Report from the Symvest Conference in Prague

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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

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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 Å ulte 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.‘ Continue reading →

Non Standard Finance Intends To Raise 100M Pound to Acquire Alternative Finance Companies

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Holding company Non-Standard Finance intends to raise around 100 million GBP  on the London stock market in order to acquire and operate alternative financial services companies focused on the UK’s non-standard customers.

The group, founded by former Provident Financial chairman John van Kuffeler, has already received a cornerstone investment of 48 million GBP from investors including Woodford Investment Management LLP,
Invesco Asset Management Limited and Marathon Asset Management.

NSF intends to enable its acquired companies or businesses to realise their growth potential through scaling of IT, capital, compliance and finance platforms. The Company has been set up as a vehicle to acquire at least one (and preferably two or three) target companies or businesses in the UK non-standard consumer finance sector. Once the Company has made and combined these acquisitions so that it is a substantial operating entity, its intention is to expand through further acquisitions in the sector in the UK and possibly elsewhere.

Out of over 100 non-standard lending businesses in the UK, the Directors have identified around 20 companies that could be of interest to the Company. The Directors are currently interested in pursuing acquisitions in the following sub-sectors: guaranteed loans, consumer loans, rent to own and home collected credit, all of which are in non-standard unsecured consumer finance. Continue reading →

Experiences with Setting up a Company in Estonia for the Purpose of Investing in Bondora P2P Lending

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This is an interview with Austrian investor Bernd R. about the experiences he made when he created a company in Estonia to benefit from the advantages that investing as business on Bondora brings. Note that these are his personal experiences and should not be construed to be investment or tax advice. The circumstances for other investors will be different and investors should seek tax advice by qualified and certified tax advisors.

How did you get the idea to setup a company in Estonia for your Bondora investments?

I read a lot about Estonia – its business friendly environment, simple tax system, huge start-up culture and the efforts to make administration processes available online.

Setting up an investment vehicle in Estonia would allow me to combine an uncomplicated taxation system with the advantages of a legal entity and all that at low costs.

What are the main advantages when investing as a company rather than an individual on Bondora?

There are several advantages.

  • The corporate tax rate in Estonia is 0%. Only dividends are taxed with 20%. This means that your retained profits will generate additional profit. Double taxation agreements with your home country protect you from being taxed twice and usually limit the total taxation to the tax rate for dividends of your country of residence.
  • In Austria interest income of private loans is treated in a different way than regular interest income (e.g. from a bank saving account). Interest income of classic bank saving product are taxed with a 25% flat rate, “private loans” fall under progressive taxation. On-top income of a full-time employee is easily taxed with 43% till 50%. So depending on the individual situation the tax savings can be up to 25%.
  • Provisions for bad debts or write-offs reduce the taxation basis.
  • Profits and Losses of different activities can be consolidated, e.g. losses generated with stock trading can be consolidated with your Bondora interest earnings and reduce the taxation basis.

How does the tax situation improve in your specific case?

I reduced the tax rate by 25% compared to my individual tax rate.

In addition I will generate more profit in absolute numbers due to untaxed retained earnings invested and at the same time reduce the taxation basis with bad debt provisions. The impact of these 2 factors depend on the future default- and interest rate of my Bondora portfolio.

To setup the Estonian OÜ you used a company formation service. Did that require you to travel to Estonia?

No, it was not necessary. A power of attorney does the job. Continue reading →

International P2P Lending Services – Loan Volumes January 2015

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Most major services grew the originated loan volume in January. Prosper, like Lending Club before, no longer makes data available for the recent month.  Funding Circle passed the milestone of 500M GBP lent since inception, while Auxmoney crossed 150M EUR. I added Investly and Mintos. I do monitor development of p2p lending figures for many markets. Since I already have most of the data on file I can publish statistics on the monthly loan originations for selected p2p lending services.
Investors living in markets with no or limited choice of local p2p lending services can check this list of marketplaces open to international investors.


Table: P2P Lending Volumes in January 2015. Source: own research
Note that volumes have been converted from local currency to Euro for the sake of comparison. Some figures are estimates/approximations.

Notice to p2p lending services not listed:
If you want to be included in this chart in future, please email the following figures on the first working day of a month: total loan volume originated since inception, loan volume originated in previous month, number of loans originated in previous month, average nominal interest rate of loans originated in previous month.

Mintos – P2P Loans Secured by Residential Real Estate

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In Latvia p2p lending service Mintos has publicly launched. All loans are secured against residential real estate owned by the Latvian borrowers. CEO Mārtiņš Å ulte told P2P-Banking.com: ‘We strongly believe that secured loans in our region and beyond offer much better risk/return matrix for investors. … We have raised 1 million Euro from a local venture capital fund. That has allowed to put together a great team and build the product. Our immediate future plans are to expand to other geographies on the borrowing side as well as test other types of secured loans. On the investing side we are already open to all European Union countries and Norway and Switzerland. We are constantly improving our product and putting daily updates as we go by taking into account investor suggestions and ideas so that we can deliver great user experience.’.

Actually Mintos started accepting borrowers and making loans in September already. Mintos prefinanced all loans and now the investors can invest into these prefunded loans. Due to regulation reasons, Mintos will continue to make all loans, before investors bid on them. CEO Mārtiņš Å ulte added: ‘… we [will keep] 5% of each loan on our books to align our interests with those of investors.’.


Chart: Cumulative loan originations by Mintos

As said all loans are secured by real estate and all contracts with borrowers are signed before a notary, which eliminates the risk of identity fraud. Typcial interest rates range from 12% to 19% with loan amounts between 1,000 and 100,000 Euro (average now is about 8,000 Euro).Loan terms are from 3 months to 120 months.

Investing at Mintos – my test step by step

The minimum invest is 10 EUR per loan. Mintos charges investors a 2% annual loan servicing fee based on the outstanding principal.

Naturally I wanted to test the service myself before writing this initial review. It took only 2 minutes to register. I then transfered a small amount via SEPA transfer which – as SEPA is pretty fast – was credited 2 days later to my Mintos account.

There are currently 62 loan listings open for bidding. There are filters allowing investors to narrow the list they want to look at and the list can be sorted by clicking on the column headings. Bids can be made directly from the overview table or the investor clicks through to the loan details view. Continue reading →