At MYC4 it is somewhat awkward for lenders to keep track of their portfolio. Some lenders keep track manually in Excel lists of their loans.
MYC4 lender Bente Pedersen created the following image, which by it’s coloring visualizes that the number of late payments and non-payments on the loan he funded grew over time.
(Image by Bente Pederen, used with permission)
As reported earlier Dutch site Boober.nl failed. Richard van den Toorn, speaking for the association of lenders PIVN, estimates that about 1,200 lenders are affected. While part of the total loan volume of 1.65 million Euro had been repayed over the loan term before the failure, overall borrower’s willingness to pay dwindled after the failure. Still PIVN hopes to recover 50-80% of the outstanding amounts on behalf of the lenders.
(Source: ANP via Nu.nl)
Over the last months it became clear that MYC4.com loans default at a much higher percentage then expected. MYC4 management states several growth and quality problems that led to the situation. Better training of the local providers, partner ratings, spot audits and a license system are measures that shall improve the quality in loan selection and management in the future.
Currently one challenge is to deal with the failing loans issued in the past. The earlier problems with Ivory coast loans continue. About half of the issued loans were insured by the organisation MISCOCI against defaults. MISCOCI failed today and is reported to be bankrupt. MYC4 has announced a few minutes ago, that they will publish until March 20th, what this means for the lenders on the defaulted Ivory Coast loans (MISCOCI covered 242 loans with an outstanding balance of 388,644 Euro).
NotreNation, one of the providers in Ivory Coast, yesterday named poor selection of borrowers by inexperienced credit agents and the difficult economic situation in Ivory Coast as reasons for high default rates.
GrowthAfrica, a provider in Kenya with a high portfolio at risk rate (PAR) has announced yesterday that it will buy back 65 very poorly performing loans at 95 percent of the balance from the lenders. This step was taken as GrowthAfrica felt they share responsibility for the poorly performing loan portfolio. GrowthAfrica expects to buy back loans for more then 125,000 Euro in total.
One of the downsides of p2p lending service Prosper.com are high default rates. Results from collection attempts are low.
In an attempt to test alternatives to the existing collection process Prosper in January selected 66 cases of nonpaying borrowers and turned them over to the law firm Hunt & Henriques to pursue these cases in court.
Fred 93, one of the lenders on these loans researched the status of the court cases himself, dissatisfied that Prosper did not inform him on the status, which he says Prosper initially promised to do monthly.
According to Fred93’s findings, Prosper.com so far lost 6 cases and won 1 case.
Lenders at MyC4.com do not have an easy task, when trying to check which of their loans are late on the repayments. The account page does not offer a comprehensive overview page. If a lender really wanted to check in detail he has to click through to the detail page of each loan he invested into.
Officially only one loan has the status ‘defaulted’ so far. However MyC4 so far has no standard policy when a late loan is to be declared defaulted. MyC4 has stated that there will be a default policy by the end of August.
Researching the situation, there are more than 320 loans that are late (fully or partly) with at least one repayment. Of these 72 loans are 3 payments late, 64 loans are 4 payments late, 30 are 5 payments late and 22 are 6 or more payments late.
Another issue that raised some concerns are the first impacts of the changed rules regarding currency risks.
… as some of you might have noticed already the first repayments are now posted on the investors accounts from Kenian investments where we investors are now taking the risk of currency fluctuations.
Within the first period from disbursement to the first repayment the KES has devalued from 97 to 104.5 = 7.2% already. … (Source: see discussion here)
To help lenders selecting loans to invest in, a column with the information whether a loan open for bidding is issued in local currency or in Euro was added to the wiseclerk MyC4 statistic pages.
(Source: uses information from Status der … MyC4 Kredite)
Prosper.com announced yesterday that the offers received for late loans to be sold off as defaults were to low to be acceotable. Doug Fuller, Vice President of Operations says, that with offers at 1.5 cents for the dollar, Prosper believes "the prudent course of business is NOT to sell them at this time". More on the Prosper blog post.