LasFin relaxes lending restrictions, but loan demand still slow
Over the past six months, Lasco Microfinance Limited, LASFM, the lending arm of Lasco Financial Services Limited, LasFin, has been relaxing some of the lending restrictions put in place to minimise loan defaults during the pandemic.
The rebound in economic activity during the December quarter was matched by rising confidence that there would be a resurgence of business among the micro and small businesses LASFM serves, and with it new demand for financing options.
But the demand it expected is yet to fully materialise.
“Loan revenues continue to show a reduction, as the customers have still not fully recovered from the effects of the pandemic. The group continues to experience challenges with high delinquency,” Managing Director Jacinth Hall-Tracey said in the preamble to the company’s audited results for year ending March 2022.
A year before COVID struck, LasFin group had a loan portfolio of roughly $1.5 billion, but the economic fallout from the coronavirus shrank its 2021 portfolio to $1 billion, and further to $812 million at as March 2022.
LASMF’s allowance for losses also climbed 15 per cent to $200 million during the 2022 financial year, reversing some of LasFin’s achievements in bringing impairments down to $174 million last year from $327 million in 2020.
Still, the LasFin group, which is also in the business of remittances and cambio services, closed the financial year with earnings of $306 million, doubling the $156 million it made in 2021. Revenue rose 9 per cent to $2.4 billion.
Cambios are basically bureaus that trade foreign exchange with the public.
LasFin has become more reliant on cambio business and money transfer services for uplift during the pandemic. The latter operation got an unexpected boost in the fourth quarter from the business that usually flowed to suspended trader Alliance Financial. It also added a fourth remittance partner, Boss Revolution, during the year.
This year, LasFin is expected to add at least another three remittance partners. Additionally, LASFM expects to do more SME loans partly seeded by $100 million of credit from the Development Bank of Jamaica.
LASFM lends to microbusinesses and the self-employed, a high-risk market in which around 17 per cent of the loans it sells are unsecured.
The company says it continues to make strategic changes within the group to improve efficiencies and attract new customers with better risk ratings, but throughout the year ending March 2022, the microfinance business still had some difficulty in collecting from customers who were granted moratoria.
Its parent company, LasFin, has since established a credit quality review process involving regular analysis of the ability of borrowers and other counterparties to meet interest and capital repayment obligations. The group assesses the probability of default of individual counterparties based on their payment history and changes in the circumstances of individuals, or groups, since the issue of loans.
“As a result of improved collection efforts and a restructure of the department, in addition to a review of some variables inputted in the expected credit loss calculation, management was able to contain this non-cash expense,” Hall-Tracey said.