Microcredit Act adds new costs for Dolla Financial, company exerts lending discipline as consumer borrowing power falls

 


Dolla Financial Services Limited in its 2024 annual report notes that operating expenses faced upward pressure due to higher interest costs, reflecting the increased cost of capital.

Meanwhile, the reduced purchasing power of our customers also posed challenges to loan affordability and repayment capabilities.

Management states, “Our disciplined lending practices helped manage default risks effectively, allowing us to maintain a stable delinquency rate. Although our non-performing loans (NPL) ratio rose modestly to 9.9 per cent from 8.2 per cent in the previous year, our expected credit losses (ECL) improved significantly, declining from 3.8 per cent to 2.6 per cent.

Despite the challenge Dolla says it delivered its highest-ever income and net profit since its inception. Dolla Financial Services Limited (Dolla) reported a 31% increase in interest income totaling $1.54 billion for the twelve months ending December 31, 2024, compared to $1.17 billion in the corresponding period last year.

Total Comprehensive Income for the twelve months amounted to $456.48 million, up 8 per cent from the $424.44 million reported in 2023. For the fourth quarter, Total Comprehensive Income was $112.56 million (2023: $96.13 million).

Loss per share for the twelve months amounted to $0.18 (2023: EPS: $0.17), while earnings per share for the quarter totaled $0.05 (2023: EPS: $0.04).

The company outlined the impact of new challenges such as the full implementation of the Microcredit Act in 2024. Enacted in 2021, the Act mandates that all microfinance institutions (MFIs) obtain licenses from the Bank of Jamaica (BOJ), adhere to strict regulatory compliance, and follow enhanced anti-money laundering and counter-terrorism financing (CTF) protocols.

Management notes that in 2024, the microfinance sector faced significant challenges due to rising inflation and heightened interest rates.

“These economic pressures increased operational costs for MFIs and impacted the repayment capacity of borrowers. Despite these challenges, Dolla’s prudent risk management strategies helped mitigate defaults and maintain a stable delinquency rate.”

The y nevertheless said, “ The focus on compliance, risk management, and financial inclusion is expected to strengthen the sector’s stability and expand credit access to a larger demographic. However, MFIs must navigate ongoing economic uncertainties and rising compliance costs to sustain their growth.”

Caribbean Money Daily

Photograph: Kenroy Kerr CEO Dolla Financial Services Limited. Linkedin photo

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