Announcements Financial Institutions Rating Alerts

GCR Assigns Long and short-term Nigerian National Scale Issuer Ratings of BBB(NG) /A3(NG) to MyCredit Investments Limited, Outlook Stable

Lagos, 15 October 2021 – GCR Ratings (“GCR”) has assigned MyCredit Investments Limited’s (trading as ‘FairMoney’) Nigerian national scale long-term and short-term issuer ratings of BBB(NG) and A3(NG) respectively, with a Stable Outlook.

Rated Entity Rating class Rating scale Rating Outlook / Watch
MyCredit Investments Limited Long Term Issuer National BBB(NG) Stable Outlook
Short Term Issuer National A3(NG)

Rating Rationale

We have adopted a group analytical approach in our assessment of FairMoney Nigeria, given that the Nigeria arm accounts for up to 85% of the overall lending portfolio of the group as at unaudited 2021 position, in line with our ratings framework. Predictus SAS (“the parent”) was incorporated in Paris, France in 2017as a non-operating holding company. The Group comprises, FairMoney Nigeria (established in 2017), FairMoney India (established in 2020) and the parent.

The ratings assigned to FairMoney Nigeria reflects the net ungeared position of the group, high cash holdings that supports strong liquidity and rapid growth trajectory as demonstrated by the Group over the relatively short operational track-record. However, these strengths are partly offset by elevated credit risks due to the uncollaterised loan book and a moderate earnings track-record.

FairMoney is one of the fastest growing short-dated uncollaterised loan providers in Nigeria. The company commenced operation in 2018 and received its microfinance banking licence from the Central Bank of Nigeria in 2021. The group’s total loans and assets grew from €0.6m and €1m at FY18 to Eur47.3m and Eur65m at end-August 2021 respectively. Total customer base has expanded significantly to up to 1.5m (active accounts) over a short period. Also, the group displayed a relatively good geographical diversification, with operations in Nigeria and recently in India. Despite the positives, competitive position score is offset by the group’s relatively short track record and monoline operations.

Cashflow and leverage is considered to be a positive rating factor. The group displayed a net ungeared position as at unaudited August 2021, which is a strong positive in support of the ratings. Similarly, earnings coverage of interest expense is assessed to constitute a moderate risk, matched with low funds from operations. Cognisance is taken of the group’s ability to quickly refinance its balance sheet and match assets to liabilities by currencies. We expect the group to maintain the assets and liabilities maturities matching of its balance sheet over the next 12-18months.

Earnings is considered moderate, reflective of the short operational track-record, while margins are modest against some rated micro-finance peers. The risk position is somewhat elevated, given the uncollaterised nature of the loan exposures and the sizeable credit losses recorded in the review period. Also, with the recently granted microfinance banking licence, non-performing loans may be reported in the near future against the current practice of writing-off after 90days overdue.

Liquidity is supported by the net ungeared position of the group and the short-dated nature of the loan book. Going forward, we could lower the assessment if the group increases leverage without more evidence of the loan book strong receipting.

Outlook Statement

The stable outlook reflects our expectation that the group is relatively new, with operation still evolving and likely to improve over the medium-term. We expect business growth to remain solid and impact positively on overall results over the next 12-18months.

Rating Triggers

The ratings could be upgraded following a sustained improvement in earnings and credit risk profile. However, the ratings may be revised downward should asset quality metrics deteriorate significantly, or if gearing increases materially and impacts the gearing metrics.

Analytical Contacts

Primary analyst Funmilayo Abdulrahman Senior Analyst, Financial Institutions
Lagos, NG Funmilayo@GCRratings.com +234 1 904 9462
Committee chair Matthew Pirnie Group Head of Ratings
Johannesburg, ZA MatthewP@GCRratings.com +27 11 784 1771

Related Criteria and Research

Criteria for the GCR Ratings Framework, May 2019
Criteria for Financial Services Companies, May 2019
GCR Ratings Scale, Symbols & Definitions, May 2019
GCR Country Risk Scores, February 2021
GCR Financial Institutions Sector Risk Score, February 2021

Risk Score Summary

Rating Components & Factors Risk scores
Operating environment 7.25
Country risk score 4.25
Sector risk score 3.00
Business profile -2.50
Competitive position -2.50
Management and governance 0.00
Financial profile 2.00
Cash flow and Leverage 1.00
Earnings vs. Risk -0.50
Liquidity 1.50
Comparative profile 0.00
Group support 0.00
Peer analysis 0.00
Total Score 6.75

Glossary

Capital The sum of money that is invested to generate proceeds.
Cash Funds that can be readily spent or used to meet current obligations.
Cash Flow The inflow and outflow of cash and cash equivalents. Such flows arise from operating, investing and financing activities.
Credit Rating An opinion regarding the creditworthiness of an entity, a security or financial instrument, or an issuer of securities or financial instruments, using an established and defined ranking system of rating categories.
Debt An obligation to repay a sum of money. More specifically, it is funds passed from a creditor to a debtor in exchange for interest and a commitment to repay the principal in full on a specified date or over a specified period.
Liquidity The speed at which assets can be converted to cash. It can also refer to the ability of a company to service its debt obligations due to the presence of liquid assets such as cash and its equivalents. Market liquidity refers to the ease with which a security can be bought or sold quickly and in large volumes without substantially affecting the market price.

Salient Points of Accorded Ratings

GCR affirms that a.) no part of the ratings were influenced by any other business activities of the credit rating agency; b.) the ratings were based solely on the merits of the rated entity, security or financial instrument being rated; and c.) such ratings were an independent evaluation of the risks and merits of the rated entity, security or financial instrument.

The credit rating has been disclosed to MyCredit Investment Limited. The rating above was solicited by, or on behalf of, the rated entity, and therefore, GCR has been compensated for the provision of the rating.

Subsequent to an appeal by the rated entity, the rating was revised as reflected in the announcement.

MyCredit Investment Limited participated in the rating process via telephonic management meetings, and other written correspondence. Furthermore, the quality of information received was considered adequate and has been independently verified where possible. The information received from MyCredit Investment Limited and other reliable third parties to accord the credit ratings included:

  • Audited financial results as at 31 December 2020;
  • Unaudited financial results as at 30 June 2021 and
  • Other publicly available information.


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