ASA International: an under-appreciated gem of a lender
We thought we’d try out a few smaller stock pitches, in the same style as 12 Stocks of Christmas. Hopefully you find it interesting! ASAI is a stock I strongly considered for my annual watchlist this year, so I thought I’d write this up to give it a sort of “honourable mention”.
Disclosure: At the time of publication (16 Jan 2026), I did not have a position in ASA International. I subsequently initiated a personal position on 20 Jan 2026.
The Pitch
ASA International describes itself as “one of the world’s largest microfinance institutions”. Headquartered in Amsterdam, it provides “socially responsible financial services to low-income entrepreneurs, most of whom are women, across Asia and Africa”.
The company was founded in 2007 and quickly spread from the Philippines to Sri Lanka, Ghana, India, Pakistan and beyond. Today it operates in 13 countries.
Recent financial results have been very strong, with after-tax net income rising to $29.2m in 2024. $48m was forecast for 2025, but the company informed us in December that it would significantly exceed this amount.
The Big Picture
For a company with such a low market cap, it has some impressive figures:
2.5 million clients with an average outstanding loan across clients of just $182.
Geographic diversification: as noted above, it offers geographic diversification across various countries and regions. The 2024 annual report showed 2,145 branches with about 30% in South Asia, 23% in South East Asia, 22% in West Africa and 26% in East Africa. While single-stock exposure to just one of the countries in these regions might signal a high-risk investment, this balanced exposure helps to reduce the risk profile.
Founder led: the co-founder Dirk Brouwer is also the largest shareholder and was the CEO until June 2023. He is currently the Non-Executive Deputy Chairperson. His shareholding appears to be c. 32% currently. Of course there is always the risk that this turns into a stock overhang at some point, and according to our shareholder analysis feature, his holding has reduced this month.
What The Brokers Say
The stock is covered by Cavendish (many thanks to them), and they put out the following updated forecasts for FY25 and FY26. The FY25 profit forecast was increased by a remarkable 31%, and the FY26 profit forecast was increased by 25%:
FY25 adj. PBT $114m on revenues of $243m. Adjusted EPS 56 cents / 43.1p.
FY26 adj. PBT $131.4m on revenues of $273.7m. Adjusted EPS 62.4 cents / 48p.
I note that the adjusted PBT margin is seen at around 47%-48%, a very healthy level.
Valuation: despite enjoying strong growth and strong profitability, the shares trade at a share price of 198p, giving a market cap of just £193.5m or $259m at current exchange rates.
This gives an earnings multiple of 4.1x for the current year.
The Bear Case
Single-country risk: while I stand by the view that ASAI offers excellent regional diversification, there are some single-country risks that are worth mentioning. Using 2024 figures, the company had 400 branches in the Philippines and 380 in Pakistan. So together, these two countries are responsible for 36% of the group’s total branches.
Hyperinflation concerns: in addition to the political risks it must take, ASAI also operates in economies that have been hyperinflationary, or are in danger of becoming hyperinflationary (Ghana, Sierra Leone, Nigeria, Myanmar).
Risks associated with rapid growth: at its interim results to June 2025, the company reported that its gross outstanding loan portfolio had grown 37% year-on-year. This sort of rapid growth can of course be associated with a range of increased risks, if it has not been managed carefully. Which brings us to…
Defaults: so far, the growth in the loan portfolio has not been associated with increased defaults. The PAR (“portfolio at risk”) was only 2% at the interim results, which was an improvement on the prior year! But given that ASAI enjoys a net interest margin of almost 40%, there is no getting away from the fact that these are very expensive loans. That’s normal for microfinance, but the default rate might still be expected to rise as the company grows.
The Bottom Line
Whether you’re a bull or a bear on this one, or somewhere in between, I think this stock does stand out: it’s rare to find what appears to be a reputable business with the following characteristics:
Rapid growth in its overall size
Profits nearly doubling at the recent interims
Return on average equity 46.1% at the recent interims, ROE 38% according to the StockReport.
Significantly beating earnings expectations and with brokers upgrading forecasts
… and all of this available at a P/E of only 4x?
I didn’t add this to my annual watchlist because I’m still fairly new to the story, and it almost seems too good to be true. At this point I can’t quite decide: is it an under-appreciated gem of a lender, or a highly risky enterprise that is in fact priced correctly?
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18 comments
Bit of a jump up today. Has it been tipped somewhere?
I covered yesterday's trading update in the DSMR, looks like follow-through from that.
Thanks Graham. Yes, I enjoyed the write up and that makes sense. The volume of news makes it feel longer ago than yesterday :-). You must be glad it’s the weekend - hope you have a good one
My concern would be legislation to cap the interest charged. I see in Pakistan the APR is 53%. I am afraid that alone- the interest charged- would make it morally un-investable. But i appreciate morals do not make good investments. And as with International Personal Finance (LON:IPF) Governments do seem to get round to curbing rates.
In many respects I agree with your view on the morality of the rates charged Charles. But on the other hand why is this business growing so fast if it is being 'unreasonable', 'exploitative' or worse? Is this the best/only show in the small towns/remote from banking regions where it is being offered? Is this (Govt regulation on rates) the reason they have pulled out of India for example? And yes there could be other countries that go the same way.
Feels a bit like Trump blasting Credit Card rates of up to 32% in the US as absolutely unacceptable. Banking system says that is a fair rate given the profile of borrowers and the tendency to default. What's the alternative? 10% limit on rates and Lenders tighten the criteria so only those that can borrow from other sources (like us) qualify for the cards?
So long as the take up of these loans is by choice and not force, like the proverbial unregistered doorstep lenders of yesteryear, and is relatively short term I don't see them as problematic and accordingly have invested here. I see this more as supporting small scale businesses as they grow and, if I've read it correctly, particular support for female micro businesses. If and when cheaper, legal alternatives are available for these entrepreneurs I'll be delighted to see it.
Just my take and respect your view.
I agree with your comments, free market and hopefully choice. Personally not one for me but I have the same on other areas such as arms manufacturing. But made money from Seraphim Space Investment Trust (LON:SSIT) so where is the line. I just feel slightly uncomfortable at 50% and as I said recall action being taken as economies develop.
I think there is a substantial difference between a micro finance loan in an economy without an advanced banking system, where credit reports are (I am guessing) much less available than in the uK and where the cost of admin is a much higher proportion of the loan than say the UK. Whether its a service or abuse is probably impossible to say but you can imagine the less well off in developed world might well be "abused" by high rents etc and this might be a way out.
Over a long period you would expect the developing economies to grow, along with loan sizes which should mean the APR / proportion of admin costs should reduce.
The alternative would likely be Gov or internationally funded non profit type organisations- where they exist or operate (of the type the US has reduced funding of since Trump).
You make a good point littledavesab - my thoughts were very much more generic in nature - i stick by my gunds though ref ther thrsut of "some" moneylenders taking alend - or being a house of cards when it comes to paying down debt fully.
I ssupect many of these loans might bve critical stuff buying stuff so they can plant crops or stay in business if there whatever needs replacing - or so they have somethijng to sell if they need to buy it in. its perhaps to be expected default rates may be materially higher tha uk. with higher defaults that has to be clawed back. Looking at as payments in arrears over 30 days not more than 1 year seem to be 2% - that seems modest i comparsion to interest rates being charged - no idea how clean adn unbiased their par>30 stat is ? eg can you change arrears to new loan and make arrears go away ? stuf like that used to exist in the uk financing back in the day.
Over a long period you would expect the developing economies to grow, along with loan sizes which should mean the APR / proportion of admin costs should reduce.
Or they could moprh into the uk where i supect many loans areb for stuff that isnt necesarry - it amazes me the amount of people buy clothes from next and buy said clothes on tick. Ok i understand some will have real need and no money - just seems crazy to me.
But on the other hand why is this business growing so fast if it is being 'unreasonable', 'exploitative' or worse?
Because vulnerable desperate people wil lap it whether they can afford to repay it or it or not - just look at all thje issues that happened in this country when the fca rightly clamped down people were lapping up the money "because it was there" - reality was many of these people never paid back their loans - cant even remember the name of the big one that went pop - pretty sure they wrote off a ridiculously high % - i luckily got out cattles i think it was many years ago - just before they realised when it came to actually repaying loans - not so easy. Lok at £PCF recenyly here one minute - shareholders equity gone the next.
I am not criticising anything happening here or predicting doom and gloom - heack i have shares in Secure Trust Bank (LON:STB) and have also International Personal Finance (LON:IPF) and could perhaps take a stake here
Lets be frank those its the wild est of business activities up there with gambling stocks and spreadbet companies.
Fairplay to the fca the last few years where they have had no qualms about tackling any stuff with companies taking the micky. Allowing car sales people to choose their interest rate of choice and pretending it was based on risk took the biscuit.
Used to love the ads for Wonga Mill. Didn't approve of the product or the rates charged though. If I recall correctly that was more about PayDay loans and allegedly drove some into more difficult. ASA International (LON:ASAI) I believe is business micro finance oriented. Happy to support those trying to pull themselves up to a better life. At least until any wrong doing is exposed. Each to their own.
Bad debt levels suggest repayments can be afforded.
I don't understand. The operating cash flow is negative and getting more negative, debt has increased, yet the StockReport shows positive and growing EPS. I can't make sense of that and the cash-flow statement doesn't help me. Please will someone explain how this company is profitable?
Profits don't show up in cash flow when a lender is growing, FREng: growth is funded by sending more loans to more customers.
Thanks Graham, but how can EPS be positive in successive loss making years? Don’t you need profits to have earnings?
I think you are losing the plot FREng
but how can EPS be positive in successive loss making years?
1 they aint loss making they are making good proits
The operating cash flow is negative and getting more negative
They are a money lender - by the nature of their trade its normal to be cashflow negative WHEN growing at a lick- thats what their business is - handing out their cash "now" to get it paid back in future year.
If their loan book goes up by more than profits made that needs to be funded somehow - loan book went up £86 mill 6 months to 30/6/2025 - thats obviously goona result in negative cashflow - thats by design
debt has increased,
well their loans to customers will decent % by funded by debt - thats standard as their loan book"asset" increases so does debt.
One issue with lenders its often easy to make profits when you are handing out teh dosh and expanding - the true test is when you want debtors to pay you back without borring again to pay you back.
The Oak Bloke had a more detailed look at ASA International (LON:ASAI) last month. He likes it.... https://theoakbloke.substack.c...
ASA International (LON:ASAI)
I notice the free cash flow is very negative, which would normally put me off. But I don't normally invest in financial stocks, so its outside my zone of competence. Is this normal for a lender?
Not unless the lender is expanding aggressively. Then the cash needed for new loans is more than the amount generated from interest and repayments. It’s really the net interest margin and the loan impairments that you need to look at I’d suggest - and decide if you believe them.