How Mintos and our lending companies are preparing for a recession

With the COVID-19 situation taking its toll on the global economy, many investors may feel unsure about how to react to the current market downturn.  

The prospect of recession is daunting for every investor, who will be wondering how their investments will fare in the long run. While no one can control the trajectory of the global markets, there is a lot of past experience of similar downturns to be drawn from lending companies on the Mintos platform. Some lending companies – like BB Finance– set up their business prior to the 2008 financial crash, and successfully leveraged the global reaction to the market change in a way that allowed them to grow their businesses even further.

“BB Finance explains: “Since the ‘Credit Crunch’ was a financial sector crisis, and our company had been well-capitalized beforehand, its impact to us was limited in that regard. Of course, it was still important to act fast around higher default rates and new regulations. This time around, we’ve taken that lesson to mind and aim to adapt even faster to changes in the financial environment. A professional and experienced senior team is crucial – if the situation is well managed, the financial crisis may even provide new opportunities towards achieving our long-term goals.”

As well as valuable insights based on past experience like this, we’re staying in daily communication with our lending companies and monitoring their performance to ensure close collaboration. All lending companies are now taking practical measures towards safeguarding the future of their business ahead of a possible recession. 

Here’s how they’re doing it:

– Cutting back on operational costs and ensuring continuity

As well as introducing remote working to allow work to continue in spite of COVID-19 restrictions, most lending companies have optimized operational costs where possible.

– Tightening credit and risk policies

The demand to borrow money is bound to increase around times of economic pressure. To ensure that future borrowers are held to even higher standards of creditworthiness, our lending companies are tightening the eligibility criteria borrowers must meet, and adjusting their risk policies to reflect this.

– Increasing focus on collections from borrowers 

Lending companies are proactively working with borrowers who are experiencing difficulties in meeting repayments, by extending or revising repayment schedules. 

Likewise, we’re also taking a proactive approach to the situation at Mintos:

– Improving flow of pending payments and compensation for delays

One of the biggest concerns voiced by investors is that due to current market dynamics, the volume of pending payments from lending companies has significantly increased. To protect our investors’ interests, we’re ensuring interest is added on top of the pending payments as compensation for the transfer delay.  For a full explanation about how our pending payments system works, you can also read this article

– Reviewing our Mintos Ratings and joining criteria

At a recent investor Q&A, CEO Martins Sulte also added that there would be even tighter checks for lending companies joining Mintos: We’re not disillusioned about the increase in non-performing loans, so we’ll be looking at them closer before onboarding to ensure as little disruption as possible.” 

To make sure that both current and future investors have the most up-to-date information possible that will help them to make informed choices about their investments, we will review each lending company’s current Mintos Rating and revise accordingly to reflect the lending company’s current profile, where applicable. 

– Cutting back on operational costs and ensuring continuity 

We’ve scaled back on operational costs by 40%. Our focus now is on minimizing the possible impact of the current economic developments for our investors, lending companies and our platform overall. CEO Martins Sulte said: We feel comfortable that we made fast decisions that have put us in a good position to weather the storm.

At the moment, with the adjustments made by both Mintos and lending companies, the future outlook for our business is positive, even in light of the economic downturn. As always, we’ll work continuously to monitor our lending companies, and communicate any news or updates as soon as possible to give investors the most useful information possible. 

For more Mintos news head over to the blog, where you can follow the latest announcements and updates from our lending companies.