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Access loans growing but Florida business a weak link

Access Financial Services Limited said the $2 billion it raised via a bond issue last year has been fully deployed into paying down older debt and investing in the company’s IT infrastructure and portfolio growth.

Brian Salmon, vice-president of finance, said the IT spend totalling around $30 million covered the development of a new app that allows customers to make payments and apply for loans online; a new CRM or customer relationship management system for Florida-based subsidiary Embassy Loans; and upgrading of the loan management system in Jamaica.

Regarding the CRM, Salmon said at the microfinancing company’s annual general meeting on Thursday that the Jamaican side of the group would be onboarded over time.

CEO Hugh Campbell reported to shareholders a greater demand for loans in the year ended March 2023, saying disbursements increased by 12 per cent.

Loans accounted for three-quarters of the group’s total assets of $6.29 billion, but Campbell also reported that job losses and migration had a dampening effect on business in the first quarter ending June.

Over the past year fiscal, Access Financial grew business loans by 25 per cent and is seeking to build on that momentum. However, personal or consumer loans are still its bread and butter.

Salmon said business loans were priced from 13 per cent per annum, upwards, depending on the risk profile of clients.

“We have recorded growth through marketing efforts. However, it is still a relatively small part of the portfolio,” added Chairman Marcus James.

“Access is impacted by higher costs of funds. We are focused on internal efficiencies rather than passing these costs to customers,” he said.

Salmon added that the higher costs were connected to the BOJ rate hikes, which have impacted the company’s borrowing costs.

Turning to Access’ medium-term plans for growth, James said geographic diversification remained a major focus.

“We are looking for opportunities both international and locally but more so on the local market,” the chairman and founder noted.

In January, Access opened a new branch for Embassy Loans Inc, but the Florida company, which now has outlets in Cooper City and Miami Gardens, continues to operate at a loss.

The subsidiary saw a 26 per cent decline in disbursements year over year. Demand for loans by customers in this segment continued to be impacted by low demand for auto equity loans, its parent reported.

James said that the US company was being reviewed for product diversification but it is happening within a context where the market is yet to fully recover from the impact of COVID-19, Access noted in its annual report.

“We are looking at other options to grow revenue lines,” James said at the meeting.

Access Financial’s primary business line are personal loans, which are unsecured, and microfinancing, which is quasi-unsecured. However, the chairman said that less than six per cent of loans are non-performing.

Management noted that a hurdle crossed during the year ended was compliance with new regulations in the microfinance sector.

Access Financial was one of the first firms to secure a microlending licence from the Bank of Jamaica under the continuing reform of the microfinance sector that is now regulated by the central bank.

Salmon said that the regulatory changes did not result in additional costs for the company as its systems were found to be largely compliant.

Campbell, in reflection on the past fiscal year, said revenue slipped by three per cent to $2.08 billion while profit plunged 30 per cent to $301 million amid a decline in operational efficiency, that is, costs relative to top-line income.

“Improving productivity was affected by rising staff costs and non-recurring debt refinancing costs,” he said.

For the first quarter, April to June 2023, profit was up by eight per cent at $94 million, drive-by new business that offset a four per cent increase in operating costs.

Loans and advances stood at $5.14 billion, an increase of $494 million or 11 per cent year over year. For the first quarter ended June 30, 2023, net profit amounted to $94 million.

Assets climbed to $6.69 billion, of which $5.14 billion was in the form of loans.

Access reported an 11 per cent growth in loans for the period.

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