Mon | Dec 5, 2022

Dolla Financial tapping into green energy market

Published:Sunday | June 26, 2022 | 12:09 AMKarena Bennett - Business Reporter
Kadeen Mairs, CEO of Dolla Financial Services Limited.
Kadeen Mairs, CEO of Dolla Financial Services Limited.

Microfinance company Dolla Financial Services has entered an agreement with energy solutions provider RTA Biz, a deal projected to bring about 700 additional clients to the microfinance company over the span of one year. The company, which is...

Microfinance company Dolla Financial Services has entered an agreement with energy solutions provider RTA Biz, a deal projected to bring about 700 additional clients to the microfinance company over the span of one year.

The company, which is pouring $250 million, or half of the equity raised from its initial public offering of shares, directly into the business to fund its growth, is on the hunt for new customers and Country Manager for Jamaica Mario Brown thinks Dolla Financial might have found a sweet spot in the financing of alternative energy solutions for residential clients.

Dolla sees that market segment as being underserved and therefore teeming with possibility, offering scope to quickly grow its loan portfolio, but secure enough to minimise the risk of loan defaults.

The partnership allows for new and returning clients of RTA Biz Energy Solutions, a company formed by Ryan Tazio Anderson in 2014, to access financing for alternative energy solutions.

RTA Biz currently has a client base of about 1,000, which it supplies with products like solar panels, solar water heaters and generators, but Anderson expects that number to double within a year under the new arrangement with Dolla Financial.

It’s a symbiotic relationship, as Dolla Financial also stands to gain from RTA Biz’s new business contracts, 70 per cent of which are expected to be financed through the microfinance company.

Over its eight years of operating, RTA Biz has largely targeted SMEs with its alternative energy solutions, but as the banks introduced financing solutions for the sector, its focus shifted more towards residential clients.

“The systems that commercial customer orders are typically larger in value than the residential customer, but we have been getting many financing requests from residential customers, who want a system but can’t afford to manage the cost upfront,” Anderson, CEO of RTA, told the Financial Gleaner.

“It’s usually a lot more difficult for an individual to be financed for a system than a business, and so it’s that demand that drove us to partner with Dolla Financial,” he said.

Based in Harbour View, Kingston, RTA Biz itself does not provide financing for the energy solutions. The company, which is staffed with 20 individuals, is mainly in the business of sourcing and installing energy solutions islandwide.

While green energy solutions are expected to pay off for consumers and businesses in the long run, through lower electricity bills, the systems can be expensive to set up or procure. To make the purchase more manageable for customers, energy solution providers have taken to teaming up with lenders to offer financing.

Dolla’s loan portfolio is currently valued at around $1 billion, nearly half of which relates to Dolla Elite, a product that targets entrepreneurs and high-net-worth clients in need of financing deal with accounts payable.

Brown expects that business from the energy sector will grow over time to surpass that of Dolla Elite.

“Sourcing green energy has huge benefits to the clients over the long term, but at the initial stage, it can be a costly decision. Based on our numbers, we anticipate that the average loan in this product category will be about $3.5 million, and so, if we get to our customer target, that could put our energy loans well above the business of Dolla Elite,” he told the Financial Gleaner.

The cost of residential alternative energy systems starts at around $1.2 million, Anderson says, and can go up to $7 million; while commercial contracts can run over $100 million.

Outside of Dolla Elite, Dolla Financial has eight other financing packages: Dolla Line of Credit, Dolla MicroFunder, Dolla SME Grow, Dolla Valu Personal, Fix Up Yu Bar, 4Pay, Medway, and One and Ready, which is targeted at transport operators.

The second-largest revenue contributor is Dolla Valu Personal, which accounts for 34 per cent of total loan portfolio, followed by Dolla SME Grow at seven per cent. Since its partnership with RTA Biz, the microlender has created a new loan product, Dolla Green Energy Loan, under which it will service alternative energy loans.

Dolla Financial wants to grow its loan portfolio to $2 billion and is exploring ways to raise more capital, whether through debt or equity, CEO Kadeen Mairs said at a Mayberry Investor Forum earlier this month.

The microlender currently has a client base of 4,000 in Jamaica and Guyana.

karena.bennett@gleanerjm.com