This liwwa portfolio assessment and borrower survey is the second in a series of posts detailing liwwa's response to the Coronavirus pandemic. liwwa's goal during this time is to mitigate risk and to honor its fiduciary duty to retail investors and other stakeholders, whilst playing a key role to support the recovery of small and medium-sized businesses in Jordan.
In an effort to understand the effect of recent events on liwwa’s portfolio we categorized our borrowers in the following way by business type or activity.
Essential goods/services - Businesses that offer goods and services that consumers will buy regardless of the changes in their income levels. These goods are necessary and will still be bought in times of economic downturns.
Normal goods/services - Businesses that offer goods and services that customer’s consumption is somewhat sensitive to changes in income levels. The demand for these goods and services will decrease in times of economic downturns.
Luxury goods/services - Businesses that offer goods and services that customer’s consumption is highly sensitive to changes in income levels. The demand for these goods and services sharply decreases in times of economic downturns. We also included businesses that would not traditionally be classified as “luxury” businesses, but are businesses that we think have highly elastic demand in times of economic downturn, such as businesses related to the construction industry.
Hospitality & Social - Businesses that are involved in the hospitality industry, but their businesses are not solely dependent on tourism, businesses that have a social or communal aspect to them. These businesses have not generated any revenue since March of this year. We expect them to recover slowly with some likely to fail.
Tourism Related - Businesses that are in the hospitality industry, related to tourism such as hotels and travel agencies. These businesses have not generated any revenue since March of this year. We expect them to recover very slowly with many being likely to fail.
|Category||Example Businesses||Portfolio Outstanding ($)||Portfolio Outstanding (%)|
|Essential goods/services||medical supplies, staple foods||$3,886,569||30%|
|Normal goods/services||household goods, office supplies, car maintenance||$2,511,489||20%|
|Luxury goods/services||jewelry, clothing, building materials||$4,476,992||35%|
|Hospitality & Social||restaurants, event planning, fitness & education centers||$1,182,392||9%|
|Tourism related||hotels, travel agencies||$743,967||6%|
liwwa surveyed 266 borrowers by phone between 29 March and 5 April.
The following highlights key results for all categories:
Our survey showed that only 17% of businesses in our portfolio were able to generate income during this ongoing lockdown period; 76% of them were from the Essential Goods/Services category. Of those businesses that were able to generate any income, 17% experienced an increase in revenue during this time, while 61% experienced a decline of more than 50% in revenue. Only 7% of businesses in our portfolio have been able to sustain at least 50% of revenues through the lockdown. Of our clients who claimed there was no decrease in revenue during the lockdown, 78% came from the Essential Goods/Services category.
Below are borrower responses about their ability to generate revenue during the lockdown, estimated timeframe to recover from the disruption, and level of concern for the survival of the business.
Able to generate revenue during the lockdown:
|Category||% of businesses|
|Hospitality & Social||6%|
Estimated 3 months or less to recover:
|Category||% of businesses|
|Hospitality & Social||50%|
We believe that it is likely that our borrowers are being too optimistic in their estimates of recovery, especially those in the Hospitality & Social and the Tourism categories.
How concerned are you at this stage for the long term survival of your business?
|Response||% of businesses|
Again, we believe that our borrowers might be overly optimistic in their response to this question given our market research. The global halt in economic activity is unprecedented, and its length and impact is still not known. Therefore, these survey results should only be read as a measure of borrower opinion, and not predictions of actual business performance.
Loan Restructuring & New Lending
Click here to read about our plan for restructuring existing loans and for new lending after the private sector reopens.