Annual Report 2019

Business Review CIM FINANCE The Finance cluster consists of Cim Finance Ltd, Cim Agencies Ltd, Cim Forex Ltd, and the newly acquired subsidiary Mauritian Eagle Leasing Company Limited, with each business being separately licensed and regulated. Cim Finance Ltd is the largest of the businesses and is regulated both by the Bank of Mauritius and the Financial Services Commission. Cim Finance Ltd plays an important role in the Mauritian economy with the focus of Cim Finance Ltd being very much “mass market” retail and SME financing. The Finance cluster recorded impressive growth during financial year 2019 (FY19). Net operating income increased by MUR 316m (+22%) from MUR 1.4bn in FY18 to MUR 1.7bn in FY19, with profit after tax increasing by MUR 53m (+14%) from MUR 379m to MUR 432m. The enhancement of our credit scorecards and automation of a number of our core lending processes in 2018 has benefited Cim Finance and its customers significantly during the 2019 financial year. Straight through processing of the loan application and approval process for HP type loans and personal loans now takes a few minutes. Cim Finance Ltd processes over 600,000 small ticket size loans each year, therefore optimising the efficiency of our lending processes has led to significant improvements in turnaround time and customer satisfaction and, importantly for the business, a large increase in loan volumes. Cim Finance’s asset (loan) book increased by 21% during the financial year from MUR 10.4bn at 30 September 2018 to MUR 12.5bn at 30 September 2019. Given market conditions, as well as the entry of a new competitor into the market, this was a fantastic achievement and demonstrates the importance of process automation and advanced analytics enhancements to the business. We implemented an enterprise data warehouse (EDW) in the 2018 financial year and we are now driving advanced analytics off the EDW. This is enabling the management team to obtain real-time insights across different areas of our business that will enable management to make better and quicker business decisions. Business unit reviews Cim Finance Ltd has four main business units: Consumer Finance, Leasing, Cards & Payments and Factoring. Consumer Finance Cim Finance Ltd started its Consumer Finance activities with the launch of its hire purchase product in 1987. As highlighted in last year’s review, the significantly reduced hire purchase rate to 12% from 19% since 2015 adversely distorted loan pricing at the lower end of the mass market. This rate is significantly below unsecured personal loans as well as credit card borrowing rates. Since 2016 we have moved away from offering finance via HP contracts and opted to finance retail point-of-sale (POS) purchases via Credit Finance Agreements (CFA) to enable our clients to finance their purchase of consumer electronic goods and furniture. Despite themarket entry of a newcompetitor, the Consumer Finance business unit has grown from strength to strength with total loan disbursements growing significantly in FY19. Cim Finance’s CFA loan portfolio remains the largest part of the business, comprising close to 50% of the value of the company’s total asset book. Our unsecured lending product, Cim MoCredit, has now been on the market for four years. Our customers use Cim MoCredit to finance their needs beyond retail financing requirements for life needs such as renovations, weddings and funerals. This is a 4-year loan product vs. the average loan tenure for CFA of 2 years. The unsecured loan portfolio now represents 25% of the value of the company’s total asset book. Cim Finance’s retail point-of-sale model for its Consumer Finance business unit is a key strength from which we originate customer loans and facilitate monthly instalment repayments. In-store counters grew from 85 at the end of FY18 to 102 at the end of FY19 and we also added one standalone branch in Mahebourg to our existing six branches to enable better customer service. The number of unique individual clients grew from 236,000 at the end of FY18 to 260,000 at the end of FY19. Leasing Cim Finance Ltd was one of the pioneers in the Mauritian leasing market, starting leasing operations in 1996. Cim Finance Ltd has grown its leasing book at a compound annual growth rate over the last 5 years of close to 10% per annum: approximately 50% higher growth than the average for the rest of the market combined. We consider leasing to be one of Cim Finance’s core businesses and will look to continue investing into the business. As mentioned in the Group CEO’s report, we acquired Mauritian Eagle Leasing Company Limited (MELCO) during the FY18 year. The acquisition of MELCO’s leasing book takes Cim Group to second position in terms of finance lease market share in Mauritius. Cim Finance Ltd leasing has traditionally been very strong in the second-hand and CIM FINANCIAL SERVICES LTD / ANNUAL REPORT 2019 28