A year has passed since I last wrote about the portfolio I built on Finbee. For a detailed description of this Lithuanian p2p lending marketplace see my earlier review. As described there, I invested mostly in the highest risk grade loans (‘D’ loans). Currently I have invested 1,027 Euro in 35 loans. 32 are current (965 Euro), 2 are late (23 Euro) and one is in default (38 Euro), but rates for this loan are paid to me by Finbee’s compensation fund. The average interest rate of my loan parts is 31%. Interim I had grown my portfolio to up to 3,000 Euro invested, but interest rates have decreased due to high investor demand that was not met by comparable growth on the borrower side, so I have withdrawn 2,604 Euro meanwhile.
My results so far
My self calculated yield (XIRR) is 31.5%. This is the highest I achieved on any p2p lending marketplace over a longer duration of time. This includes the 110 Euro capital gain caused by sales of loans on the secondary market with premiums (see my article on trading on Finbee’s secondary market). Calculating the result again, this time with assuming a full write-off of the defaulted loan gives a yield of 29.4%.
Screenshot of my Finbee dashboard – click to enlarge
There are 19,930 Euro (as of March 13th) in the Finbee Compensation Fund. Current estimate is that the fund is paying about 9,000 Euro per month on defaulted loans and has decreased about 2,000 Euro from February to March. To grow the amount in the Compensation Fund Finbee will need to increase the volume of new loan originations. I looked into the list of open loan requests this morning and there are currently only 3 consumer loans and 2 business loans open for funding.
P2P lending marketplace Finbee has so far offered consumer loans only. Now Finbee is extending the product range to SME loans. Finbee sources the applying companies through a separate website and will focus on small loans up to 15K EUR and a term of 12 months. For most business loans rates will be fixed without an auction (which Finbee uses to set interest rates for consumer loans). Different to consumer loans, investments into business loans will not be covered by the Finbee compensation fund (CSF), if the loan defaults. Each loan application will be individually assessed, by assigning risk grade from A+ to D, where A+ is a low risk loan, D – high risk loan, based on reputation of the management (20% of risk grade), financial sustainability (60% of risk grade), market situation (20% of risk grade).
Audrius Griskevicius, head of SME lending, told P2P-Banking: ‘SMEs in Lithuania have very limited access to financing. As result of this, the government issued a law, allowing p2p lenders to issue loans for small business. Finbee took an active role in development of necessary regulation and we are very proud to be the first one to receive a license of p2p lending to SMEs.’
The first business loan listing is online. Magava wants to borrow 10K EUR working capital for 12 months at 15% interest rate. Investors have to complete a self assessment survey before they can invest into business loans.
Lenndy is the first lending marketplace in Lithuania that connects loan originators with individual and institutional investors. At Lenndy, investors can invest in asset-backed loans and get a 12-15% return.
What are the three main advantages for investors?
Loans are secured by buyback guarantee and collateral as well as personal guarantees.
12-15% annual return.
No investment amount limits and no platform fees for investors;
What are the three main advantages for loan originators?
Easy and transparent opportunity to obtain working capital by selling part of their existing loan contracts to investors (like Mintos).
Advanced IT integration with credit management systems capabilities.
Ability to grow reputation and brand awareness internationally.
What ROI can investors expect?
Currently, investors at Lenndy earn 12.53% average annual interest. Earnings usually depend on investment strategy and risk awareness. That is, when investors chooses to invest only in loans secured with buyback guarantee and collateral, they can expect to earn around 12% return. When investors seek 13-15 % annual return, they should consider adding invoice financing and business loans to their portfolio.
Is the technical platform self-developed?
Lenndy IT system is self-developed from scratch. IT development company was hired to complement in-house developers. It is very dynamic in order to react to market changes, adapt to multiple financing models and investors’ needs and comply with all legal requirements.
How reliable is the credit rating / credit history data available?
Loan originators collect information about borrowers from reliable credit agencies as well as public registers. We do not use standardized credit rating yet but we already have a developed model for it that will be introduced in the near future.
How is the company financed?
Company was founded in late 2015 and secured seed investment from an angel investor. Currently, Lenndy is negotiating with several angel investors and venture capital companies for another financing round that will be used to expansion and further product development.
What was the greatest challenge so far in the course of launching Lenndy?
Our goal was to create an investment instrument that would be attractive to investors, which would be liquid and would supplement any investment portfolio for great diversification. Loans market is massive, but only a fraction of it was available for investors. We know we have a great tool and we are looking forward to reaching individual and institutional investors across the whole Europe and beyond.
What is the current state of regulation in Lithuania?
Parliament of the Republic of Lithuania passed the Law on Crowdfunding, which was created by the Bank of Lithuania and the Ministry of Finance. The Law also describes Lending Marketplace as a crowdfunding model and Lenndy had already started the procedures of involvement in a list of crowdfunding operators.
Which marketing channels do you use to attract investors and borrowers?
Lenndy uses gentle digital marketing to attract investors from Europe and already has about 1000 investors who funded around 90 loans. Lenndy is growing very fast, even though we do not engage in heavy marketing. We believe it is a result of trustful model and word-of-mouth marketing. The word is spreading quickly in Lithuania, therefore we are preparing for international growth.
Is Lenndy open to international investors?
Yes, Lenndy rolled out English language and we have already started working on German and other languages.
Where do you see Lenndy in 3 years?
Lenndy has a target of at least 10 loan originators across Europe to improve portfolio diversification for our investors. In the following years we are planning to introduce portfolio buyout functionality which would allow investors sell their whole portfolio at once, secondary loans market where investors could buy and sell individual loan claim rights and many other features. We see Lenndy as transparent, innovative and trustworthy international lending marketplace.
Finbee is a small p2p lending marketplace for consumer loans in Lithuania (see earlier coverage). I have been using it as an investor for a little over a year now. My strategy on Finbee is different than on other marketplaces. I invest loans mainly with the purpose of trading in mind, that means on Finbee I don’t plan to hold the loan parts to maturity
Finbee secondary market basics
Loans can be offered at a discount, par or premium
Seller pays 1% fee upon successful transaction
Only loans with at least one repayment can be offered. This means I cannot sell loans directly after acquiring them on the primary market (no flipping). I have to hold each loan for at least 30 days.
Late loans and loans in arrears can be offered. Loans that are 60+ days overdue cannot be listed for sale.
Maximum listing duration is 20 days; thereafter seller can relist
Buyers can buy instantly at ‘buy now’ price or make a bid, hoping that no other buyer overbids them in the remaining listing duration (or pays buy now price)
Finbee parameter UI for selling loan parts on secondary market
How I select loans on the primary market
I mostly invest in ‘D’ loans (that is the most risky rating) with long loan durations (>36 months) and high interest rates. The average interest rate in my portfolio is 32%, the maximum 35%. My reasoning for this choice is that these loans allow high markups and still offer an attractive buyer yield (XIRR value). The longer the remaining loan term is, the lower will be the impact of the markup on the calculated yield for the buyer. I mostly buy 40 Euro loan parts, sometimes multiple in the same loan. I selected this amount because larger parts might not appeal to as many buyers, as some investors only invest small amounts.
Why I select different values for the reserve price and the buy now price
Since the XIRR that is displayed to the buyer depends solely on the buynow markup, it would seem logical to set same markup prices for the reserve price and the buy now price, doesn’t it. If in the example above I would set the price to 8.4% for both than I would get 8.4% markup if the sale takes place. With 8% and 8.4% values, I most likely get only 8% (at these markups there are very rarely multiple bidders competing). So why would I forego 0.4% gain? The reason is simple. With buynow the sale takes place instantly. But if I get the buyer to make a bid, the transaction takes place at the end of the listing duration, and all interest accrued during this duration is mine. Note that the buyer can NOT back out. He is commited and the sale will take place if he made a bid. In the above case the 20 days on a 39 Euro loan part at 32% mean I earn an extra 0,68 Euro (39€*32%/365 days*20 days) interest. So in effect if someone bid 8% on this loan my gain is 8%+1.74% accrued interest = 9.74% gain (which is much better than the 8.4% buy now). Of course I have to deduct the 1% seller fee.
BTW, I wondered how Finbee manages the sales with the accrued interest. When the buyer makes the bid, as said he cannot back out. But it is not clear if he will win (another buyer could overbid him) or how much interest will accrue for I as the seller have the right to accept the bid anytime early (which would only make sense if my cash is zero and I urgently want to bid on a new loan with a much better interest rate). But Finbee can’t wait until the time of sale because at that time, there could possibly be not sufficient cash in the buyer’s account. I couldn’t figure it out, therefore I asked Finbee. The answer is Finbee reserves the maximum possible price (principal+premium+maximum possible accrued interest) at time of the bid in the buyer account. Once the sale takes place, if the actual accrued interest is lower than the reserved maximum accrued interest, part of the amount is freed up. Continue reading →
BLender, a p2p lending company from Israel, today announced its global expansion, beginning with new offices in Milan, Italy and Vilnius, Lithuania that will serve customers in Italy and the Baltics. The Israeli-based company delivers a P2P lending platform with a proprietary consumer credit rating system designed for territories without credit bureaus or traditional consumer credit information. BLender is a cloud-based platform that was built to work in a wide range of markets and languages.
In Italy the platform charges borrowers a 4.5% origination fee and investors 1.5% of each repayment (principal and repayment). Compared to other marketplaces these fees are in the higher price range. The fee for selling a loan on the secondary market is 0.45%.
BLender has experienced exponential growth since its launch in 2014 and has already provided approximately 12 million USD in loans. The company will continue expanding its global operations into territories that are craving consumer credit. In 2017, BLender plans to launch operations in Africa, Latin America and other European Union (EU) countries.
“Offering multi-national P2P lending has been our vision since BLender’s establishment,” said Dr. Gal Aviv, CEO, BLender. “Since our Israeli launch in 2014, we have built the foundation, infrastructure and technology to enable BLender to operate in the global market, so we will be able to face operating, cultural, technological, regulatory and taxation challenges.”
With the expansion into Italy and the Baltics, BLender is enabling users to lend and/or borrow across countries, making financial borders a thing of a the past, says the service.
“BLender identified a credit gap in countries where the supply of consumer credit is insufficient for the populations’ needs and is priced very high, and a gap in other countries where the savings options have very low or even negative yield,” said David Blumberg, founder and managing partner, Blumberg Capital, a San Francisco-based venture capital firm that led BLender’s last funding round. “BLender’s multi-national lending options mediate this credit gap by creating a meeting ground between borrowers from countries that lack consumer credit, to lenders from countries where the yield on their savings in insufficient. We support and strongly believe in the vision, management capabilities and business potential of the BLender team.”
Investors on the BLender platform will earn predicted interest rates of 5-6% annually. The safeguard fund acts as an additional layer of protection to the lenders in case of a default. BLender’s default rate is approximately 1% before activating the safeguard fund. Thanks to the SafeGuard fund, the effective default rate is 0% says the service. BLender also offers ReBlendTM, BLender’s secondary market that offers the lenders the option the trade their loan portfolios and enjoy liquidity.
Recently BLender was chosen to participate in the exclusive ELITE program of the UK Stock Exchange that finds and nurtures companies with the potential for an IPO. As part of the program, BLender receives the guidance of the program’s experts for two years that help promote the company’s activity.
Furthermore, the company was selected as one of the most promising Fin-Tech companies in the world for 2015 by the accounting firm – KPMG, and also by the United Kingdom Trade and Investment Department.
The multi-national expansion was done in collaboration with KPMG.
P2P-Banking.com Interview with Laimonas Noreika, CEO of Finbee
You launched Finbee a year ago. Can you sum up the major developments since?
More than 3,000 investors have issued 2M EUR worth of loans via FinBee and none of them lost any money due to a default and our compensation scheme. We are very proud for this result. We have a reliable and highly skilled team that has built a company that is constantly growing. We are in full legal compliance with existing regulation and are constantly working on developing new products and features for our investors and borrowers.
What were the biggest challenges in this first year?
P2P lending is a relatively new concept in Lithuanian lending market, so raising awareness and overcoming scepticism was one the biggest challenges that we’ve faced from day one. Also, when we started to expand, building a team that can deliver results while maintaining highest standards was also time consuming. From technical perspective, learning the dynamics of supply and demand in FinBee auction was also something that we put a lot of effort to.
In your opinion, which 3 most important skills does a CEO need to successfully lead a fintech startup?
In my personal opinion, a key feature that a CEO has to be experienced in is team building. Even the most outstanding CEO will not be able to achieve much without a great team. A great manager has to have a diverse experience in corporate governance, finance, legal matters, marketing and IT. Also, I would like to emphasise, that simple and transparent communication is vital for a CEO.
Are collection and default figures in line with the expectations & projections you had a year ago?
Current default figures are better that we expected and projected. We expected to operate with 8 to 10 percent of non-performing loans. Currently we have 2.25 percent (it worth noting that we consider a loan to be non-performing when two monthly instalments are missed, that is when loan is 60+ days late). We also project 40 percent recovery of non-performing loans. So we expect 4.8 – 6 percent losses after recovery. Having in mind that investors now invest on 26 percent interest rate on average, they can expect 20 percent returns even without our compensation fund.
We achieve this by minimizing the chance of default with wide range of measures. For example, we check every single borrower using more criteria than is required by regulation. Also, we meet each and every one of them personally. We confirm only 7 percent of loan requests and only then pass them to the investors. Continue reading →
In August 2015 the new p2p lending marketplace Finbeelaunched in Lithuania. Finbee finances small unsecured consumer loans. The CEO told me that they meet all borrowers in person and that these are mostly looking to refinance other debts at higher rates, which they have paid in accordance to schedules punctually over months or years. Typical interest rates for investors are in the range of 20% to 32%. The platform is still very young, but recently loan volume picked up and Finbee crossed the milestone of 1M Euro loans financed since launch.
I started small and deposited only 50 Euro right after launch to test it and gain first hand experiences. Only two months ago I started depositing more and right now my deposited total amount is about 1,550 Euro.
The auction mechanism
Finbee lists all loan request and investors can bid either manually or via autoinvest (autolend). There is an auction period for each loan with investors underbidding each others in an reverse auction, meaning the interest rate will sink once the loan is filled. A pecularity of Finbee is, that each investor with a winning bid gets the individual interest rate he made the bid on, meaning there is no uniform lending rate for investors in the same loan (this is different from the way most other platforms handle reverse auctions, where usually all investors with winning bids get the same rate which is set at the highest winning rate at auction closing).
Loan requests at Finbee. The ones with the green button at right are open for bidding. Auction periods are initially set to 14 days but then reduced to 48 hours, once the loan is 100% filled by bids.
This auction mechanism often causes a mad rush in the last 5 minutes. Lots of bids are made right before closing and it is usual that the top closing interest rate drops 3-5% in these last minutes.
This is aided by a mechanism abbreviated ‘ARBU’ (Automated Response to Bumbed-off Underbids). Investors can enable ARBU to make lower bids on their behalf, once their original bid is outbid. The mechanism is quite configurable in selectable settings, but the catch is that it will not make more than 5 lower bids per loan. This led me to do quite a bid of configuring and experimenting with my settings. I also changed my strategy from multiple smaller bids on the same loan (e.g. 5 bids at 20 Euro), to now just 1 or 2 bids per loan at 30 to 35 Euro.
In the first months I have just observed what is happening on the Finbee marketplace. Since February I go for the riskiest loans, risk category ‘D’ and sometimes ‘C’ with the highest loan amounts and the highest interest rates. I do all bids manually and have ARBU enabled with my settings, which I tweaked quite a bit. If I have multiple successful bids in one loan I try to sell some of the loan parts on the secondary market at premium in order to reduce the concentration. On the secondary market only current loans, that have made at least one repayment, can be sold. I also try to sell my late loans on the secondary market, but that means I have to wait for them to turn current again before I can sell them. Continue reading →
The first P2P lending platform in Lithuania, SAVY, is organizing their second annual P2P lending conference on the 23rd of March in Vilnius, Lithuania. Guest speakers from all over the world, including the co-founder of LendIt Conference Jason Jones and the leaders of the top Baltic P2P lending companies – Mintos, Bondora and SAVY, amongst others, will engage in a number of panel discussions and presentations.
The conference will be focused on the possibilities of P2P lending and Crowdfunding, while the participants will touch some important topics related to the prospects, challenges and trends for Alternative Financing on a global scale and in the Baltic region specifically, as it offers a considerably higher return on investments than most Western European countries.
Live stream of conference starting at 13:30 GMT+2 on March, 23rd
*Sponsored post: This post was paid for by Savy.lt, the conference organizer. I rarely publish sponsored posts, but in this case I thought the content is a very interesting fit for the blog audience.
We have created what is best defined by the term “bank”. But our bank is virtual; it differs from a traditional one in that it is exempt from the requirement of capital sufficiency. Borrowers apply for loans and investors grant loans on our platform; it’s a meeting place.
In short, the SAVY P2P lending platform is a virtual bank that (will) operate in three segments:
Consumer credits, that is, personal loans;
Loans with real estate mortgage (for persons and businesses);
We have not yet offered business loans; however, we are planning to offer the service by the end of 2016. Our real estate product will be fully launched by the end of this year. Our secondary market appeared in early 2015.
A standard practice of global P2P lending platforms is that investors transfer funds to an account owned by the platform managers and the latter do the lending. We took a different path. The SAVY interpersonal borrowing platform does not manage the funds of investors directly. Each investor creates their own “personal wallet” in the Paysera e-money institution. They are then entitled to use their funds at their own discretion; for example, they can take their money out as soon as they need it without any intervention from SAVY.
Even theoretical risks for investors’ money are eliminated under this structure. The platform reserves the right to evaluate the creditability of borrowers and allocate investors’ money to the borrowers. Other risks, such as funds being used for other purposes than intended by investors, are simply impossible on our platform.
Paysera is an e-money institution. Investors can be confident as Paysera has 10 years of experience as an e-money license holder in the European Union. Its business in Lithuania is supervised by the Bank of Lithuania.
What are the three main advantages for investors?
Safe storage of money. The platform does not manage any investor funds. The funds are kept in dedicated e-accounts of each individual investor. In addition, investors are not charged a fee for investing their capital on the platform.
Experienced team. All members of our team and management are experts in their respective fields of business. This is very important in this new, dynamic industry.
Possibility to diversify risks. Traditional platforms offer only a single product for their investors. SAVY (will) offer the ability to invest across three different sectors and risk types on one intuitive system.
What are the three main advantages of SAVY platform for borrowers?
The SAVY platform is a new alternative for borrowers, something that has never before existed in Lithuania. This is a speedy and cost effective solution compared to expensive payday companies, banks and credit unions.
Our platform offers borrowing costs at a price similar to bank credit cards or even cheaper.
We guarantee a quick loan. Furthermore, we do not impose any fees on early repayment.
What ROI can investors expect?
Currently, the average return on investment is over 20 percent. Generally, our investors should plan a net return somewhere between 15 and 20 percent for the unsecured product loans. For the secured loan products such as real estate and business loans, they can expect slightly less. The expected return on investment for foreign investors on platforms from Central and Eastern Europe is, generally, much higher than the same metric found on Western European platforms.
What is the background of the SAVY team?
Our team is a collaboration of industry professionals, which is crucial to create an innovative and effective product in the financial sector. For example, our marketing manager is the former general manager of one of the largest Lithuanian consumer credit institutions. We have an internal lawyer with an MA degree in Law from a prestigious university in the UK, who is also a former employee of a private capital fund there. We have a banking professional on our board, well known in the Baltic region, and former CEO of SEB and Šiauliu Bank in Lithuania. An American professional in commercial real estate development is also on our team. […] Continue reading →
Laimonas Noreika is the CEO of Finbee, a p2p lending service that launched last week and is open to international investors starting today.
What is Finbee about?
FinBee is about borrowing for less and earning more when investing. We also are most user friendly p2p lending platform in Lithuania.
What are the three main advantages for investors?
Firstly, our loans have high interest rate – from 10 to 40 percent. That means, that investor can expect higher return of investment, compared to other p2p lending platforms. Secondly, we have reliable software, that is developed by UK based Madiston. That means, that it is tested and extremely user friendly from day one. And finally, we pay great attention to selection of borrowers, so that the risk for investors is minimized as much as possible. On top of that, we invest 10 percent on total sum into each and every loan, so we share the risk with investors. In the near future we also will introduce compensation fund that in an unlikely case of borrower defaulting on its loan will compensate lenders their investment.
What are the three main advantages for borrowers?
I would say that first and foremost, we offer cheaper loans than most of the players in Lithuanian market, including banks, payday loan companies and credit unions. This is achieved by implementing auction principle when borrowing. That means, that borrower can set interest rate ceiling, for example 15 percent. Lenders then are able to offer lower interest rate, therefore making loan interest rate for the borrower as little as 12 or 13 percent. This is free market at its finest, when the market sets the real interest rate for the benefit of the borrower. Secondly, we are very consumer friendly. We talk, look like and do our business like majority of our clients. We know, what they want and we are doing our best to meet those expectations. Lastly, we have a fair commission policy. That means that if borrower has high credit rating, our commission is lower.
What ROI can investors expect?
It‘s all up to investors. Loan interest rate will be between 10 and 40 percent, therefore investors can decide for themselves if they want lower risk and lower potential ROI or higher risk with possibility of higher potential ROI.
How did you start Finbee? Is the company funded with venture capital?
FinBee started little over a year ago, when I quit my position as a CMO in one Lithuanian company and started everything from scratch: examining the market, getting know-how, attracting investors and partners, picking up experienced team members. Big breakthrough moment was when Madiston became our partner and we got a technological edge against our local competitors
Is the technical platform self-developed?
No, software is provided by Madiston, whose Tim Simon is also member of FinBee board. Tim has an extensive experience of delivering successful applications to the Financial Technology marketplace as a founder and CEO of Quotient plc and Mondas plc, listed on the London Stock Exchange and AIM respectively. Continue reading →