Update on the Tugende Kenya Facility

Authors: @Obinna @SEyob


  • This post is a follow-on from the original community notification from 15 Feb 2023 found here
  • The Tugende Kenya facility will need to be restructured, leading to losses possibly up to the entire amount of the loan
  • This will result in a net 3.95% write-down to the NAV of the Senior Pool over the next four months. Since the APY on the Senior Pool has been 7.81% for the past year, this means the overall trailing 12-month APY at the end of this 120-day write-down will be a net positive 1.50% APY (excluding GFI).
  • This net 3.95% decrease in NAV over the next four months represents the worst possible outcome. We will pursue all options to maximize the recovery from this loan over time.
  • If and when any payments are made into the protocol as a result of the restructuring, NAV decreases due to the default will be partially reversed based on the corresponding amount of those payments.


  • Tugende is a motorcycle taxi (i.e., boda-boda in Swahili) financing company headquartered in Uganda. In markets where the alternative is for operators to rent motorcycles at exorbitant costs and into perpetuity, Tugende provides affordable financing that allows these operators to own their motorcycles and double their profits from $5/day to $10/day.

  • Today, Tugende operates through three entities:

    • Tugende Global - their holding company based in Mauritius, which wholly owns their Ugandan and Kenyan operating entities
    • Tugende Uganda - their legacy business based in Uganda which has been operational since 2016 and is responsible for 89% of their outstanding loans, and
    • Tugende Kenya - their newer Kenyan business, which commenced in 2019 and represents 11% of outstanding loans
  • In October 2021, the Goldfinch Protocol made a $5M loan to Tugende Kenya, set to mature in October 2023. Here is a link to the Tugende deal page, inclusive of all on-chain payments made to date thus far

  • Below are the original deal terms for this pool

    Deal Terms

    Borrower Tugende Kenya
    Use of Funds Loan Origination in Kenya
    Facility Size $5,000,000
    Tenor 2 years
    Amortization Bullet
    Interest Payment Frequency Monthly
    Security - All assets inclusive of bank accounts of the business
    Covenants - Loan to Value < 80 per cent + Other traditional covenants
  • This loan was made before the launch of tranched pools, which means that it was made entirely with Senior Pool capital, and no backer capital went into the loan.

  • In our review of Tugende’s reporting in December 2022, we discovered that Tugende Kenya made a $1.9M loan to Tugende Uganda (i.e., the related company) in contravention of their facility agreement, and without the knowledge or consent of the Goldfinch community. This loan caused them to breach several covenants of their loan agreement.

  • On the back of this discovery, we informed the Goldfinch community of this breach and sought permission to work with Tugende to remedy it. The intended path for the remedy was to be an equity raise. This would inject fresh capital to plug the $1.9m hole ultimately owed to the Goldfinch community. At the time, the Tugende team was confident that they could get this done.

    • Link to 15 Feb 2023 Governance post here
    • Link to on-chain snapshot vote, passing with a 99.99% vote, appointing Warbler Labs to act on behalf of the Goldfinch Community here

Where we are now

  • Over the past six months, we’ve been working closely with the Tugende team to support their fundraising efforts and, ultimately, the resolution of their covenant breach.
  • In this time, and in our discussions with various stakeholders, it has become clear that the situation in Tugende Uganda (i.e., the affiliated company) is much worse than we were initially led to believe.
  • Due in large part to macroeconomic factors (specifically inflation and rising energy costs) and certain managerial missteps (mainly an aggressive headcount increase in 2022), over the last 12 months, Tugende Uganda has performed poorly, and its balance sheet has deteriorated.
  • The unauthorized intercompany loan, which we now know was made to support the struggling Uganda business, spread this contagion to Tugende Kenya (i.e., the Goldfinch borrower). Because of this unauthorized intercompany loan from Tugende Kenya (i.e., Goldfinch borrower) to Tugende Uganda:
    1. Goldfinch is now directly exposed to the situation in Tugende Uganda, and
    2. Tugende Kenya has not had the capital it needs to grow its loan portfolio and create the profits needed to repay the loan. This has led to a decrease in its portfolio size and a decline in its portfolio quality over the past nine months.
  • After numerous conversations with the Tugende team, its dozens of existing lenders, advisors, and external consultants, it is now clear that there will need to be a restructuring of Tugende’s debt on a group level, i.e., in all three Tugende entities.
  • Although we are still determining the specific amount, we are certain that this will lead to a material write-down, potentially up to the full amount of the principal value of the Goldfinch loan to Tugende.
  • Warbler has since appointed a global Tier 1 law firm in service of protecting Goldfinch interests.
  • We continue to work with the Tugende team and prospective equity investors to ascertain the exact details of the restructuring. We will share with the community the details here as soon as we have them.

What this means for Goldfinch and the Senior Pool LPs

  • This means that Goldfinch LPs will see a write-down in the senior pool’s Net Asset Value (NAV). Please note that we do not yet know the exact amount by which the assets will be written down.
  • In the meantime, because of the way the Goldfinch protocol is programmed to handle defaults, from Saturday (07/29), there will be a monthly step-wise decrease in the NAV of the Senior Pool. Starting on 07/29, the senior pool will be written down by ~12.5% of the Tugende Pool principal value (i.e., 12.5% * $5M =$625,000). Subsequently, on 08/15, 09/15, and 10/15 the NAV will be written down by an additional 25% of the principal value (i.e., 25% * $5M = $1.25M) on each date. And on 10/22 (the original maturity date of the Tugende Pool) the NAV will be written down by another ~12.5% of the Tugende Pool principal value (12.5% * $5M = $625,000) making a total NAV write-down of $5M. By 10/22 the Senior Pool NAV will have decreased by a total of 6.31% ($5M, representing the sum of the principal amount).
  • Over the same period, the Senior Pool will continue to receive interest from the other loans, which are expected to total 2.36%. So the net decrease in NAV during this 120-day period will be 3.95%. Since the APY on the Senior Pool has been 7.81% for the past year, this means the overall trailing 12-month APY at the end of this 120-day write-down will be a net positive 1.50% APY (excluding GFI) which represents 7.81% (trailing 12-month APY) - 6.31% (write down from the Tugende pool over 120 days).
  • This net 3.95% decrease in NAV over the next four months represents the worst possible outcome. We, in conjunction with the external Tier 1 law firm, will continue to pursue all options to maximize recovery and minimize the negative NAV impact from this loan over time.
  • If and when any payments are made as a result of the restructuring, the NAV will automatically increase correspondingly.

We appreciate that there are still several open questions, especially regarding the details of the restructuring. We are working closely with our global Tier 1 counsel, Tugende, and prospective equity investors to determine this. As such, there will be some details that cannot be shared publicly due to non-disclosure agreements. Given all the moving pieces between multiple stakeholders, we will share updates here as soon as the next material update is available.

In general, what sort of legal recourse do lenders have in a country like Kenya?

Contravening loan agreements sounds serious, but I don’t know how strong the legal system is in a country like Kenya.

Is there any channels that we can chase the law process, we want to know how goldfinch can help us eliminate our loss

And we also want to make sure how do you guarantee us orther companies will not default in the future