GIP-41: Appoint Warbler Labs to act on behalf of the Goldfinch Community in the resolution of Tugende Kenya’s Covenant Breach

Authors: @Obinna and @SEyob


  • Tugende Kenya is in breach of two of their financial covenants - their Loan-to-Value covenant and their Tangible Net Worth to Total Assets covenant.
  • Tugende has NOT missed any payments since their loan began in Oct’21, including their Feb’23 interest payment which can be found here. In addition, they have shared that they will continue to make their interest payments on time.
  • Tugende is also eager to work collaboratively with the community to resolve this breach and is already actively taking steps to remedy the situation.
  • We believe there is an opportunity to treat this as a case study and for Warbler to illustrate how we can create a process to collaboratively manage RWA risk with Tugende to resolve this breach and bring them back into compliance.
  • We also believe there is an opportunity to create a standard for transparency and risk management for Real World Asset protocols more broadly.
  • Voting Yes would affirm Warbler Labs should act on behalf of the Goldfinch Protocol in the resolution of this covenant breach.

Who is Tugende

Tugende is a for-profit asset-backed fintech lender that provides asset-backed financing to small businesses in Uganda and Kenya. Their core customer base is motorcycle taxi drivers (e.g., think about how many Uber drivers get financing for their cars), specifically in Uganda and Kenya. The company was founded to provide an alternative for the millions of motorcycle taxi drivers in Africa who are forced to rent their motorcycles at exorbitant costs. Tugende provides value to its customers through its leasing structure. By switching from a perpetual lease to a lease-to-own system, Tugende customers can double their profits within 1-2 years.

Since its inception in 2012, Tugende has financed over $60M in assets to 60,000+ drivers. To facilitate their growth, they have raised over $18M in equity from investors like Toyota’s Mobility 54 (a corporate venture arm of Toyota) and Partech (a tier 1 European VC fund). They have also raised $30M+ in debt from an array of debt funds, including the US Development Finance Corporation (an arm of the US government’s overseas investment arm), and have successfully repaid significant principal and interest over its 10+ years of operations.

In November 2021, Goldfinch provided $5M in debt to Tugende Kenya (Tugende’s operating subsidiary in Kenya). Goldfinch’s funding was provided for the purpose of growing Tugende’s lending activity in Kenya. Since the loan’s inception, Tugende Kenya has doubled their active loans and has met all their interest payment requirements, including the payment due today, which can be found here.

However, in the course of reviewing Tugende’s quarterly reporting, it has come to our attention that Tugende Kenya is in breach of two of their financial covenants - specifically their Loan-to-Value and Tangible Net Worth to Total Assets covenants.

For the sake of completeness and transparency, Tugende is NOT in default of any payment obligations they owe.

What are Covenants

Covenants are clauses in a loan agreement that set out specific requirements that must be met and maintained by a borrower throughout the life of a loan. The purpose of majority of covenants, such as the below, are meant to act as early warning systems for potential trouble down the line. For example, the maximum ratio of debt to equity, and minimum level of cash, are put in place to ensure a borrower is financially healthy throughout the life of a loan. Whenever a borrower fails to meet these requirements, they are considered to be in breach of their financial covenant.

At the onset of Tugende’s loan, several covenants were established to ensure their financial health. Of them were the following:

  1. Loan-to-Value: This means that throughout the life of the loan, the amount of the loan outstanding must be no more than 80% of the value of the collateral for this loan. This means that Tugende’s borrowings must be less than 80% of the sum of their cash on hand, inventory on hand, and loan receivables. This is done to ensure that the loan is always overcollateralized.
  2. Tangible net worth to Total Assets: This covenant requires Tugende to maintain a tangible net worth (tangible assets minus liabilities) that is at least 20% of their total assets. This covenant is in place to ensure that a borrower is not taking on too much debt.

As at December 2022, Tugende did not meet these levels, which we want to work with them to rectify.

What led to this breach?

Over the past six months, many of Tugende’s clients struggled economically, particularly in Uganda, which accounts for the majority of its revenue. The recent rise in fuel costs due to Russia’s invasion of Ukraine, as well as global high inflation, have made it harder for drivers to meet their obligations leading to an increase in lease cancellations and resulting repossessions (i.e., Tugende borrowers give their motorcycles back to the company). This, combined with the overall slowdown in the global investment environment, led to delays in new capital-raising efforts by Tugende Uganda even as it serviced maturing current loans. In an attempt to help support operations in Uganda, Tugende Kenya made a short-term inter-company loan to Tugende Uganda. This triggered a breach in Kenya’s LTV and Tangible Net Worth to Total Assets covenants.

What does this mean? Does this mean money is lost?

It is important to highlight that this is not a payment default, and no money is lost. Tugende Kenya is in a position to continue to honor their interest obligations through to the end of their loan, and based on our early conversations with them, it appears there is a low risk of any actual payment default.
There is a need for an entity to act on behalf of the Goldfinch community and work with Tugende on its plan to get the covenants back above the required levels and, if necessary, continue to work collaboratively with them to ensure they are able to repay their $5M loan to the Goldfinch protocol. We are putting forth this proposal for Warbler Labs to act on behalf of the community to ensure the covenant breach is cured.
It’s worth noting that the Tugende team is cooperative and eager to work with the community to meet the covenants and has already started working in this direction.

General thoughts on risk management

It’s important to note a few things as it relates to risk management in the context of the Goldfinch protocol:

  • Although this is not great news, occasional covenant breaches are to be expected in the regular course of business in the world of private credit, no matter whether you’re talking about the US, Africa, or the EU. What’s important is that issues are resolved as quickly as possible by people with relevant experience.
  • We believe the Goldfinch community should lead the way in transparency and in creating a framework for risk management that allows Real World Asset protocol to deal with such breaches when they do arise.
  • In addition to addressing the immediate issue, we believe we can use this situation as an opportunity to create a process for how we as a community manage these issues more generally going forward.
  • Although Warbler Labs is requesting to act on behalf of the community in this specific case, we believe this creates precedence that allows other delegates with relevant experience to act on behalf of the Goldfinch community in the resolution of similar breaches in the future.


Yes: Warbler Labs should act on behalf of the Goldfinch community in the resolution of the Tugende covenant breach.

No: Warbler Labs should not act on behalf of the Goldfinch community in the resolution of the Tugende covenant breach


Hi everyone,
This is Michael Wilkerson, the Founder and CEO of Tugende. Tugende is a for-profit asset-backed fintech lender that provides financing to motorcycle taxi drivers in East Africa. Our Kenya arm, Tugende Kenya, has been a borrower on the Goldfinch protocol since November 2021.
I’m writing to follow up on this message from the Warbler team to confirm that Tugende Kenya did not meet two of our financial covenants.

The Tugende team is committed to a speedy resolution and to getting Tugende Kenya back into compliance. We will work with Warbler and the whole community collaboratively to achieve this, and we will be in touch in the coming weeks with progress toward those goals.

Please let me know if you have any questions. We are on East Africa Time (GMT+3) so I will be responding as much as possible with that in mind.


I would be supportive of this. There’s not an efficient way for any other entity or community member to handle this and as a community, I feel confident in trusting Warbler to act in the Backers of this loan’s best interest as well as all stakeholders.

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I don’t have the slightest doubt: Warbler Labs will be able to solve the problem outlined in this GIP, and I fully support the initiative

I will vote “Yes” and believe that Warbler Labs’ involvement on behalf of the community would be the most effective way to resolve this situation

Yes: Warbler Labs should act on behalf of the Goldfinch community in the resolution of the Tugende covenant breach.

I think that it is good practice to use other reliable companies. We need to try to do it.

I would definitely vote “Yes” to this proposal as I completely trust Warbler labs on this.

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Certainly “YES”.
There is no other better way to handle this situation than the one proposed here.

I fully support this idea, you can trust Warbler Labs in these matters

Would it make sense for Warbler Labs to outline what their resolution plan will be? (i.e. will it be an amendment of the loan structure and/or the covenant? or an amortization schedule and a lower advance rate?)

Also, does the Tugende loan not follow a borrowing base concept?


You can find out more specific figures in terms of violations. Namely: 1) By what percentage does the amount of the outstanding loan exceed the value of the collateral for this loan? 2) What percentage is the net worth of tangible assets of their total assets? Also, based on the input for voting, it is not clear how Warbler Labs, acting on behalf of Goldfinch, will be able to resolve the situation that has arisen in connection with the identified violations? It may be worth simply increasing the frequency of reporting on borrower compliance and setting a floating percentage of compliance, not 80%, but for example 80±5%. Thus, it will be possible to make comments to the borrower in a timely manner in order to eliminate them.

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I think this is a good decision. Warbler Labs is well positioned to deal with these kinds of issues and respect the interests of both parties.

I believe that Warbler Labs should act on behalf of the Goldfinch Protocol in resolving this breach of agreement. It will be in the interest of the entire community. :four_leaf_clover:

I am sure that the actions described above require a thorough investigation and surely Goldfinch can provide help and advice in the matter

I support this proposal. I sure that Warbler Labs will be able to solve the problem. I don’t see any other options.

If there is a good reason to change the risk management standards, then why not turn to experts to create a methodology for less risky interaction with the borrower. Therefore, I am “for”.

supportive for this, is this where the votes are counted or is there a separate link for it? thanks

Yes. Warbler Labs should look into this matter as it will be a great learning experience to deal with similar issues and risks in the future.

Thanks for your comments and support! The votes will be help on snapshot and we typically follow a process where we invite comments and discussion for 7 days, and once there is a general consensus we move to snapshot for a 3 day vote.

I vote for “yes”. As we can see they really want to fix problems that they struggle with.