The Dolla Financial story

The Dolla Financial story

WRITING stories about the determination of several people to achieve success in business, over the last few weeks, has certainly pushed many to reach out to me to have other stories told. As I write each week, I am forced to realise that it takes a special breed to dream of running and a business and to actually have the resolve to overcome the hurdles that present themselves in the way of the continued survival of that entity. This week in this series of Corporate Profile, we tell the story of Dolla Financial, a microfinance entity run by an enterprising young man, Kadeen Mair

IN 2013, the world witnessed several monumental events. Among them was the death of former South African apartheid revolutionary Nelson Mandela and the election of a new pontiff, Pope Francis, while words such as “selfie” and “twerk” were added to the dictionary.

While those were happening, in the sleepy town of Lucea, Hanover, a young banker was venturing off on his own with nothing but a dream to fill financing gaps he saw while working as a loans officer at the National Commercial Bank (NCB).

“I used to work at NCB, when I left NCB I started my first loan company at the age of 24, a company called M24 Investments in Lucea, Hanover,” Kadeen Mairs reflected as he took a deep breath.

Mairs, who worked as a loans officer at various branches of the NCB in rural Jamaica – Lucea, Hanover; Savanna-la-Mar and Negril, Westmoreland and Junction, St Elizabeth – explained that the “M” in the name of the company was just the first letter of his last name and the 24 being his age at the time.

“While I was working at the bank I would visit small businesses in need of loans, but because of the requirements to get these loans, a lot of the small businesses would not qualify to get the loan. But I could see the potential in these businesses and I realised there was a market for loans to informal businesses that are not structured enough to access credit from the bank,” he continued.

“That was a big market so I decided to tap into that market starting small. I took a loan and onlend that money to small businesses.”

Mairs said when he started out the loan, he was lending a maximum of $30,000. “So I would lend a man $5,000, $10,000 up to $30,000 because of the small pool of funds that I had, I couldn’t stretch it beyond that I just kinda manage my portfolio,” he recalled.

He said the seed funds for his company came through two loans totalling $4 million. The loans were taken from his own workplace and Scotiabank.

“When I started out in Lucea, I used to give loans to a lot of persons in the bus park, in the market, the soup man, the vegetable lady, the conductor, the bus driver. Everyone who had a need to cover short-term expenses or needed money to grow their micro business. I would be that filler for that gap for them.”

He told the Jamaica Observer that banks did not target these people’s micro businesses for loans, because “the soup man who is selling in the bus park doesn’t keep accounting records of his purchases and sales”, leaving the opportunity for someone like himself to step in.

“When I go to these people, I have to employ a different method of assessment from what I did in the bank when giving loans,” he explained. That assessment process, he said, involves physically going to the locations where the businesses are set up and observing the operation and asking questions of people around. If he is comfortable with what he sees, a loan would be made. “Even though we are a lending company, we still practise good prudence in onlending.”

In the beginning he said things were not smooth sailing.

“As a startup you have to go into your personal funds or ask a friend or family to help you meet your payroll at times.” Still he celebrated the wins.

“In terms of success, I have seen where we would have a customer in the market who started with a small stall and continue borrowing and in the process, grow that stall into a shop.”

Mairs said he made good business as the only employee of the company at the time. He recalled borrowing money at between 18 per cent and 25 per cent for onlending, but the small size of the loans made the repayments manageable.

“The good thing for a company like ours is that the change in the interest rates does not affect how we price our loans. We borrow to onlend. If we are borrowing from the banks at 10 per cent, we put a five percentage point premium on it.”

But still there were challenges. “I’ve had instances where people would borrow and migrate. We also have instances where customers borrow and worked genuinely for the business to succeed but it still end up failing, and thats a loss for myself and the customer.”

Those losses he explained were managed and kept low. “It’s like if you are doing farming. You know that some of your crops will spoil and you make provisions for that. In the same way, I had to make provisions for loan losses.”

Four years after starting the business, Mairs would however sell the entity to Dolla Financial Services, a cambio and remittance outfit owned by Stocks and Securities Limited.

Mairs ,who admitted to being emotionally attached to the business, said selling the entity was a hard decision, but one he does not regret.

“The end result was I took part ownership in Dolla Financial. We discontinued the cambio services and the remittance service that we had going on at Dolla and started focusing exclusively on loans.”

Mairs now owns 25 per cent of the company through an entity called Dequity Capital with First Rock owning the other 75 per cent. He remained with the company as CEO.

With the coming regulation of businesses like his by the Bank of Jamaica (BOJ), Mairs said he is unbothered and even welcome the move.

“Dolla Financial operated under BOJ supervision previously with its cambio and remittances licence. So we had already structured the company to be ready for reporting to a regulatory body, our structure was already built for that, so internally we will not be making much change.”

“In terms of the legislation, I think it is very good for the customers because more microlenders would then be transparent in terms of their fees and rates. The legislation is really just to create some transparency. It’s good for microfinancing companies because it would give us some more recognition and establishment in the finance space versus when you are unregulated. In terms of the pros and cons, it is a big benefit for microfinance companies. Yes, it comes with a lot more governance and reporting but once you are a transparent company with governance in place, you shouldnt have a challenge.”

Mairs, who flirted with taking the company public five years ago, is focused otherwise now.

“Currently we have eight branches and by the end of the year we are looking to have 12. The four main locations we are looking at are Ocho Rios, St Ann; Port Antonio, Portland; Morant Bay, St Thomas and Portmore, St Catherine.”

“We will always continue to expand the branch network. We are in Guyana now and we are currently exploring money lending licences in other Caricom countries, including The Bahamas,” he added.

“In terms of growth, that’s the kind of growth we looking at in the next year and a half and also looking at rolling out some new products to launch as well that will tap into some different segments of the credit market.”

Mairs declined to say what kind of new products he will be taking to market in the near future but added: “As long as we see a need in the market that is not being fulfilled then we will design something and ensure that customers have access to it, so we have some things coming out.”

CEO of Dolla Financial Kadeen Mairs (karl mclarty)
A couple speaks to a loan officer at Dolla Financial.