Premium International for Credit Services aims to reach a turnover reaching EGP 3.8bn by the end of 2024, supported by the provision of liquidity from the securitisation process, planning to launch a retail product in 2020, and contracting A50 to provide mobile payment services.
The company is also seeking to join the umbrella of consumer finance law as a prelude to the initial public offering (IPO) within three years, in addition to launching a company with Sarwa Capital company to introduce a new product in the field of consumer finance. Daily News Egypt sat down with Paul Antaki, owner of Premium International for Credit Services, in order to get the latest of the company’s plans.
What is the volume of business in the next five years?
The company aims to bring its current business volume to EGP 1bn, targetting to reach EGP 1.3bn in 2020, EGP 1.8bn in 2021, and EGP 2.5bn in 2022. We aim to bring up its business volume in five years to EGP 3.8bn by the end of 2024. The sales volume is calculated on the basis of the total purchases of cardholders and not returns. The number of sales and purchases amounted to EGP 1m transactions per month.
What are the main sectors covered by the Premium Card?
Premium cardholders are able to cover all simple daily needs directly and without restrictive procedures, including foodstuffs, clothing, shoes, all fashion products, and electrical appliances, as well as health care services, tourism, and travel. Customers can pay on instalments over 10 months without interest. Premium Card is a commercial credit card for commercial goods and services, not funds.
How many premium card customers are there currently?
The number of customers currently reached about 130,000 cardholders. The number of customers increases from 2,000 to 2,500 at a monthly rate. The figure is seen to increase by 4,000 cardholders per month starting next year with the support of securitisation.
How many companies contract Premium to obtain cards for their employees? What are the conditions of the contracted companies?
The number of companies contracted with Premium is more than 800 companies. The company aims to expand its contracts with the private sector. The volume of government contracts ranges from three to four government agencies whose employees use a Premium Card with negotiations with the ministries of investment and housing currently underway.
Premium contracts with companies with specific conditions, a joint-stock company, the capital of which shall be no less than EGP 2m, and that the company’s employees must be registered with the General Authority for Social Insurance, and the number of employees at least 100 employees.
What is the company’s percentage of profitability from the contracts of traders?
The profit margin of the company is estimated at 2% to 3% obtained from the contracted trader. The company is currently contracting with 5000 outlets through which premium services are provided for instalments with the same advantages as the outlet. The volume of sales and purchases amounted to 1m annual transactions.
Can you give us some details about the company’s securitisation bond programme?
The duration of the short-term bond issuance programme of the premium credit services company is up to two years until 2021. The company could offer an additional bond programme parallel to the programme in case of need for liquidity.
EFG-Hermes has announced the launch of a short-term securitisation in a multi-issuance programme for Premium Credit Services. The total value of the issuance programme is EGP 2bn divided into six, nine and 12-month tranches. The Arab African Bank covered the offering of premium bonds by 50%, and the investment bank Hermes covered 25% of the offering, while 25% was covered by Azimut company.
The company’s decision to move towards the issuance of securitisation bonds aims to provide large liquidity that enables it to expand the issuance of new products.
Are there new products in the pipeline?
One of the new products that the company plans to add during 2020 is the premium cards for individuals through specific communities, and after credit and field inquiry. We are also planning to launch a new product in the near future.
The cost of the first securitisation represents about 12.80% annually on the first tranche of the issuance programme, and 6.9% cost on a 10-month basis. Financing by issuing bonds is cheaper than bank borrowing, and over the years the cost of securitisation has become constant and the volume of securitisation has been increasing. The guarantee for the securitisation programme is the biggest obstacle faced by the company in the process of securitisation since it does not have the receipt securities in the conventional sense. The cardholder form of premium customers and receipt is the guarantee of the securitisation programme. Securitisation proceeds are purchases of 38,000 cardholders.
The customer at the beginning of the contract signed a receipt of the credit limit set by his company. Premium contracts with companies and bodies and not individuals.
How does one overcome the credit risk of default?
The credit risk of non-payment is very limited, as the customer signs a receipt equivalent to the limit allowed to borrow which corresponds to the credit card. The biggest motivation behind the company’s tendency to securitisation instead of credit facilities from banks is due to the Central Bank of Egypt’s instructions that the size of facilities for non-bank financing companies does not exceed 1 to 10 of the capital, while the company’s capital is currently EGP 50m.
Can you tell us more about your partnership with Sarwa Capital?
A partnership agreement was signed with Sarwa Capital Holding for Financial Investments to establish a new product offering in the field of consumer finance. Under the agreement, the partnership will draw on the expertise and capabilities of the two companies to develop a unique product in the consumer finance sector, which will contribute to reach a larger segment of customers and promote growth opportunities in the market. The partnership is 50/50 between the two companies.
What are the benefits of securitisation for Premium Card?
The process of securitisation gives the company flexibility in cash flows and greater liquidity without pressure on leverage, and continue to retain profits for faster growth. The company, since its inception 17 years ago, did not distribute any profits to partners to achieve a rapid growth rate. Securitisation gives more room to control profits. The volume of credit facilities of the company amounted to about EGP 250m, the latest of which is a loan from the Arab African International Bank. The year 2002 witnessed the start of the company through the contract with 50 dealers, 2,000 customers, and six companies. The year 2009 witnessed the beginning of the profitability of the company since its establishment. The first credit facility obtained by the company during this year was from the Arab African International Bank.
What are the total credit facilities obtained by the company?
The company’s first loan in 2009 was worth EGP 5m in return for a capital increase of EGP 5m to reach EGP 17m at the time. In 2018, the company obtained a credit facility from the same bank worth EGP 200m.
What is a premium store?
Premium Card has launched an online store under the name of a premium store to sell the products of non-contracted outlets to Premium customers with the same instalment policy. This is being developed to satisfy Premium customers.
Is there a competition with payment cards from banks?
In terms of competition with electronic payment cards, the advantage that Premium offers to its customers is continuity in instalments without interest for 10 months, and not for a certain period as the rest of bank cards.
How many outlets is the company contracted with?
Premium Card has sought to include a huge network of service providers and products to serve different segments of consumer groups. It currently consists of 500 brands and retail chains dealing with various products and services, representing more than 5000 outlets across Egypt. The emergence of the idea of an alternative solution and the establishment of Premium Card came in 2002, 17 years ago, which allows the average consumer to buy and consume through a huge network of merchants offering various products and services through a card that allows them to install purchases in 10 months without interest.
Are there new technologies the company is considering adding?
Premium is always moving to the new technology after the launch of the Premium app, which allows the user to complete purchases using the application on mobile phone. The company plans to contract with A50 to launch a mobile payment system, which is scheduled to be completed by the end of the year.
In the coming years, Premium could consider expanding outside Egypt in countries such as Nigeria and Ethiopia through a partner in those countries, which will be provided by the operating system for a certain percentage agreed upon.
What about the state’s policy of financial inclusion?
The government’s tendency for financial inclusion in Egypt supports the idea of individuals turning to the use of credit cards to pay various services and reduce liquidity, which would expand the base of premium card customers.
Premium Card applies to consumer finance law, where the company is waiting for the availability of licenses to obtain them immediately. The company has turned to Financial Regulatory Authority to be included under the umbrella of consumer finance law. After obtaining the necessary licences, the company will launch the IPO procedures in the capital market. The IPO is one of the options offered for financing. All Premium Cardholders are expected to be premium investors at the IPO.
What are the main challenges facing the company in the market?
The main obstacles faced by the company in the establishment phase is to convince merchants to sign a premium with a discount in the presence of Visa and Master Card. Premium cardholders accounted for three times the cash sales of merchants. In terms of operational hurdles, the biggest challenge faced by the company is the introduction of a special operating system. The operating system of Premium is the credit card system of banks that has been launched and developed more than once to meet the needs of Premium. The company started to work with the ports manually using a manual system based on the merchant’s contact with the company, and then the company was able to contract with the National Bank of Egypt to accept premium cards on its machines through a contract that allows the issuance of premium cards to cardholders of the bank.
Premium was established in the Egyptian market in 2002 for the brothers Paul and Rami Antaki, through the issuance of a system of instalment cards for corporate employees, up to 10 months without interest through more than 450 brands in the market.