Long awaited the law that several Latvian p2p lending platforms have been lobbying for will become effective on Nov. 14th 2022. This will lower the withholding taxes applied on interests earned by EU and EEA investors from 20% to 5%. Furthermore Mintos* says, that investors will need to only confirm their country of residence once. It will be no longer necessary for them to supply additional documentation or certificates a requirement which had put off investors from many countries. In several countries the 20% could not be fully deducted when declaring taxes with the local tax authorities. And while it could be lowered to 10% there was unliked paperwork associated with that, that needed to be repeated every tax year.
While the change has been announced by Mintos, it will also apply to other Latvian platforms like Twino* or Viainvest*.
On invitation of Crowdestor* I travelled to Riga and met the founders of Crowdestor Janis Timma and Gunars Udris. Crowdestor is a Latvian p2p lending platform for SME loans. They launched a year ago. Loans are typically for terms of up to 18 months and interest rates are quite high – the current loan offer by a transportation company seeking expansion capital carries 17% interest rate. The Crowdestor website is available in English, German and Portuguese language. Currently most investors on the platform are Germans, followed by Spanish investors.
We talked about their experiences in launching the platform and I asked how they acquire new clients requiring a loan. Janis explained that at the current stage it all comes down to networking in the business community of Riga. Latvia is a small country, about 2 million inhabitants, and Riga is the dominating city with about one million inhabitants in the larger urban area. He said chances are very good that he has a friend that learned that a company is looking for financing and know someone in the management of the company and can put him in contact.
Crowdestor* then negotiates the loan terms with the business and checks their business records and background. Janis said they have been extra careful with their loans so far, turning down very many requests as the founders understand very well that a default of a loan at this very early stage could harm their fledging marketplace.
Gunars (left) and Janis in font of the luxury appartment complex they showed me.
Both are very proud of the projects financed by the Crowdestor marketplace. They drove me around to show some of the projects. As one real estate project is at the moment only a piece of land, where construction has not yet been started, we went inside another apartment complex finished by the very same real estate developer, so I could experience the high quality of work and the attention to detail. It was an apartment complex with 3 buildings, themed Churchill, Hepburn and Dietrich, located directly on the shore at a popular beach. There is a spa in one of the buildings only for the residents and each building has a concierge.
Another project they were really enthusiastic about is INCH2 shoes a e-commerce venture that designs and sells fancy shoes online and is growing extremely fast. The shoes are produced in Portugal on their behalf. They had a smashing success selling shoes for 1 million EUR turnover on black Friday this year (overall turnover about 5 million EUR in 2018).
I got a small tour of the INCH2 office and had a look at some of the fancy shoe designs
INCH2 got a 100K expansion loan through Crowdestor earlier this year at 17% interest. Janis explained to me that they actually were looking for a 500K loan, but it was clear that at the current stage of development of the platform Crowdestor would not be able to raise that much cpaital from investors, therefore it was agreed to start with a smaller loan. In 2019 there will be a second loan for INCH2 on the Crowdestor platform.
And that brings us to the current situation. Crowdestor has a pipeline of 7 projects they want to finance in the near future but are aware that they need more investors, to be in a position to fund all these projects. Over lunch at ‘The Catch’ restaurant – really great tasting food by the way I can very, very much recommend that restaurant – and they will open a location in Berlin too – in fact when we were there they had staff of the German restaurant there that was getting training – we discussed pro and cons of possible different marketing strategies and platform features that could help Crowdestor to accelerate growth or the platform.
During a small drive to the city, Gunars showed me where several of the many other p2p lending marketplaces that are headquartered in Riga (most well known is probably Mintos*) are located. Crowdestor itself is currently moving office to have a more space. Gunars told me that they have a good working relationship with the founders of many of the other platforms and are exchanging experiences and thereby benefiting each other.
In fact he arranged a small visit for me at the Viainvest office where we had coffee with Simona the Viainvest CEO, who had wanted to meet in person when she learned that I would be in town. Simona answered my question and gave some details to the current situation of the Viainvest business and future plans (which I am not to divulge just yet, but the company plans to announce them very soon).
At the Viainvest office. The group occupies a two floors in the building.
The minimum investment amount on the Crowdestor marketplace is just 100 EUR, investors can sign up here and check it* out.
I thank Crowdestor for the invitation, the time they took to guide me around and for paying the flights and the lunch.
DoFinance is a P2P platform for private individuals to invest in consumer loans.
We believe in finance for human –  DoFinance aims to become the most user-friendly, secure and accessible P2P lending marketplace possible, so that anyone can participate in seemingly complex processes and become his or her own financial director.
What are the three main advantages for investors?
Potential investment risks for investors are well-balanced and brought to minimum: all loans are secured with a BuyBack guarantee. If the borrower doesn’t pay back the loan, you don’t have to wait for an extra 30 days (after the investment due date) to get your funds back – your money is available right away;
You have access to your money at any time – if you decide to withdraw invested money before the due date, you can receive your money starting from 14 to 28 days after your request with (or without) accumulated interest, depending on your chosen investment plan and preferred withdrawal term;
Your money never sits still; it is always earning. Auto Invest program on DoFinance reinvests funds the moment the borrower returns the loan and the investor’s money becomes available.
What ROI can investors expect?
Depending on the chosen investment plan, investors earn up to 12% annual return.
DoFinance was founded by the Alfa Finance Group. Can you please describe what Alfa Finance Group does and why it decided to set up the DoFinance marketplace?
The Alfa Finance Group is an online lending and investment management company operating with consumer loans in Poland, Georgia and Indonesia. We are proud that in less than two years – since its launch in 2015 –  the Alfa Finance Group has attracted more than 150,000 registered clients and over €16 million in loans issued as financing loans.
Launching [the] P2P platform is just one of the steps toward expanding the list of available financial services of Alfa Finance Group. Our goal is to continue developing and offer more financial services in the investment management sector.
According to the press release Alfa Finance Group has invested 2 million Euro in launching DoFinance. Can you please describe what the money was used for?
The money was invested in technologies to create the platform and in building our loan portfolio.
The best warranty for the safety of investors’ funds, we believe, is effective risk management when it comes to the borrowers thereof big part of the money was invested in developing risk assessment tools that allow us to evaluate borrower’s behavior to detect their willingness to repay as precisely as possible. Our risk assessment tools as well as expertise in risk management permits us to evaluate the behavior of each potential borrower, hence minimizing the risk of failure to repay the loan and making the investment process as safe as possible.
Is the technical platform self-developed?
Yes. The technical platform is built on two pillars – creating a more secure and user-friendly P2P lending platform. During the development stage, we focused on smart risk assessment and platform that is handy, accessible and easy to use. We consider customer feedback carefully and, although a lot has been done already, we are still at the very beginning of our journey – the next challenge is to work on the planned improvements.
What was the greatest challenge so far in the course of launching DoFinance?
Obviously, the fierce competition in the industry challenges us to work faster and bring innovations to the marketplace, but it would be just fair to call it motivation and not challenge.
DoFinance is a marketplace, and it is vital for us to make sure the products we offer are entirely safe.
The greatest challenge was to develop a risk assessment tool that would minimize the risk of failure to repay the loan, be effective and secure. Risk assessment and management is our strength, and all our loans are secured with a BuyBack guarantee. If the borrower doesn’t pay back the loan, you don’t have to wait for an extra 30 days (after the investment due date) to get your funds back – your money is available right away.
Another challenge was becoming available also to Asian investors. DoFinance is the first European-based P2P lending platform to open customer center in Indonesia, bringing together European customer centered approach and Asian investors. We are happy to be the first ones to offer such individual approach to all our customers and give the chance to Asian investors to invest in Europe.
Which marketing channels do you use to attract investors?
Technology innovations are at the heart of our products hence we mainly use the opportunities digital marketing channels offer. It is a great channel to also reach important players in the industry – opinion leaders, investors, experts etc.
Finance for human stands behind everything we do, which means we look for creative ways to reach our audiences – not only fintech professionals, but also investors without a professional background in financial and investment management. Anybody who is at least 18 years old and holds a bank account can register at DoFinance and, by investing as little as 10 EUR per loan, become his own financial director.
Is DoFinance open to international investors?
Yes, DoFinance is available to private individuals holding a bank account in EU, EEA countries as well as Asian countries which are not included in the lists of high-risk and non-cooperative jurisdictions and international sanctions (Indonesia, Singapore, Vietnam etc.).
What is your opinion on the planned upcoming regulation in Latvia for p2p lending?
It is important that the Ministry of Finance includes industry representatives, when developing regulations on p2p lending platforms. Regulations developed without a throughout understanding of the industry can harm both investors and businesses.
Fintech industry has a potential to become Latvia’s success story which would contribute to both image and prosperity of the country, thus there must be healthy balance between industry regulation and its self-regulation. The entire financial industry and eventually the consumer will benefit from the development of FinTech as banks and FinTech companies will start cooperating when it comes down to providing financial services, customer service etc. Therefore, it is the state’s responsibility to create environment where these companies will stand and where intellectual capacity of labor will increase and taxes will be paid. At the same time, the regulation must ensure transparency and monitoring – simply because then dishonest entrepreneurs wouldn’t be able to harm investors.
Where do you see DoFinance in 3 years?
DoFinance will definitely expand geographically and continue working on developing new financial products for international markets. Our services just became available to Asian investors and now DoFinance looks even further – we don’t want to limit ourselves when it comes to geographical borders.
As we already mentioned, DoFinance is just the first step toward expanding the list of available financial services of the Alfa Finance Group. Most importantly, with every new development we make sure to keep our core principle – finance for human.
P2P-Banking.com thanks Janis Kulikovoskis and Viesturs Kulikovoskis for the interview.
VIAINVEST is a peer-to-peer lending marketplace offering both private individuals and companies to invest in consumer loans originated across Europe. VIAINVEST follows worldwide trend and offers investors safe and more effective investment opportunities than traditional banks do. The main aim of VIAINVEST is to ensure outstanding investor support as well as provide easy and accessible investment environment that does not require useless actions or extra time for understanding ongoing processes.
What are the three main advantages for investors?
VIAINVEST is a truly customer-oriented company, and we strive to provide the most satisfying investing experience possible. Great deal of investors’ concerns are related to investment safety, so all loans listed on VIAINVEST are secured with a Buyback Guarantee. Also, to guarantee that one investor will never be 100% committed to particular loan, originators keep 5% “skin in the game†for each loan.
To develop the platform that would be convenient and easy to use, we encourage investors to leave their feedback; each of recommendations is reviewed and most of them are included in our future updates list.
What ROI can investors expect?
Currently investors can choose to invest in loans originated in the Czech Republic with 12% annual ROI and Spain – up to 12,2% annual ROI depending on the loan.
VIAINVEST was founded by the mother company VIA SMS Group. Can you please describe what VIA SMS Group does and why it decided to set up the VIAINVEST marketplace?
The launch of VIAINVEST was great refresh for VIA SMS Group that is alternative finance services provider operating across Europe. Until now VIA SMS Group was mainly operating in consumer lending market but with VIAINVEST the company is making a shift from non-bank lender to a fintech company. Currently VIA SMS Group is offering its services in 5 countries – Latvia, Sweden, Poland, Czech Republic, Spain – and has recently launched several new products to diversify its product portfolio. From the end of 2016 the company is also offering payment card with credit line SAVA.card, savings product VIASPAR for Swedish clients as well as there is still an opportunity to invest into company’s bonds. The company has great development plans, but outstanding customer care will always remain the most important goal.
VIA SMS Group is active in more countries than in Spain and the Czech Republic. Will loans from other countries be listed on the VIAINVEST marketplace soon?
This is actually the next update planned for VIAINVEST – in following weeks we will publish loans originated in Poland and Latvia, Sweden will also follow in the nearest future.
Is the technical platform self-developed?
Yes, we have built VIAINVEST from scratch. As we prefer to have full control over all processes, we have great team of IT professionals employed in house to ensure continuous support at any time.
What was the greatest challenge so far in the course of launching VIAINVEST?
As VIAINVEST is not the first platform entering the peer-to-peer lending market, we had a lot of examples to learn from. I can say that there were no critical problems within the development process, adjusting VIAINVEST to the specific needs of investors on the go is more challenging!
Which marketing channels do you use to attract investors?
We mainly use digital marketing, but reaching out to the fintech influencers and opinion leaders is more effective tool to spread a word about VIAINVEST. As clients of peer-to-peer lending platforms are specific group of people with certain interests and goals, you need to be more creative and intelligent within any advertising activities.
Is VIAINVEST open to international investors?
VIAINVEST is open to any investors holding a bank account within the European Union or other country to which the requirements arising from European Union legislation on the prevention of money laundering and terrorism financing apply. Currently there is no legislation in Latvia regulating operations of peer-to-peer lending platforms, but it may be developed in 2017, so VIAINVEST is already implementing existing regulations.
Where do you see VIAINVEST in 3 years?
Fintech is changing traditional finance world in such pace, that it is hard to predict what will happen even in a year. VIAINVEST will definitely continue to expand its loan originator list and implement new features to make online investing mush easier and accessible to everyone. We have great plans, first news will be out soon, stay tuned!
P2P-Banking.com thanks Eduards Lapkovskis for the interview.
On October 1st Jevgenijs Kazanins became new CEO of Latvian p2p lending marketplace Twino. He previously worked as CMO at Estonian p2p lending marketplace Bondora. Twino was launched in June and is part of the Finabay group which operates since 2009. So far all loans offered on the p2p lending marketplace are from Latvia, whereas the Finabay group is active in a broader set of markets. Twino is open to international investors – German retail investors are the largest foreign investor base.
In a call with P2P-Banking.com the new CEO outlined the expansion plans. Twino will add loans from new markets, starting with polish loans shortly and possibly adding loans from countries like Russia, Denmark or Georgia at a later stage. There will be no currency risk for investors as it will be covered by Twino. Twino will apply its buyback guarantee to all loans – by which Twino covers overdue principal and interest for investors once a loan is 60 days overdue (though due to extensions this might take 8 month). The interest rate offered to investors for p2p loans in the new markets will be in line with the current offering: up to 14.9%. The loan terms will likely longer and Twino will move away from the current very short term loans many of which I deem essentially payday loans. He said: ‘… we are working on introduction of the loans from other markets, where Finabay has lending operations, such as Poland, Russia, Georgia and Denmark. The reason for the inclusion of other countries is that the demand from investors has already surpassed the volumes we can originate in Latvia. We aim to offer similar rates to the Latvia-originated loans and all loans will also come with the buyback guarantee‘
Since the mother company Finabay is already originating these loans, it will not be a challenge to build loan volume. Kazanins aims to originate 5 million Euro loan volume per month. As the loans already exist and the new aspect consists only of refinancing through p2p investors, Kazanins is convinced of the good quality of the loans: ‘We estimate that 15-20% of [polish] loan volume will be bought back through the BuyBack Guarantee program (defaulted loans and loans with more than 6 extensions‘.
Twino also works to add statistics to the site. He stated: ‘ … Disclosing information about financial health of Finabay is highly important given the fact that all loans offered on the platform come with the buyback guarantee …‘
Mintos is a marketplace lending platform that brings together investors and borrowers by enabling various loan originators to use a marketplace lending model in funding loans. Previously loan originators established their own platforms; now Mintos offers a single platform to those non-bank lenders that seek to sell loans. This means non-bank lenders do not have to make major investments in establishing and maintaining their own platforms. By connecting to the Mintos platform non-bank lenders get an instant access to investors that are looking to purchase marketplace lending assets. Thus, non-bank lenders can focus on their core skill of originating loans.
What are the main advantages for investors?
At Mintos investors can invest in loans that are originated by various non-bank lenders that use our platform to fund their loans. The main advantage for the investors, accordingly, is that they get an access to much broader investment opportunities as part of a single platform, both in geographic terms, and in terms of various loans originated by various non-bank lenders. Investors on the Mintos platform can invest in mortgage loans, secured car loans, small business loans, and soon also unsecured loans. Loans are currently originated in Estonia, Latvia, Lithuania, and we are about to add loan originators from Finland, Georgia, and Spain. This, combined with the fact that the minimum investment in one loan is EUR 10, means that investors can easily build very well diversified investment portfolios. Also, as a result of having various loan-originators and many investors on one platform our secondary market is very liquid.
It is also important that non-bank lenders whose loans are available to investors on our platform are experienced in underwriting. The platform is used by Capitalia, for instance, which is the leading small business lender in the Baltic sates and has been lending for five years. All lending processes are orderly at the company, it has experience, and it has access to historical data. That is essential for investors who can be sure that the detailed credit analysis are preceding the granting of a loan. Moreover, the loan originators on the Mintos platform are required to retain a part of each loan on their books, i.e., to have “skin in the game†to align their and investors’ interests.
Finally, all loans on the Mintos platform are prefunded by the loan originators; thus investors can start earning from the moment of the investment and there is no cash drag. At the moment more than EUR 1 million of loan inventory is readily available for investment on our platform.
What about borrowers? What are the advantages for them?
Mintos does not issue loans, but it is important for us that the loan originators who use our platform at the end of the day can offer cheaper rates to borrowers. Also, the lending process is much more convenient at these loan originators. When borrowing money from Capitalia, for instance, a small company can expect the money to arrive in its account in just a few days’ time, usually even faster. At a bank, by contrast, that could take several weeks. Finally, some of the loan originators who use our platform provide loans and services to those borrowers who might not have had an access to affordable credit before. For instance, among clients of Mogo, the largest non-bank car loan provider in the Baltic region that is also on our platform, there are those who are seeking a car loan, with the average requested sum being around EUR 3,000. This segment is underserved by the banks.
What ROI can investors expect?
So far the average net annual return for investors investing via the Mintos platform have been slightly below 13%. We expect the average net annual return to hover around the low double digits also in the future. However, investors should look not just at the return, but also the relevant risks. In the case of Mintos, investors can easily build a very well diversified investment portfolio across different loan products and geographies, thus reducing unsystematic risk within the marketplace lending asset category. Also, the Mintos platform was the first with a buyback guarantee where some of the loan originators buy back non-performing loans from investors, thus substantially reducing risks for investors.
What is the background of Mintos?
We started to work on the idea in mid 2014 and launched the platform in January 2015. I come from the investment banking where I spent six years before going for an MBA at INSEAD. That, actually, was the first time I heard about the peer-to-peer lending because I borrowed from Prodigy Finance, a platform that provides funding to international postgraduate students attending top-ranked business schools, while also delivering competitive financial returns to institutional and private investors. The other Martins, Martins Valters, our CFO and also a Co-Founder, has 11 years of experience from Ernst & Young where he audited some of the largest financial institutions in the Nordic region.
To fuel our growth we have raised EUR 1 million in venture capital to date. That has helped us in forming a strong team and an experienced board of directors. In a bit more than six months since the launch, more than 2,400 investors from 30 countries have registered on the Mintos platform and funded more than 1,500 loans for a total of more than EUR 4 million, of which EUR 1 million in the last month alone.
Is yours a bespoke platform?
Yes. We began work on the platform half a year before we launched it to the public, and we developed it in-house from scratch. Each marketplace lending platform has its own nitty-gritty approach, so it is best to design the platform ourselves. The Mintos platform is used by various non-bank lenders, and so we see ourselves as a technology company with a strong finance background. Currently, we have eight software developers in our team. We listen carefully to what investors say and appreciate their feedback as it greatly helps in improving the platform. Continue reading →
