“There are very many people in the world with free financial means and with a desire to invest their money and earn that way; and there are also many people in the world who need money for the implementation of meaningful ideas, yet the necessary funds are not easily accessible. We wish to be a bridge uniting investors and borrowers from various countries and even continents” was underlined in the interview by the Chairman of the Board and Co-founder of Mintos, Mr Mārtiņš Šulte.
Mintos that is managed by you is recognised as a rapidly growing start-up. How would you characterise the business culture of startups in general?
The business culture of startups is based on experiments. Ideas are implemented quickly, decision-making takes place briskly. Moreover, the testing of which ideas can be implemented at all and which should be left at the level of visions is also quick. A characteristic of the startup business culture is a lack of fear to make mistakes, and it is considered that the main thing is to move forward even if you happen to make mistakes.
Startups can be characterised by continuous development, the continuous search for new options of how to improve the offer to customers, how to improve cooperation with business partners and what other innovative business directions can be developed. It can be said that there is a belief in the environment of startups: it is better to make a decision quickly, even if the decision is not perfect, instead of all ideas being bogged down in discussions on what should and shouldn’t be done, and due to discussions, the decision-making with a following action is ever delayed.
“The culture of startups can also be characterised by a very flexible and tolerant attitude of both the employees and cooperation partners, as well as the customers.”
Startups accept that each employee is a free, independent personality with their own individual traits and that people have various working styles. Result is considered as important, but the way of how the employee achieves it is up to them. Inquisitiveness and ability not to be afraid of changes, as well as a wish to improve the routine solutions is also important in the startup environment. When choosing activity in the startup environment, the person must not be rigid and conservative in their views of business and the world in general.
The Minister of Economics Arvils Ašeradens is proud of the Law on Aid for the Activities of Start-up Companies that has been adopted in Latvia. Does the law help the company you manage?
We have indirect benefits from the law. I think that the greatest direct benefits from the law may be received by those startups which are being established now because a new company has to invest a lot of energy in taking the first steps of development, and in this stage any support – also moral – provides benefits. We are already a startup with experience. Yet, in general I believe that the Law on Aid for the Activities of Start-up Companies is a very necessary initiative, and the fact that the Minister of Economics acts as the standard-bearer of the start-up movement is also good because such standard-bearers are very necessary.
How did you come to establish and manage a fintech startup?
The business niche in which Mintos works is new, not only on the scale of Latvia but also globally. Similar platforms such as Mintos came into existence only around 2005, and it happened in Great Britain. In my life it so happened that I worked in the area of finances but then I had an opportunity to go and study abroad, and I had to find money to finance my studies. I went to the banks in search of a loan, offered immovable property as a pledge, yet I could not get a loan. Then I began to look for options on how to receive a loan outside the banking sector and found a platform of mutual loans which was directly linked to the educational institution to which I was about to go and study. The nature of this platform of mutual loans is such that graduates of the educational institution finance loans to the people who wish to study in the same educational institution by using a co-financing via the platform. This fuelled my interest in platforms of mutual loans, which is the business niche in which Mintos currently operates.
What is the typical customer of the company you manage?
We work on a global level and unite investors with borrowers. It is a bilateral market with purchasers on one side and the sellers on the other. On the side of purchasers our customers are investors. Currently the number of our customers who are investors reaches almost 70 thousand from more than 70 countries. For the most part, investors come from Europe, but we also have investors from Asia and Latin America, and also from Africa, yet Africa is not yet widely represented among our investors. Taking into account the broad geography, we do not have any typical investor – they are different. Here it should be underlined that practically any private person can become an investor, lots of free monetary resources is not necessary. Investors can begin their activity on Mintos with a just small amount – ten euros. There are investors who invest small amounts – 10, 20, 50 euros – and there are investors who are used to working with large amounts and invest hundreds, thousands, even millions via our platform. Many investors from the Baltic states are middle aged – around 30 to 40 years of age – with a stable career, experience in professional life; but investors from the wealthy countries of Western Europe usually are older – exceeding the age of 45 and much older. However, as I already mentioned, we have many investors, and the invested amounts vary widely.
Are there companies among the investors?
Yes, companies as well, and there are institutional investors, for example, various funds. Yet it should be said that mostly the customers of our company, the investors, are private persons.
How would you characterise the borrowers?
Via mediation of Mintos, loans have been issued in more than 20 countries, including Latvia, Lithuania and Estonia, Nordic States, Spain, Great Britain, Czech Republic, Poland, Columbia, Mexico, Kenya, Kazakhstan, Georgia and other countries. Borrowers come through mediation of loan issuers. Those are loan issuers who join our marketplace, evaluate the borrowers, and give the loan to those people whom have the capability of repaying the loan . It may be said that essentially the investor buys the loan, and the investor’s money reaches the borrower. It should be emphasised that we, so to say, supervise the issuers of loans, but the issuers of loans control the borrowers. Supervision and control is stringent because the investors are very demanding.
Usually the investor’s motivation is to invest their money in order to earn more money. What profit can your customers investors expect?
So far the return on investments has been approximately 11% annually. If the investor invests a hundred euros, in a year he will earn approximately 11 euros. There have not been instances when investors who have chosen to cooperate with our marketplace have suffered significant losses due investing on Mintos. If the borrower comes to a difficult spot and cannot repay the loan, a procedure has been set in place in accordance with which the loan is restructured and the recovery of a loan is facilitated. It should be said that you shouldn’t imagine that when working in the area of loans you will never have such cases when there are problems related to repayment of a loan.
“Each sector, each direction of business has its risks, and it is wise to be aware of these risks and keep them in mind.”
It should also be noted that the borrowers often choose to seek a loan outside the banking sector because non-bank creditors offer a faster acquisition of a loan and simpler rules for borrowing. However, when taking any loan, you have to remember that it will have to be returned regardless of the fact whether the creditor is a bank or a representative of a non-bank sector.
If any person in Latvia who has sold, for instance, an inherited immovable property now thinks of what to do with an amount measured in thousands of euro, would you recommend them to become an investor in the marketplace of mutual loans?
Yes, but I would definitely suggest diversifying the investments and to invest the money in various financial solutions, including, deposit. Never and in any circumstances, it is smart to invest the whole money only in one financial solution. Moreover, the diversification of risks relates to all business directions and in all areas of life in general.
In your opinion, do the platforms of mutual loans create competition to the banks?
I think that this question may be discussed in a broader range. In my opinion, we make the financial system more effective. For example, an investor who is in Germany enters our marketplace and sees there is a loan from Kazakhstan, a loan from Kenya, a loan from Spain, a loan from Columbia. A few clicks of their mouse, and the money travels from Germany to Kazakhstan, Kenya, Spain and Columbia, and it happens very conveniently and quickly. I believe that the development of information technologies has changed the financial sector, but the changes are not over yet. There are no grounds to think that the current situation will be maintained and that after five, 10 or 20 years nothing will have changed because information technologies continue and will continue to develop.
I think that there is no basis for the belief that none of the banks will follow the trend. At least part of the banks will offer their customers more convenient solutions related to advanced technologies. Non-banking financial services companies will also continue their development, and surely the growth will be seen also in the segment of technology companies. As a result, the customer will be a winner. Along with the wider entry of advanced technologies, the possibilities to obtain loans and to become an investor will increase. The development of technologies has already proved that money can be loaned and borrowed very quickly, that it is no longer a long-term process that would include long conversations at the bank in person; moreover, due to technologies, transactions of investing and borrowing may be for various amounts – both very small and very large.
Do you feel the differences of various cultures when working with a business on an international level?
Of course, you cannot ignore the cultural differences. For example, in Brazil the attitude towards time planning is different than in Latvia. People in Brazil have a much freer attitude towards punctuality and keeping in line with the set time of meeting than we are used to here in Latvia and our neighbouring Baltic countries. But in Poland there is a very strong hierarchy – a person in a higher position has a very great influence on decision-making, but he is expected to shoulder the responsibility and consequences of the decisions made. Here in Latvia, hierarchy is not so important in the business environment as it is in Poland. In summary, I would say that the dominant thinking in the business environment has many similarities across all regions of the world.
The offices of the company you represent are in Riga, Warsaw and Mexico City. Why exactly in these cities?
It is linked to business volumes. Poland is an important market for us. The same way it is with Mexico and the nearby region; moreover, we need an office in Mexico because there is a major time difference between Latvia and the continent of North America which affects communication with America from Latvia. It should be said that also in our Latvian office we have a multicultural team, we have staff from Poland, Germany, Estonia, Australia and other countries; therefore, we widely use English in our office alongside Latvian. When working in other countries, the main communication language is English. Knowledge of local languages, for example, in Mexico or Poland, surely help, but in all countries there are people who work in the financial area and more or less have a command of English.
It has been heard that by the end of this year Mintos is planning to open offices also in Brazil, Russia and one of the countries in Southern Asia. Is it true?
Yes, these markets are rather interesting, and there are local people in these countries that could work in our offices. Let’s say, Russia is a major market, and there we could develop both the directions of involving investors and borrowers. Brazil also offers a large market, and it has a wide range of development possibilities.
Is Mintos’ activity in Latvia currently more supervised by the Consumer Rights Protection Centre or Financial and Capital Market Commission?
Currently our activity is not classified as regulated activity, but the draft law is being developed that will determine that our business direction corresponds to the criteria of regulated activities, and then our supervisory institution will be the Financial and Capital Market Commission. It is understandable that regulation and supervision is necessary for the companies of the financial area because they work with someone else’s money – with the money of many various private persons and legal entities.
Lately much is being discussed in terms of prevention of money laundering. Do you feel concern that a marketplace of mutual loans may be used for money laundering?
It is difficult to use our marketplace for money laundering. The investor transfers money, but the ability of the investor to influence that the money he invested reaches a specific borrower chosen by him are small. There are many borrowers, and in the process of money circulation the loans are without a name, surname; therefore, it is very difficult for investors to identify the borrowers. However, of course, any entrepreneur choosing to work in the financial area should be aware that money laundering schemes are a globally relevant problem, and you might have to answer various questions posed by supervisory institutions. Therefore, we have in place a special procedure to verify the origin of the investors’ money.
How can you verify the origin of the money from the investor living in Belize, for example?
We would not accept investors from Belize. We pay attention to the fact whether the investor has a bank account in a European Union bank or an account in a bank in such a country outside the EU, in which combating money laundering is as systematic and comprehensive as in member states of the EU. Of course, there are other criteria as well which we use to evaluate investors. It should be said that in the financial area it is important to see the money amounts used – the larger the amount of money, the more research is necessary.
Original interview published on Uzņēmēja Diena, August 8, 15:04