ISP Finance to acquire loan portfolio
ISP Finance Services has entered into an agreement that will see the microlender acquiring portions of the loan portfolio of an unnamed entity before year-end.
The size of the portfolio to be acquired was not disclosed and efforts by the Financial Gleaner to get more information on the transaction from ISP were unsuccessful up to press time.
The deal comes amid restructuring in the microfinance sector, which has sparked talk of takeovers and partnerships as vulnerable payday lenders try to strengthen their operations in preparation for central bank oversight less than a year from now, starting August 2022.
The heavy cost to comply with regulations under the new Microcredit Act, in addition to loan losses skyrocketing industrywide from clients’ inability to repay loans throughout the pandemic, forced the closure of a few microlending companies, but at the same time, created opportunities for others to grow.
ISP Finance’s Chief Financial Officer and Company Secretary Diyal Fernando previously said the company was looking for inorganic growth opportunities during the first half of the year, on announcement that ISP had secured the services of an unnamed investment bank to help structure potential merger and acquisition, or M&A, deals. ISP Finance is also looking to grow its business through organically through an expansion of its loan offerings and footprint across Jamaica.
As for the current deal, IS has only divulged in a release that the agreement gives it the right to purchase select existing loans from a “medium-sized loan portfolio”, and that the transaction is expected to be immediately accretive, that is, grow its loan book on completion.
ISP Finance’s loan portfolio was valued at $689 million at half-year ending June, reflecting growth of nearly 13 per cent year on year. The company had experienced loan growth of 25 per cent in the similar period in 2019, but its performance dipped dramatically but was still positive at to 3.0 per cent loan in the 2020 period.
For the first half of 2021, ISP also grew its total assets by 13 per cent to $784 million, which includes cash resources of $49 million.
The loan company, which operates from Phoenix Avenue in Kingston, targets loans for household expenditure, education and health purposes. Its earnings at half-year improved marginally to $32 million, while its interest income grew 15 per cent to $204 million.