Dolla Financial Services’ improved top-line performance was not enough to save the company from seeing its profitability in the first quarter of 2025 shrink, due to a sharp rise in provisions for bad debt.

The company reported net profit after tax of J$116.60 million, or 17 per cent lower than the J$140 million generated in Q1 2024. Earnings per share fell from $0.06 to $0.05.

For the period ended March 31, the microfinance outfit saw its total interest income rise year-on-year to J$502.72 million, an increase of 38 per cent.

This was due to the expansion of the company’s loan book, up 51 per cent, due to a capital raise in the last quarter of 2024. Compared to Q4 2024, loans net of provisions for expected credit losses increased by 6.5 per cent.

Strong sales effort

Dolla Financial CEO Kenroy Kerr credited the growth in the company’s loans to “dedicated efforts of our sales team and the continued trust and support of our customers”.

Kerr, speaking at Mayberry’s investor briefing last Thursday (May 15), further elaborated on the sales team’s contribution.

“We have 10 locations across Jamaica, and I believe that those are sufficient at this point in time, because we do have officers in all 14 parishes, even though it’s just 10 locations. And I mean, our sales officers are actually always on the road,” he said.

“So, having a physical location is not the most important thing for us, but it’s really the sales team who have really been out there and going to the different places to get the business, and we’ll just continue to keep that focus to grow the revenues,” the CEO continued.

Additionally, the company embarked on its ‘One N Ready, Two N Drive’ campaign, which eliminated upfront costs for vehicle purchases. Describing the initiative as “successful”, Kerr said the campaign significantly increased loan disbursements in Q4 2024 and “exemplified Dolla’s innovative approach to customer engagement”.

The CEO is also optimistic about the future growth of the loan product.

“So when we look at products like that, we will just continue to find ways to innovate and to just add value to those products and bring it back to the customer.  And I think that just looking at some of those products, there are a lot of opportunities to leverage and to help to grow the business from a product perspective,” he stated during the briefing.

Interest expense and bad debt

Dolla’s loan portfolio growth and the injection of new capital came with their own costs, reflected in the increases in interest expense and write-off and provision for bad debts.

Interest expense rose from J$304.25 million in Q1 2024 to J$402.36 million, or by 32 per cent. At the same time, expected credit losses spiked from J$3.96 million in the comparative quarter to J$50 million in the period under review.

The write-off of “an irrecoverable bad debt” also slashed the company’s profitability, contributing to an 86 per cent jump in operating expenses.

“We did mention this in the write-off of the presentation of the financial statements. So we would have conducted our quarter-end portfolio analysis, and we determined that a small fraction of our loans required some more conservatism, based on their state as at the end of Q1, and we would have just appropriately provided for those and written off what we needed to,” Dolla Financial Group chief financial officer Trevene McKenzie outlined during the Mayberry investor brief.

Responding to a question, McKenzie said she expects the company to recover some of the write-off of bad debt not in the short term, but possibly in the upcoming financial year.

Additional expenses

Aside from bad debt, increased staff costs related to Ultra Financier Limited and costs associated with our continuous marketing efforts contributed to a J$130 million increase in operating expenses.

“We did see some marketing increases as well, as we have been doing a lot of marketing throughout the past two quarters. You would have seen where we did a very large giveaway based on our ‘One-and-Ready product. And that didn’t come out as an expense, but we are as always grateful that we had the income to cover those expenses so we’re able to have a profitable quarter,” McKenzie further explained.

On the company’s balance sheet, total assets increased 45 per cent to J$4.6 billion, while liabilities also grew, up 59 per cent to J$3.4 billion