have preference for certain markets, certain countries and other lenders focus -- prefer to focus on other countries. Now in -- as we speak, we have not been able to fulfill all our covenant ratios during H1 2021. That has more to do with timing. We received waivers from all our lenders for some of those covenant breaches except for about $54 million of loans, which we were not able to complete yet. But we've also received waivers for the majority of these loans now, but they still have to be approved by internal procedures by our lenders and we finally document. But this is a process, which we have been going through since actually beginning of COVID, and there's nothing much different from what it was before. The regulatory updates, I think important figures that we're inching towards getting the bank license, the microfinance bank license. In Pakistan, the State Bank actually completed its inspection in August and now it's basically for them to provide us with the license that may and will most likely contain various conditions, which we then will need to meet for -- particularly to become fully able to start taking deposits, which is part of the microfinance bank license. So that might take still another 12 months, maybe even it's a little longer. We have to see what State Bank comes up with, but we're waiting for news in that respect over the next coming months. As you also know, probably India, they are actually changing or they're proposing -- the RBI is proposing some new uniform regulations for all lenders, which is in the field of microfinance. So there's microfinance institutions, NBFC-MFIs, like we are small finance banks. We're also banks, which focus on microfinance and to really align the regulation for all the groups who provide microfinance. This may lead to fewer restrictions, which the NBFC-MFIs, which ASA -- we have -- we are an NBFC-MFI in India that may release some of the restrictions we currently have. Like, for instance, the margin capital's debate whether the margin cap should be removed. That would be a very positive thing for ASA India. And there's also a debate whether there should be more freedom in charging certain amounts of interest to our clients. So there's various things, which are being under review and we will be carefully reviewing those. We're also debating possibly over time whether we want to keep the NBFC-MFI license or possibly move towards a small finance bank license, which is more a regional bank, but also the advantage of the small finance bank is that you can actually secure deposits from your clients, which as an NBFC-MFI, we have not been able to do. And that's been quite -- that has hurt us in a sense, particularly during the whole COVID crisis because any loan we -- which is not current, we need to provide for over a period of time, it's through the PAR>30 and further, but ultimately, we will make an expected credit loss for that particular loan. And in India, we do not have the ability to have any security collateral as an NBFC-MFI, which we do have -- we can do that in most other markets. And in most other markets are the amount of security collateral we have from our clients, on average, can be between 40% to 45%. So that's quite a substantial sum. So if we need to make a provision against a particular loan, because the client has not been able to repay that loan within the prescribed time period, then the provision will be substantially less than in the situation in India where we have to make that provision for 100% of the loan. So that's -- that also has a real impact on the financials of the group at this point in time. Now Sri Lanka, we -- there's no particular -- other specific events, which from a regulatory point other than the curfews and the lockdowns. Same actually in Philippines, is mostly in Myanmar, everyone knows about the military takeover and the impact that, that's had and also the fact that Public holiday already now from 17 July to 10th September, which basically stopped us from doing any business during that whole period. Important thing for us is companies in Ghana, they at the time of COVID had started to disallow dividend declarations by Ghanaian companies, which also impacted our operation. That dividend restriction has now been suspended or basically -- it's basically released. And as of now, we can actually declare dividends. We do need still to get approval by the Bank of Ghana. And so we already have actually declared a dividend, which is now subject to the approval by the Bank of Ghana. And then in that case, we will dividend some funds up from Ghana to the holding. On Tanzania, we received a non-deposit taking license in June 2021. Prior to that, we were an unregulated financial institution. Now we are a regulated non-deposit taking institution, and we're preparing there to also apply for the application for a full deposit-taking license. So that's the next phase where we're going through it -- going forward with. In the next slide, just a quick snapshot of the business update. Many of you will have already seen this. This is what we report every month. And you can see that the collection efficiency has been quite good with the exception of a couple of countries. Sri Lanka, I mentioned before, was about 80%. Myanmar in August, we couldn't do anything because of the fact that everything was literally closed at the moment there. Uganda, also a little lower. That was really quite triggered by these lockdowns, which were implemented after the Delta variant actually hit. Asia, they also became more cautious. In Uganda, there's more relaxation forthcoming now. So we would expect that the collection efficiency will gradually increase in Uganda, and it probably might take a couple of months to get it back to the levels where it was in March and April. But the big issue is really India. India is about 60%. We have given quite a large number of moratoriums recently. This is related to the RBI. Actually when the Delta variant hit the country, the RBI proposed a moratorium period for clients, which, as a microfinance institution, you could apply for or you could basically implement. And so we have done that this time. The year before, we actually didn't do it. But this time, we felt that it was appropriate to do it. So we've given our clients -- quite a large number of clients slightly later this. But there's quite a large number of clients who now actually have a moratorium for their loans for a period of time. So that gives them some more time to get current. And this is also -- ultimately, we do have -- in India, we do have to give our clients more time because otherwise because they simply cannot have -- do not have the current ability to pay our loans installments on time. So that's what is obviously reducing the collection efficiency and what is also then increasing the -- decreasing the quality of the loan portfolio in India. So the amount is -- in India, it's about -- of the moratorium amount, it's about $47 million. So it's quite substantial sum actually. And it's about -- affecting about 230,000 clients we have in India. So this is good for the clients. We also feel fairly positive about it because we do recognize that we've given these moratoriums specifically to clients, which we know need a little extra time. So it's been -- we've gone through a very detailed process to ensure that the right clients were able -- were eligible for this moratorium period. And then I go to the next slide. Yes, you can see the portfolio quality as we speak. You can see the portfolio quality is of August. PAR>30 in India is very high, 35.9%. It's not -- PAR>30 has not improved as a result of the moratoriums. So that's really the situation on the ground. And you can also see that for many other countries, the PAR performance actually starts to become quite good. The only outlier has basically been India. Philippines still -- but Philippines, if you would look at the PAR>30, and you exclude all the loans, which have already been fully provided for it and the PAR>30 in the Philippines is actually quite reasonable. It's actually quite good. It's about 1.9%, which means that, that's also one of the reasons why the Philippines has actually started to become profitable because we've taken a lot of provisions in the past and those provisions basically reduced the overdue situation, which we had before by having made that full provision against it. And you can see that on the whole list on the right-hand side of that slide, it's really India, which is still despite the fact that we've already made many provisions, which have been fully provided for over 180 days. It's in Sri Lanka. It's in -- it's to a lesser extent in Uganda, although that's quite -- that's not such a long overdue. So we do think that, that will recover quite soon. So the issue really is India primarily, particularly because of the size of the overdue as well as the size of the business. Now our growth strategy and yes, we do focus again on growth, which is a positive thing, is that we will continue to try to increase the number of branches and the number of clients per branch. We will increase the loans per client gradually. We see real situation is real. Renewed demand for bigger loans by many of our clients in the countries, which have been economically doing better. We also have been opening new branches, as I mentioned before, in some of the countries, which have been performing well. And we are reviewing some further -- some new greenfield operations in some countries. This is not a high priority, but we will be doing some further investigations during the course of this and next year. And our ultimate part of also our strategy is to broaden our old financial services. We do already -- we will want to increase our portfolio of savings. We want to continue to increase our SME lending as well and be more active in the whole payment side as well for our clients. That immediately links them to our whole digital strategy, which has become a high priority for the organization. We spent a lot of time and also have been recruiting a number of senior staff members to help us in this process as well as various advisers to go through the whole digitization of all our loan processes and onboarding procedures as well as customer care and client group communication. So we're in the process of building a fairly substantive application, which will enable our clients to do all their loan processes as well as their onboarding as well as the repayment of the installments as well as receiving their loan installments from the company all digitally. We're in the process of also enabling our clients to not only digitize money into cash -- cash into digital money, but also the other way around through features, which we are trying to integrate in our model where specific loan of our clients who have some of bigger shops will enable our other clients to kind of digitize -- turn digital money back into cash. And normally, in many of the countries where we operate, there is a certain cost involved in that, and we are trying to minimize that cost for our clients to make it much more convenient for them to live in our digital world. At the same time, if they need the cash that they can easily get it without any hurdles or any restrictions. Besides that, we will be providing a wider range of digital services, which will enable our clients to grow their businesses. Those various initiatives, we're evaluating at this point amongst others to try to aggregate many of our clients' orders. As you probably know, many of our clients are small businesses. They might have grocery shops. They might have little eateries, hardware shops, drinks, they may be selling some of our clients -- they make things, but also in the service industry, they would need often stock to actually make things with or they need -- as hairdressers, we have many hairdressers you may know in Africa, they need hair colorings, hair extensions, shampoos, et cetera, all the things which are necessary to -- for our clients -- for their clients. So -- but what we are considering is to help them purchase in an aggregated form by the power of all our clients in countries like, say, Ghana was under 60,000 clients to basically try to get better terms for purchasing, but also importantly, to be able to make -- to get the purchases delivered to their doorstep as well as actually be able to do shorter -- smaller purchases because many of our clients, at the moment, purchase their goods once every so often, and they do not as often as would be appropriate, restock their shops. And for the simple reason for that is that it will take them out of their shops. They have to close the shop often if they go do that, and that's quite -- yes, that's not something which they like to do. So therefore, they sometimes run down their stock more than what would be appropriate if you want to keep the same level of income streams coming out of that shop. So these are the type of things we are looking at, at the moment. We want to create a suitable platform for attracting deposits from the wider public. Once we're digital, that will be possible in the situation where we have a bank license. And that also relates then immediately to the fact that we are in the process of upgrading some of our licenses to bank -- to microfinance bank licenses or at least deposit-taking licenses so that once we have our digital platform in place that also non-loan clients can actually save with us by opening a bank account with our organization in each of those countries. Now all this clearly needs to be supported and protected by state-of-the-art cybersecurity infrastructure. This will become more and more important. The more digital we'll become, the more important this will be as well. So we're spending time on that as well to ensure that it's all in the best shape possible. Finally, our funding strategy is -- hasn't changed much. We like to align our growth in assets and liabilities. Therefore, we also want to become more fully regulated, which would make -- which would enable us to get more -- become -- take more deposits from the broader public. And by itself, that will diversify our funding possibilities. And as a result will, in our view, provide us as a more stable and hopefully also lower cost of funding for our organization. Finally, summary and outlook. Yes, just very brief, we've been -- we've seen good performance in Q1 -- in H1 2021, which in some major markets and important markets, actually, the largest markets, Ghana and Pakistan, both delivering record profits. Also, Tanzania has actually grown their business very fast and with record profits as well. The profitability for the whole group for was really held back by the substantial provisions for credit losses in India. As we discussed, the number of branches increased by about 4% in H1, which is quite a good number. And the number of clients return back to 2.5 million, which is at the peak -- at pre-COVID levels. So that's all positive. We are very busy with the development of our digital financial service platform, as mentioned. We're planning to launch a pilot in Ghana by the middle of 2022. And once that pilot has been hopefully successful, we would plan to roll that out through the rest of the group for the period thereafter. We've seen the operating currencies remain relatively stable vis-a-vis the U.S. dollar, with the exception of -- that's quite a number of countries, because most of them are quite small. The biggest loss of currency deviation -- negative currency deviation has been in Nigeria, which is one of our bigger markets. We've seen obviously -- Myanmar also have had a bad currency movements from our point of view and Sri Lanka and Zambia, but those are somewhat smaller markets, so have had less impact on the whole group. Cash and cash equivalents remained high, as mentioned before. Funding pipeline remains strong, and we have about $150 million of loans currently under negotiation, which we hope to complete throughout the remaining of this year and early next year. Despite all that, we do believe that the operating environment will remain challenging and uncertain in many countries for the second half of 2021. Vaccination rates have remained relatively low in many countries. I mean we've heard that India is really boosting their vaccination rates. In total, it's about 10 million chaps a day, but nevertheless, there's so many didn't vaccinate. It will take more time. Now vaccination is very important for our business because it will stabilize the business. The more -- the less disruption from the health's from, the more normal our business will become. We've seen it already in many countries where it's been just less impactful COVID, but there's definitely a number of countries which we consider still to be at risk, and there's many countries which you may not even know that it might come, but it suddenly happens. So that creates a certain amount of uncertainty for us. And it also is important for us how to see -- how the portfolio will develop over the next coming months. And this is particularly relevant in light of the situation in India, which is a difficult situation, as discussed, and that also makes us somewhat uncertain to be very specific for the outlook of our business because any type of substantial and additional provision in India will have an immediate impact on our P&L. Yes, we do expect, though, that it will further improve in the first half -- in the second half of 2021. And again, as mentioned, they're depending on the situation in India. So that's, I think, it, and I open it up for any questions.

[Operator Instructions] Okay. So it looks like we have no questions over the phone lines today.

Okay. We have a couple of questions posted on the webcast, and I will bring them now. So we have 2 questions from Hugo Cruz from KBW. The first one is you are starting to open up new branches and the presentation mentions that branches might be opened in new countries. And while the outlook for COVID is still uncertain in many of your countries, aren't you worried that it might be too soon to grow again? And also, can you please tell us the name of the new countries and when you expect to enter them?

Yes. I think on the new countries, that's -- it's on the pipeline, but it's, as mentioned, actually in the presentation. It's not a high priority. We may, at some point, send some staff over to do -- to update -- primarily updating the possibilities for starting a greenfield in some of those new countries. There's only about 2 or 3 we're currently considering, but we have been considering these already for a couple of years, pre-COVID. So it's not high priority, but it's also not -- it's -- it will -- if the situation arises that we can start, then we would seriously consider that. It normally starts with an evaluation. Some of these countries, we have evaluations. We have a team doing an evaluation of the possibilities of opening business there. But then we -- that the evaluation is now somewhat dated since the start of COVID, so we at some point may want to update that. And once we have updated that, we will then carefully consider whether we want to do it in the current environment. But before we get that far, hopefully, the COVID environment will have improved, at least, that's what we -- that will be really an important requirement for us before we even want to add new countries that we can actually go there and we save there and be able to evaluate it properly -- situate it properly. So that's -- now new branches in country, yes, that we will do. If the situation is good enough, I mean, clearly, in the current situation, we will not be opening new branches in India. In fact, during the whole COVID situation, we have closed a number of branches, not many. but these -- and these branches which we closed are mostly branches which were opened just prior to COVID. So they had very few clients. So we kind of closed them down quite quickly. And whatever clients we had, we directed them to some of the other branches nearby. So at this point, in countries where the situation is not particularly good and more challenging or there's more questions about the direction of travel in certain countries, then we would not add many branches. But like in Pakistan, situation has been very strong, very good. We have been opening quite a large number of branches, same applies in Tanzania and just a few branches in Ghana.

Okay. Thank you for that answer, Dirk. Another question from Hugo is, can you give us an estimate for the potential financial impact of getting the licenses in Pakistan, in Tanzania, both on Day 1 and on a more recurring basis? Would it be material for the P&L?

Well, yes, it's -- if in Pakistan we become a bank, our funding situation will definitely improve because we will have more funding to be able to come through from other actually banks. As a microfinance bank, we would be able to borrow from the major banks in Pakistan, which we currently already do. But as a fully regulated institution, that will become easier for us. In addition, over time, we will be able to mobilize savings in countries like Pakistan -- in Pakistan as well. That will not be immediate, definitely not in the first year of operation as a microfinance bank. We will not be allowed to mobilize savings. And if the -- once we have crossed that 1 year, it all depends if the Central Bank is happy with the structure we have in place and the strength of our systems to manage a substantial amount of savings from the public. So that will be -- we will go through a process with the regulator to get that approval as well. Now would it be good for our business? Yes, we do think it will stabilize our company substantially. It will enable us to open branches anywhere in the country easier -- well, easier at least -- the locations will be easier. The way it's set up with Pakistan is that we would have main branches, and we would have satellite branches. And the satellite branches are more like the smaller ASA-type branches, and the main branch would be branch where also clients can come in and there -- they can actually go to a teller and get money out of their account or deposit money in the account. Still that's somewhat old fashioned. We ultimately would like us to be primarily focused on deposits really on the digital channels and not actually working with the bank branches, but this is the situation on the ground at the moment. Would it make other differences? No, we don't expect to make other differences than the fact that initially we may have some higher cost structure. It's not going to be much higher because we can maintain those satellite branches and -- but we do -- we will be able to gradually get savings in. And the savings should ultimately be lower cost than the funding, which we currently attract. And also in Pakistan, there's quite a lot of international funding. It's well priced. But the Pakistani authorities actually prefer to see more local funding coming in for microfinance than international funding. It's not an issue at this point in time, but there are definitely some rate caps established for international lenders who wish to lend to microfinance institutions in Pakistan at the moment. So in Tanzania, we do think that it will be the same situation, where we also -- once we have a deposit-taking license, we can do this, where we can start attracting deposits from a wider public, not only from our own clients. So that's definitely positive. And ultimately, it should also enable us to -- yes, to grow our business, we will be -- the entity in Tanzania will just be able to grow -- more rapidly grow its business with funding -- local funding as a result of becoming a deposit-taking institution. I hope that answers your question, Hugo.

Okay. Then we move to the next question from Mark Gordon-James. On India, are the moratoriums behind us now or could more be declared in the near future? Do you expect some write-backs of provisions taken in India in time? What is the time line for recovery and normalization of your business in India back to past levels of profitability?

Yes. I think it's difficult for us to predict what will happen with COVID in the sense that, that makes it also difficult for us to do real predictions across the world, frankly, at the moment. India-specific case, India, right now, the situation is relaxing a bit. So it's getting better. COVID is -- the infection rate has been really high. So many people also now have more resistance to COVID. But it could well be, if it's not a Delta variant, it might be another type of variant, which may come in at some point, which could again trigger a lot of havoc in the market. And that we cannot predict. So it remains, from our point of view, quite uncertain and it's particularly important, not only the infections itself, but also the steps taken by the government. And all those restrictions for our clients to do business, that's been hurting them most. So it's been -- the number of clients actually who got sick and died from COVID has been quite low and actually none of our staff have. So it's really impacted their ability to do their business. So yes, that remains a big level of uncertainty from our point of view what's going to happen in India over the next coming months. Now with regards to all the credit losses, which we have already provided for in India, that's a fairly substantial sum. It's in the mid-20s, as you know, if you've read the RNS. I mean if I ask my CEO in India, he's very confident that large amounts and that's -- and he really thinks about more than -- definitely more than half will be recovered by the company over a period of time. And he has very good reasons why he argues that because he says, "Look, in India, we haven't given any much moratorium other than the recent moratorium. And the reason why we haven't done that is that generally, if you give moratorium, it does relax the clients -- more clients will get moratorium if you give it to some because then everyone else would like to have a moratorium. And it does have some impact on your repayment habits of the clients. So most microfinance institutions like to -- they shy away from giving many moratoriums. On the other hand, the fact of the matter is that many of our clients have not been able to do their normal business for a long period of time and have been disrupted from the beginning, 2 months lockdowns, long moratorium periods, now there's reasons. Once the situation improved in April -- March, April last year, then the Delta variant came in. So a lot of disruption, and that really has impacted our clients. Now many financial institutions will give clients more time and basically which -- either they can renew loans or they -- without repaying the full loan, I'm sure that some of the microfinance institutions in India, some of them will basically provide new loans, which enable these clients to pay off old loans. That would be a little bit more evergreening some of these loans. So that's by itself in a situation like this, that is not necessarily that bad because it's just completely our -- control of our clients. And clearly, to let your clients default in a situation, which is really out of their control is also somewhat unfair and not necessarily always helpful. However, the rules of the game for us has been that we basically provide if we feel that the client is late in repayment and the contract applies to that, then we make those provisions. And in our CEO's view in India, he feels -- and I understand why he feels that is that many of these clients will gradually repay because in India, there is a very strict requirement that every single loan, microfinance loan, is registered with the credit bureau. And if clients actually fail to repay loans, their credit history will be badly affected. And as a result, it will become much more difficult for them to get new loans. Amongst all the microfinance institution in India, there's a rule or basically an agreement that we will not provide loans to a defaulting client of another institution. Now that makes -- that essentially could mean that clients will become financially excluded or more or less financially excluded if they don't ultimately repay the loans. So there is a general view that once clients' businesses gradually get back on stream that they will do whatever they can to repay the loans. But it might just take a long time. It might not be just a couple of months. It might be 6 months, 12 months, maybe 2 years or even more. And that's why we also made it very clear to any investors we speak to, I mean, the key for us is actually staying as close as possible to these clients, continue to see them, continue to talk to them, understand -- for our loan officers and being understanding. At the same time, if they have some funds to repay and clearly, it's in their interest because they also have otherwise improved interest, et cetera. So there's a lot of activity going on with all these clients. And we're quite hopeful, I would say, is probably the most appropriate word here that a large amount of this overdue in India will ultimately be recovered, but we don't know when. And frankly, we also don't know if we are at the end of our -- the need for making these provisions. At this point, we kind of have the view that we may not be at the end yet, and we may have to make some more provisions before we even will start to see a reversal where some of those provisions will be repaid.

Okay. And Rahul Bajaj has posted 3 questions. I'll do them one by one.

We've got to answer all 3 of the previous one, by the way...

Yes, I think you did that sufficiently. So we have 3 more questions from Rahul and one other question at the moment. So the first one is you talked about 40% to 45% security collateral outside of India, is that a necessary requirement for clients to seek funding from ASA International outside of India?

I would say, requirement for clients. Well, it's a requirement for the institution for us, right? We basically...

Is it a requirement for clients to put in a security collateral?

Yes. Yes. Yes, it is. Yes. We have basically -- it depends a little bit per country. In some countries, we do have -- we have free deposits. If we're a bank, we can do free deposits. If we are not a bank, we charge a bit of security collateral, which can be released under certain conditions. So that it is actually as the element of being a proper savings, while it is really -- it can never be more than the outstanding loan. That's the general rule. So -- but if a client, say, borrows 100, we can actually -- they can save with us and we can even pay a little bit of interest on that in certain countries. And so then we will do so because we like our clients to save. But we also generally would like our clients to have some security collateral with us so that the exposure for us, in the case the client defaults, is going to be low -- is going to be reduced. So generally, if we disburse a loan, let's say, 10% of the loan can be deducted as security collateral and then during the life of the loan, the client will pay small installments together with the regular repayment of the loan, the interest as well as the repayment component. They may make a small amount of money, which serves as security collateral, which is really to protect the loan, but also enables us, if need be, in an emergency situation that the client can withdraw that. So it serves also as some savings. And in certain cases, we are allowed to pay some -- in certain countries, we're allowed to pay some interest on that.

The second question from Rahul is how should we think about your cost base, particularly cost-asset ratio going forward?

Cost-asset ratio, you mean return on assets ratio going forward or...

Yes. Well, Rahul mentions cost-asset ratio. But at the end, it's similar, right? ROA.

Okay. Well, I think we -- I mean, we are -- our target is to get back to levels where we were pre-COVID. That's also why we kind of want to keep it high on our own radar screen. That's why we also incorporated that in the table for our financial and operational performance, we did include the 2019 table because we think it's important that we want to kind of get back to the levels we were in 2019 and then go -- hopefully go back to more normal growth. It might be that COVID will not be disappearing in the next coming years, and that there will still be further disruption and we cannot predict that. At the same time, we hope to be seeing our -- that we -- this year, we will be crossing in terms of number of clients in 2022 that we will have more clients than we've had in 2019. And the same applies that the loan portfolio will be more sizable and that we are servicing more clients and that the loans are increasing gradually because clients' businesses are doing better, and they can use some extra funds to grow -- further grow their businesses. And that all will be then reflected in increased profitability, but we have a long way to go still. But over the next, I would say, this half year and the next year, it will be important to see whether the progress we are now seeing and it's still quite small progress in some countries small, some countries -- other countries somewhat bigger, and some countries, the progress is not really apparent yet. But we will -- we kind of hope that the situation would go in the right -- continue to go in the right direction as it currently does. And that we will be able to cross our performance in 2019 over a period of time and that we can then look forward to continue to expand our business and serve as many female micro entrepreneurs as we can in a responsible manner for their benefits as well as for our organization's benefit.

Okay. And the next question, I think you already or at least partially explained it, but maybe you can explain it a bit more. The question is, are you doing new lending in India? And when do you defer loans in India under the new moratorium? Or if you restructure loans, how are these accounted in the PAR>30 metric? And I think you already explained that we're not providing new loans when the client is still in default on the old loan, but we're providing new loans to new clients and clients who repaid their loans already fully. Maybe you can explain it a bit more.

Yes. Well, first of all, if you look at the business update, which we also published yesterday, the collection efficiency is not improving as a result of moratoriums we granted. So that's also the reason why the collection efficiency is still low. It's about 60% in August coming from a high of 87% in April, pre-Delta variant hitting us more in India. Now the PAR is actually improving with the -- as a result of the moratorium because the overdue will be less. So there will be some improvement as a result of that, and that is also reported in the business update. For the group, it's not so big, but it does have some impact in India. That the moratorium period granted will basically postpone any installment paid, will not -- an installment not paid will therefore not -- because it's on a moratorium, it will not trigger an increase in the PAR. So that's somewhat helpful for our clients, but also obviously for the organization itself, as long as these loans will ultimately going to be repaid over a period of time.

Yes. We have 2 more questions, one from [ Marita Suboyoska ]. She asks, can you please provide an update on finding a third-party equity investor in India?

Yes. Well, we have started the dialogue with potential partners. It's too early to say which way it would go. It's not that parties are just jumping up and down and saying, "Wow, this is the best time to start investing in microfinance in India," and we're not surprised about that. So that's -- so it is a dialogue. It's -- we're not in a terrible rush. We just also -- I have a bit of a wait-and-see situation from our point of view in India is let's see how the situation develops. Let's work -- let as a company in India focus as much on dealing with their clients, but we also feel that if the situation improves and the company would need more capital to rebuild its portfolio and grow the portfolio that we need to be ready for that. And at that point, we also would like to have some potential partners to join us in that endeavor. So -- and I would say that how that all will work out also depends a little bit on what is going to be the new regulation for microfinance institutions in India. If it's going to stay the same, that would be different than if there will be, say, some relaxation of the rather strict regulation, which was put in place after the Malegam Committee made its determinations and recommended that to the RBI in 2012. So if it becomes more flexible and allows us to actually not necessarily work on with such strict interest rate cap and a margin cap, then the microfinance business environment, in our opinion, in India will improve quite a bit. So we're very interested to see how that's going to develop. So for the time being, yes, some discussions have been going on. And -- but there's no immediate thing which will happen in the very near future.

Great. Thank you, Dirk. Currently, the last question, but we'll monitor if any new questions will come in. But currently, the last question from Mark Gordon-James is also about India. Some states in India have talked of prescribed loan forgiveness by law for harder borrowers. Is this a probable risk in your view?

Well, the State of Assam was exactly considering that. And this was obviously -- it was a very much a political event. This is -- unfortunately, in our business, our clients represent a very large percentage of the electorate generally, the lower-income clients. And we've seen this in various countries, India is one of them. We've seen it in Sri Lanka the same, where actually political activism is actually focused on some of our -- these lower income female micro entrepreneurs and not only the women, but also the men. That's -- that they pay too much interest or that there are loans, there's too many defaults and that they -- that these politicians that argue well, we are going to fight for a loan waiver for you with the intention to get their votes on the election. This is very much what happened in Assam. Actually, the opposition party went that way. Then also the party in power went the same way. So actually, both parties argued that there should be some loan waivers because microfinance loans have been granted by some microfinance institutions to tea party -- tea plantation workers who didn't really have a business, but they were salaried employees and not necessarily the best salaried employees either. So that triggered a lot of overdue and that triggered then this whole debate and this whole discussion. And that spread around Assam that there might be some kind of loan waiver program. Then ultimately, what happens, elections have taken place. The party in power basically reviewed sales situation and obviously realizes also under the strict instructions, instruction maybe not the right word, I would say, probably State of Assam would argue that they cannot be instructed by the RBI. But in reality, the RBI said very clearly, you can't just give loan waivers. That will be a bad impression you would set if that happens. So the loan waivers were off the table. And then basically, there is some resolution where some clients and it's a fairly small number of clients in Assam, who basically now will get some loan waivers under very strict conditions. And the State of Assam has also said if you pay off your microfinance loans, they're basically big payer installments due on your microfinance loans, you will get some benefit from the state. It's not big, but it's some. So effectively, what that means is that the situation now is clarified. It doesn't look like we're going to have large defaults as a result of all this. I mean it did stop our business in Assam for quite a long time. But we do believe that most of the overdue, which is build up there, will gradually become current.

Okay. Dirk, there are no further questions on the webcast. So I think you can close the meeting.

Okay. Well, ladies and gentlemen, thank you so much for your attention. I hope this was informative. I hope you will continue to follow us. We will do our best as much as we can to improve the likelihood from our female micro entrepreneurs, which we serve. We hope very much that the situation on the ground will continue to improve with less COVID and more regular business for our clients and that, as a result, we can better service our clients and we can also benefit from that by increasing our profitability along the way as well. So thank you very much for your interest in the company and as a shareholder, thank you for your supporting our company. And we will speak to you at the next results meeting.