New microfinance firm enters the market with big backing
Published:Monday | August 28, 2017 | 12:00 AMNeville Graham
A new outfit has joined the crowded micro-finance market with financial backing from NCB Capital Markets Limited, which owns half of the business.
Mundo Finance, which launched into business on August 21 in New Kingston, is a start-up founded by businessman Linden 'Mark' Mahfood and attorney Robert Taylor.
NCBCap has a large stake in the business but is mum on the size of the investment.
"We will not disclose the quantum of the equity investment at this time," said CEO Steven Gooden. "Our percentage ownership is currently 50 per cent," he added.
Mundo aims to differentiate itself by not dealing with walk-in clients, according to CEO David Lee.
"The difference with our business model is that unlike other microfinance operations that have a branch in every major town, we take the completely different approach of not lending to strangers walking in," said Lee in an interview with the Financial Gleaner.
"The only loans that will be given by this company are loans that we negotiated, for example, payday loans that come through employers," he said.
The CEO, who was handpicked by Mundo's founders, has a background in investment banking with outfits such as Mayberry Investments and GK Capital. Ceramics producer Wassi Art was also one of his entrepreneurial ventures.
"I was recruited by the shareholders because of my entrepreneurial experience, as well as my work in investment banking. I was basically given a business plan written by some consultants and tasked with transforming that to a viable operational plan," Lee said.
Taylor is the chairman of the company. He leads a board of five members, the others being Mark Mahfood, Steven Gooden and Allyson Wynter of NCB Capital Markets, and Christine McMorris, business consultant with Kronos.
Mundo has a staff of eight, including chief financial officer Rickurt Galloway, formerly of the GraceKennedy Group.
"Our mandate is to bring professionalism and credibility to the space and based on our experience in banking, we have the ability to do risk-based lending, so the interest rate charges will be commensurate with the level of risk determined," he said.
The typical microfinance outfit charges high interest rates to offset risk. Market rates range from a low of 48 per cent to 75 per cent and more. Mundo is pricing its loans at under 40 per cent, according to Lee.
Lee said NCBCap's involvement in Mundo gives it an edge in the market.
"... Because they are our equity partners, the negotiations have led to very affordable cost of funding as well as almost guaranteed long-term funding because of who our partner is," he said.
Doing very well
Although Mundo formally began operating less than two weeks ago, the company is nearly 10 months old, having been incorporated in October 2016, and Lee says it began writing loans before its launch, but was sparse on details.
"As a new entrant, we are doing very well compared to others who might have just come in," he said.
Mundo's products include short-term business loans, trade financing and personal loans, and it finances solar installations in partnership with Alternative Power Solutions. Lee says the company will also be moving into lease financing for automotives and equipment.
"We're going to be very innovative with the leasing business and try to offer, in this local market, facilities that are common in, for example, North America," the Mundo CEO said.
There is a dynamic cap on loans approved for individuals, according to Lee, depending on the performance of the total loan portfolio.
Otherwise, the company is willing to lend big to businesses.
"We don't really have a cap, per se, because we have access to capital that if there is a large opportunity, then we can be a part of it," Lee said.
"Being associated with the NCB Group means that we will be able to do a lot of things that other players can't even dream of," he added.