Interview with Koen The, CFO of Lendahand

What is Lendahand about?

Lendahand is a Netherlands-based online lending platform with the objective to stimulate employment in emerging countries. Small and Medium Enterprises (SMEs) in these countries do not have proper access to financing as they are too small for banks and too large and complex for microfinance institutions. Hence they are not able to grow and percentage-wise only provide half of the jobs that SMEs in developed countries deliver. Financing the ‘missing middle’ leads to significant social impact while leaving room for a solid financial return. On our platform individuals can unlock this potential by choosing promising SMEs to lend to. We call this meso-credit.

What are the three main advantages for investors?

We’ve asked each and every new investor what they like about Lendahand and the three advantages that stand out are:

  • You know exactly how your money is used (in control)
  • You get a fair interest rate of 3-4% per annum (financial return)
  • You help creating jobs in poor countries (social return)

What are the three main advantages for borrowers?

One of my colleagues went to the Philippines where Lendahand’s first local partner is based and interviewed 15 borrowers. Key takeaways:

  • For some of the companies, the only alternative are so-called ‘Bombays’. These are men (usually from Indian descent, hence the name) that provide 1-month loans without credit checks. The interest rate is around 20% per month. Lendahand together with its local partner provides loans with interest rates that are closer to what banks are charging
  • Most of the companies are not eligible for bank loans because they’re too small. If they are able to get a bank loan then they need to go through a process that takes a couple of months before they actually get the money. These companies need funds quickly (e.g. a large order comes in) and can’t wait that long. At Lendahand’s local partners they get the funds within weeks if not days
  • Lendahand has set up a foundation that provides non-financial support to SMEs in the form of demand-based training. The funds come from NGOs that donate to the foundation. We’ve held three training sessions so far with a total attendance of 117 SME owners. Once Lendahand is profitable it will donate at least 10% of its earnings to the foundation

Koen The LendahandLendahand cooperates with MFIs. Which criteria do you use when choosing the MFIs you work with?

Lendahand carefully selects its local partners by going through a rigorous due diligence process where it assesses, amongst others, the financial position, portfolio quality, and governance. Typically a local partner has a loan portfolio of more than €5mio, a write-off ratio smaller than 2% and equity capital of at least 10% of the total assets. Although the local partners are for-profit organizations, it is a necessary condition that they have a social mindset and intend to offer competitive interest rates to their clients and screen them for environmental and social impact. The local partners take the full credit risk to the SMEs and so have skin in the game.

How did you start Lendahand? Is the company funded with venture capital?

Lendahand is a social enterprise, i.e. it has a social objective but is run as a business. It was founded in 2011 by Peter Heijen who got intrigued by the ‘missing middle’ and envisioned a solution in crowdfunding. Beginning of 2014 a team was formed: Peter Stolze for marketing and myself for finance and scalability.

Lendahand’s funding mix reflects its status as a social enterprise. It was first funded by a subsidy from the Dutch Ministry of Foreign Affairs and a Dutch NGO. Then angel investors came on board. We’ve also obtained funding through crowdfunding (both equity and convertible debt). Later this year we hope to speak to a few VCs as we are planning on a somewhat bigger funding round.

Is the technical platform self-developed?

We’ve hired an IT agency to develop the platform. We are the owners of the platform. Continue reading

Lending Club Fourth Quarter Results

lendingclub-logo-2010Lending Club just announced the 4th quarter numbers in the investor conference call.

CEO Renauld Laplance stated: “We have continued to expand our reach through 2014 by doubling the size of the business again, while continuing to invest heavily in future growth and risk management. Our IPO in December was an important milestone in the life of the company, and everyone at Lending Club is excited about the next 5 to 10 years and committed to delivering more value and a great experience to our customers. 2015 is going to be another investment year, and we intend to continue growing originations and revenue at a fast, yet deliberate pace.”

Lendingclub Q4 figures 2014

Fourth Quarter 2014 Financial Highlights

Originations – Loan originations in the fourth quarter of 2014 were $1,415 million, compared to $698 million in the same period last year, an increase of 103% year-over-year. The Lending Club platform has facilitated loans totaling over $7.6 billion since inception.

Operating Revenue – Operating revenue in the fourth quarter of 2014 was $69.6 million, compared to $33.5 million in the same period last year, an increase of 108% year-over-year. Operating revenue as a percent of originations, known as our “revenue yield”, in the fourth quarter was 4.92%, up from 4.79% in the prior year.

Adjusted EBITDA(3)  – Adjusted EBITDA was $7.9 million in the fourth quarter of 2014, compared to $6.5 million in the same period last year.

Net Income/Loss– GAAP net loss was ($9.0) million for the fourth quarter of 2014, compared to a net income of $2.9 million in the same period last year. Lending Club’s GAAP net loss included $11.3 million of stock-based compensation expense during the fourth quarter of 2014.

Earnings (Loss) Per Share (EPS)  – Basic and diluted loss per share was ($0.07) for the fourth quarter of 2014 compared to EPS of $0.00 in the same period last year.

Adjusted EPS(3) Adjusted EPS was $0.01 for the fourth quarter of 2014 compared to $0.02 in the same period last year.

Cash and Cash Equivalents – As of December 31, 2014, cash and cash equivalents totaled $870 million, with no outstanding debt.

“We are entering 2015 with strong momentum on many fronts, and we intend to continue to execute on our strategy of fast yet disciplined growth,” said Carrie Dolan, CFO of Lending Club. “We will also continue to aggressively invest in product development, engineering, process automation, and the buildup of support and risk management functions to pave the way for our long term growth opportunity.”

Outlook

Based on the information available as of February 24, 2015, Lending Club provides the following outlook:

First Quarter 2015
Operating Revenues in the range of $74 million to $76 million.
Adjusted EBITDA(3) in the range of $6 million to $9 million.

Fiscal Year 2015
Total Revenues in the range of $370 million to $380 million.
Adjusted EBITDA(3) in the range of $33 million to $42 million

(3) Adjusted EBITDA and Adjusted EPS are non-GAAP financial measures

Strategy is to focus on the US market in the near future. There is no urgency to expand into international markets. There is not a lot of clarity which of the different models in particular geographies might prevail in customer adoption and get blessed by regulator.

Lending Club 4th quarter results

Moving Mainstream – The European Alternative Finance Report

university cambridgeThe new study ‘Moving Mainstream – The European Alternative Finance Report‘ is available now (free download). The study by the University of Cambridge and EY looks at the development of p2p lending, p2p equity, crowdfunding and other alternative finance offers in Europe and compares it to the development in the UK. The very comprehensive study combined survey results from 205 platforms in 27 European countries with 50 survey responses gathered from UK platforms as part of the Nesta Study.

P2P-Banking.com was one of the research partners in this study.

Here are the main findings from the executive summary:

Since the global financial crisis, alternative finance – which includes financial instruments and distributive channels that emerge outside of the traditional financial system – has thrived in the US, the UK and continental Europe. In particular, online alternative finance, from equity-based crowdfunding to peer-to-peer business lending, and from reward-based crowdfunding to debt-based securities, is supplying credit to SMEs, providing venture capital to start-ups, offering more diverse and transparent ways for consumers to invest or borrow money, fostering innovation, generating jobs and funding worthwhile social causes.

Key statistics moving mainstreamAlthough a number of studies, including those carried out by the University of Cambridge and its research partners, have documented the rise of crowdfunding and peer-to-peer lending in the UK, we actually know very little about the size, growth and diversity of various online platform-based alternative finance markets in key European countries. There is no independent, systematic and reliable research to scientifically benchmark the European alternative finance market, nor to inform policy-makers, brief regulators, update the press and educate the public. It is in this context that the University of Cambridge has partnered with EY and 14 leading national/regional industry associations to collect industry data directly from 255 leading platforms in Europe through a web-based questionnaire, capturing an estimated 85-90% of the European online alternative finance market.

The first pan-European study of its kind, this benchmarking research reveals that the European alternative finance market as a whole grew by 144% last year – from €1,211m in 2013 to €2,957m in 2014. Excluding the UK, the alternative finance market for the rest of Europe increased from €137m in 2012 to €338m in 2013 and reached €620m in 2014, with an average growth rate of 115% over the three years. There are a number of ways to measure performance across the various markets. In terms of total volume by individual countries in 2014, France has the second-largest online alternative finance industry with €154m, following the UK, which is an undisputed leader with a sizeable €2,337m (or £1.78bn). Germany has the third-largest online alternative finance market in Europe overall with €140m, followed by Sweden (€107m), the Netherlands (€78m) and Spain (€62m). However, if ranked on volume per capita, Estonia takes second place in Europe after the UK (€36 per capita), with €22m in total and €16 per capita.

In terms of the alternative finance models, excluding the UK, peer-to-peer consumer lending is the largest market segment in Europe, with €274.62m in 2014; reward-based crowdfunding recorded €120.33m, followed by peer-to-peer business lending (€93.1m) and equity-based crowdfunding (€82.56m). The average growth rates are also high across Europe: peer-to-peer business lending grew by 272% between 2012 and 2014, reward-based crowdfunding grew by 127%, equity-based crowdfunding grew by 116% and peer-to-peer consumer lending grew by 113% in the same period.

Collectively, the European alternative finance market, excluding the UK, is estimated to have provided €385m worth of early-stage, growth and working capital financing to nearly 10,000 European start-ups and SMEs during the last three years, of which €201.43m was funded in 2014 alone. Based on the average growth rates between 2012 and 2014, excluding the UK, the European online alternative finance market is likely to exceed €1,300m in 2015. Including the UK, the overall European alternative industry is on track to grow beyond €7,000m in 2015 if the market fundamentals remain sound and growth continues apace.

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Interview with Maurizio Sella, CEO of Smartika Spa

What is Smartika about?

Smartika is a fully licensed Payment Intermediary (IP) authorized to operate in the P2P field by the Bank of Italy and is the leading Italian P2P platform, with over 3,085 loans granted to individuals for  16.5 million EUR, lent by 5,445 lenders.

What are the three main advantages for investors?

Lend money in an innovative and ethical way and take control of how your own money is invested.

What are the three main advantages for borrowers?

Simple process, fast response and good rates (about 3% lower APR than industry)

maurizio-sellaWhat ROI can investors expect?

Lenders have had returns of approximately 6% after fees and defaults.

You originally started as Zopa Italy. Can you share the story with our readers?

We arrived in Italy too early (in 2008) when the P2P business was not understood and “boycotted” by banks and institutions in general. It then took over 2 years to work with the regulators in order to find the best solution for framing the P2P business. The European Directive 2009/110/CE came to our rescue and we were finally granted the license as an IP in 2012.

And what is the situation for p2p lending in Italy now?

Italy is a country of 60 million people, with a consumer market that has finally bottomed (at a still respectable 19 billion EUR) and P2P has the potential to grow exponentially. Time works every day in our favour in terms of trust, reputation, and market penetration at a time when banks and financial institutions are slowly pulling out of the personal loan market. Continue reading

Victory Park Capital will invest 420M in P2P Lending Loans on Funding Circle USA

fundingcircle-logo-2012US asset manager Victory Park Capital will invest 420 million US$ over the course of the next 3 years in p2p loans to SMEs in the US via p2p lending marketplace Funding Circle USA. This agreement follows an earlier deal where Victory Park Capital agreed to lend 150 million GBP via Assetz Capital over the next five years.

With a single institutional investor planning to fund these volumes, these are staggering numbers.

 

Fundedbyme Launches P2P Loans To Swedish SMEs today

fundedbyme-logoSwedish p2p equity platform Fundedbyme expands the product portfolio offered to p2p lending today. Typically loans are between 25 and 25,000 EUR. They pay yearly interest, a percentage of the profit and a possible exit bonus. Anyone can lend money to a p2p lending campaign on Fundedbyme. The minimum bid size is 50 EUR per loan. Daniel Dabocy, CEO of Fundedbyme on the reasoning of entering p2p lending: ‘The idea behind our business is to link investors with entrepreneurs in the most efficient way. That is why we talk with both parties very much. When we started to get regular feedback that they would be interested in something between equity-based and reward-based crowdfunding we thought about p2p business lending. And it turned out this is what they need. Now we are launching the product and I am pretty sure results will confirm that we took the right decision.’ (Source).

Fundedbyme says they have (for their equity offer) signed up 47,000 investors, so they are confident they will fund the new loan offers.

I just checked. Right now there are 4 loan-based offers open for funding on the site.

Fundedbyme loan offers

Every company needs to have a turnover of at least 15,000 EUR in early turnover, and have been registered for at least 1.5 years. In addition to this, the information from credit bureaus UC and Bisnode both have to give the company a favourable risk rating. Loans over 40,000 EUR have a personal guarantee. Continue reading

P2P Lending Marketplace is Raising 2M GBP via Seedrs

Assetz LogoP2P Lending Marketplace AssetzCapital is raising 2 million GBP via a convertible note on Seedrs from the crowd.

Assetz Capital is one of the established, medium sized UK p2p lending marketplaces. Since inception they originated over 60 million GBP in loan volume. I covered Assetz Capital in when I visited them last year. How a convertible note pitch differs from a ‘normal’ equity pitch on Seedrs is described in this document.

Minimum investment is 10 GBP. The valuation cap for this convertible is 60 million GBP and the discount rate is 10% provided that the convertible shares are issued within 12 months. In the event that the convertible shares are issued after 12 months, the discount rate shall increase by a rate of 0.8% per calendar month for a further 11 months, increasing to 20% in the 24th month. The discount rate will then be capped at 20% thereafter. Continue reading

Report from the Symvest Conference in Prague

Last Thursday I attended the Symvest conference ‘P2P Lending – the New Frontier in Finance‘ in Prague, which was organised by Michael Sonenshine of Symfonie Capital in cooperation with the university of Economics, Prague. Speakers and panelists were mainly from Eastern Europe, though some made the trip from UK, Austria and Italy. The audience consisted predominantly of representatives of Czech finance (banks, investment companies) and students. A main motivation for the conference was to create awareness for p2p lending in general, which is a new phenomenon in the Czech Republic. Sonenshine announced his plans to launch SymCredit, a p2p lending marketplace catering to SMEs in Poland and the Czech Republic.

Matching the audiences experiences some of the content presented was introductory, like ‘What is p2p lending?‘, ‘What are the risks?‘ and a recap of what happened abroad in the past years of development in p2p lending. Regulation was also discussed. Sam Ridler of the P2PFA gave an overview on the UK situation and Danica Sebestová of Squire Patton Boggs did a very informative presentation on what the applicable legal environment is in the Czech Republic. Actually the hurdles for launching a p2p lending marketplace there are rather low – there is no specific regulation for p2p lending. While some applicable laws are to be obeyed, summed up it amounts to registering to start trading – at least as long as the loan volume originated is lower than 3 million Euro in the last 12 month.

Speakers pointed out that a hurdle to establish p2p lending is that Czechs are very conservative investors. Backing it up with figures, they explained that Czechs prefer to deposit their money in short term deposits at banks yielding only about 0.15% interest or invest into real estate rather than to look for higher yield investments.

The best part of attending conferences for me is the ability to network with so many people working in p2p lending in one place. I had lunch with Jevgenijs Kazanins, Chief Marketing Officer of Bondora. He wouldn’t disclose which markets Bondora will be entering next. Discussing investor wishes around the new portfolio manager, which does limit selection choices, he said that in Bondora’s view the new API will address this, as it will allow many parameters for selection. He would not disclose when the new API will be available.

I also had a long talk with Siim Maivel, CEO of Investly. He has interesting plans for new offerings. As soon as those are launched, I will write about them here in the blog. With David Bradley-Ward, CEO of Ablrate, I chatted about the scondary market and the loan pipeline. The secondary market will be completely overhauled and the new version launched in April. A small anecdote: He mentioned that it is not uncommon that 200,000 pounds would be spend on legal costs and due diligence of one of the aircraft loans on the platform. He therefore thinks it is porbably safe to call it the most extensive vetting of all p2p lending platforms.

With Martins Sulte I catched up on the last happenings around Mintos. He assured me that he does not expect the talks with the consumer protection body to have any impact on operations. I asked him for the reason for the high interest rates of the Mintos loans, after all these are secured loans. He explained that the Latvian banks are not interested in small loans (<50,000 Euro) backed by real estate, as for them the costs associated with the process are too high. Mintos is receiving many loan applications and so far approve only 3 to 5% of them. Sulte has expansion plans, both in product offering (moving into other secured loan types) and geographically (moving into more markets with Estonia being the next).

Concluding I would like to express my thanks to the organizers for this free to attend conference. It was well organized – they even had simulteneous interpreters translating every panel from Englisch into Czech language.

 

Latvia: Mintos in Disagreement with Consumer Right Protection Centre over Interpretation of Regulation

Recently launched p2p lending marketplace Mintos is in disagreement with a consumer right protection body of the government over the interpretation of rules regulating lending to consumers and whether Mintos is conducting business within these rules or not.

Two statements were published on the internet (here and here) last Friday that state, that while Mintos has the necessary license to lend to consumers, it failed to mention during the application that it would receive deposits from third party investors and make assignment of loan parts to these investors, for which in the view of the PTAC it lacks the necessary license. In the statement the body asks Mintos to cease continuing with this practise.

P2P-Banking.com contacted Mintos CEO Mārtiņš Šulte on Friday evening and received this comment by him: ‘To put it shortly Consumer Right Protection Centre (CRPC) has asked us to provide additional information on how peer-to-peer process works at Mintos. Before launching Mintos we did an in-depth legal due diligence and we are confident that we are working in accordance with all aplicable regulations.
The peer-to-peer (or better, marketplace) lending is still nascent industry and regulators in general around Europe are still debating on how to best respond to it. As forerunner of peer-to-peer lending in Latvia we have already had discussions with regulators and will continue to engage with them and help with information where necessary. We will hold an official press conference on Monday to encourage further discussion.
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