Integrated Report 2020

INTEGRATED REPORT 2020 CIM FINANCIAL SERVICES LTD Impact of COVID-19 and lockdown The first priority during lockdown was to ensure the safety of our employees and business continuity of our key functions, to ensure continuity of operations and our ability to provide support to our clients. We put in place our business continuity plans and had over 200 staff set up to work from home. Post lockdown, Personal Protection Equipment (PPE) was made available to all staff and requisite social distancing was implemented to ensure the safety and welfare of both our staff and clients. We managed to obtain the requisite approvals to open our branch network two weeks before the end of lockdown, and post lockdown, our full focus for the first few weeks was on cash collections. A huge amount of focus and effort has gone into managing our collections and recovery process in the subsequent months and we have seen month-on- month improvement in the reduction of clients’ arrears. We have invested significantly in enhancing our credit application scorecards and process automation over the last few years, which enables the granting of retail credit facilities to our clients within a few minutes. Given the increased level of uncertainty as well as likely increase in credit risk as a result of the impact of COVID-19, during the lockdown we performed a full analytical review of our scorecards with scenario analyses. We adjusted our scorecards to take into account the likely increase in risk. Although this has impacted the volume of loan disbursements somewhat, we have seen positive repayment performance from our clients that have been granted loans post lockdown that are in-line with historical repayment trends. Funding our business A key initiative last year was to review our funding strategy. The focus of the funding strategy was to ensure that we strengthened the liability side of Cim Finance’s balance sheet, through better asset and liability duration matching; better aligning Cim Finance’s funding to its predominantly fixed-rate asset book (approximately 90% fixed rate); and reducing our liquidity risk. As stated in last year’s review, we decided to embark on a structured sequence of Medium Term Note (MTN) programmes. CIM Financial Services Ltd launched its first MTN programme in November 2019 with an issuance size of MUR2.0 bn. Given the importance of securing funding for our business in these uncertain times, during the lockdown we started preparations for a further unsecured and listed MTN programme of MUR3.0 bn. The MTN were assigned ‘AA’ rating by Care Ratings (Africa) Private Limited. There were positive responses during the investor presentations post the lockdown, with investors particularly impressed by how quickly we managed to resume operations during the partial lifting of the lockdown in May 2020 and by the loyalty shown by our clients for the repayment of their debts. We had a significant oversubscription for the programme that was allocated and completed at the end of July 2020. Bank borrowings will continue to be a very important part of our funding mix, and as such, we will continue to work closely with our key banking partners. Group amalgamation Structure-wise, we completed the amalgamation of CIM Financial Services Ltd with five of its wholly-owned subsidiaries and we are now well poised to leverage the competencies of our team, which is now housed under one entity. The amalgamated Cim will leverage on the positive brand equity associated with the ‘Cim Finance’ brand, which will be maintained as its customer-facing brand. Kenyan expansion We completed our second full year of operations in Kenya during 2020, with our Kenyan business branded as Aspira. In this market, we have a fintech-enabled hire purchase (HP) business model, through an app that leverages Kenya’s unique mobile digital ecosystem and high consumer awareness of mobile phone app-based lending platforms. Customers can download the Aspira app onto their phone, apply for an HP loan and be granted a credit decision within two minutes. They can then use their loan to purchase durable consumer goods at Aspira’s electronic and furniture retail partners. Customers are then sent an in-app payment reminder each month and can settle their monthly instalment via an in-app link to M-Pesa (Kenya’s digital money system). Kenya has, of course, also been impacted negatively by COVID-19, which has had an impact on loan disbursements. We have collected a lot of data from the market and now have a well-developed credit scoring capability, as a result of which we are seeing good loan portfolio performance. Building a new lending business in a new market is challenging, but we see a lot of scope for growth in our Kenyan business in the future. 23