Significant increase in loan disbursements

Durrant Pate/Contributor

Jamaican micro lender, Dolla Financial Services is reporting a bumper half-year performance with pre-tax profit surging 368 per cent to J$132.3 million.

For the six months ended June 30, 2022, Dolla grew its pretax profit by J$104.0-million profit before tax for the June quarter, increasing by J$55 million or 490 per cent year-over-year. Total income for the June quarter stood at J$156.8 million, an increase of J$102.6 million or 189 per cent year on year and overall $298.3 million year to date (YTD).

Dolla Financial CEO Kadeen Mairs, speaking with Our Today, said: “We have delivered on second quarter and the next quarter will be no different. There will be a lot of strategic plays in the pipeline for the next six months.”

Dolla recorded net interest income before expected credit losses (ECL) of J$143.1 million in the second quarter, an increase of J$14.5 million or 11 per cent over the prior quarter. This increase was driven by the expansion in loan portfolio, as is reflected in the micro lender’s balance sheet.

Dolla Financial, which is the latest company to be listed on the Jamaica Stock Exchange, last month saw its interest expense remained relatively flat quarter on quarter and increased by J$4.0 million or 18 per cent year on year (YoY).

Increase in expenses

Operating expenses for the period totalled J$80.4 million, representing an increase of $16.4 million or 26 per cent quarter on quarter and $65.5 million or 83 per cent increase YoY. The increase in expenses was primarily attributed to an increase in staff costs, as Dolla continues to invest in people, processes and delivery to its customers.

While staff costs increased, ECL decreased to $7.9 million relative to $9.3 million YTD June 2021. The reduction in ECL is primarily due to the changes in the company’s loan portfolio, proactive management of delinquency and a deliberate effort in employing sound risk management to loans.

The company recorded total loans receivable after ECL of J$1.0 billion for the June quarter, an increase of J$177.4 million or 20 per cent relative to the previous quarter, and 177 per cent year on year. The significant increase in loan disbursements during the period contributed to management’s concerted effort to grow the loan portfolio thus the increase in total loan portfolio.

As at June 30, 2022, business loans accounted for 74 per cent of the total loan portfolio with personal loans accounting for the remaining 26 per cent. Furthermore, secured loans represented 71 per cent of the total loan portfolio while unsecured loans accounted for the remaining 29 per cent.

Improving credit quality

The increase in secured loans year over year is a deliberate effort as the company aims to improve credit quality and strengthen its total loan portfolio. Non-performing loans (NPLs) increased slightly from five per cent% to 6% quarter over quarter.

However, this ratio remains below Dolla’s benchmark as well as the estimated industry average. The loan portfolio results are reflective of improvements in credit quality.

Dolla recorded total liabilities of J$535.5 million for the period ended June 30,2022, which decreased by J$30.4 million or five per cent quarter on quarter and J$9.2 million or two per cent YoY.