Microfinance was once hailed as the silver bullet for poverty reduction. Its practitioners promised profits with purpose: small loans to the unbanked, particularly women, who would transform credit into sustainable livelihoods. The romance faded as repayment crises erupted from Andhra Pradesh to Cambodia. Yet ASA International LON:ASAI, one of the sector’s largest listed players, is showing that old-fashioned growth still has legs.
In the six months to June, ASA’s gross loan portfolio swelled 37 per cent year on year to $541m. Ghana alone added $59m in the second quarter, boosted by both lending appetite and a 32 per cent appreciation of the cedi. Pakistan, Tanzania, Uganda and Myanmar also chipped in. The customer base grew 9 per cent to 2.6m, supported by a 7 per cent increase in branches to 2,232.
- Japan: New leader, new look, new stock tip
- Global banks take £170m stake in LSEG’s post-trade unit
- LendInvest refinances old debt with new 2030 8.25% bonds
Profitability surged alongside. Net profit almost doubled to $26.8m. On an underlying basis, stripping out hyperinflation accounting effects, it rose 73 per cent to $24.2m. Return on equity climbed to an eye-catching 46 per cent. With portfolio at risk (over 30 days) down to 2 per cent, the quality of growth looks solid. Investors have been rewarded with a 60 per cent rise in the interim dividend, keeping the payout ratio at 20 per cent.
Stronger balance sheet for ASA International
ASA’s balance sheet has strengthened too. Equity rose 41 per cent to $136m, aided by profits and a $15.5m foreign-exchange gain. Comprehensive income hit $44m, more than ten times the level of the prior year.
Funding stood at $597m with a pipeline of $229m to sustain second-half expansion. On these numbers, the group insists there is no longer “material uncertainty” around going concern — a lingering concern for some shareholders after the stresses of Covid and political turmoil in key markets.
Management is keen to stress new growth avenues. An insurance tie-up launched in May has already reached Uganda, Kenya and Nigeria, offering clients “Enhanced Credit Life” cover from as little as 30 cents a month. The product is expected to improve retention, diversify revenue, and bolster ASA’s claim to be deepening financial inclusion.
At the same time, the group is rolling out a new core banking system in Ghana and Tanzania to improve efficiency. Clients per loan officer have already risen, trimming the cost-income ratio.
Why this matters for shareholders
For investors, the appeal is obvious. Double-digit portfolio growth, rising margins, cleaner funding, and resumed capital returns paint the picture of a maturing institution that can still grow fast. Consensus for full-year net profit sits at $37.5m; ASA now guides to a “significant” beat.
Risks, however, remain endemic to the business model. Exposure to volatile frontier markets means that currency, inflation, and governance shocks are never far away. Ghana and Sierra Leone have been removed from the IMF’s hyperinflation list, but Nigeria and Myanmar remain watch-listed. Regulatory shifts can be sudden. Political instability, as seen in Myanmar, remains a live hazard.
Even so, ASA’s first-half performance demonstrates resilience. Microfinance may never regain its halo as the cure for global poverty. But as a business, it can still deliver handsome returns. ASA has shown that lending $200 at a time, across thousands of branches and millions of clients, can scale into macro-sized profits. Investors willing to stomach frontier-market risk may find the story worth another look.
