Due to the COVID-19 pandemic, we’ve experienced changes compared to the usual flow of our daily dynamics since the middle of March 2020. The pandemic has affected the companies offering loans for investing on the Mintos marketplace, and our investors. Problems borrowers are facing and moratoriums introduced by governments impacted operations of some of the lending companies, causing headwinds in the crowdlending industry.
In the live-stream session with Mintos CEO Martins Sulte that we held for investors at the beginning of the crisis, we were already expecting that borrowers and some lending companies would experience problems with repayments in the time to come. On the other hand, we remain confident that many lending companies will come out stronger and will keep their positions in the international alternative lending market. In this blog post, we want to take a look at data that gives a perspective of the strength of lending companies on Mintos, in general terms.
Investors and lending companies: banking the unbanked around the world
Many lending companies on Mintos work in countries that are at the bottom of the world GDP list. They are providing financial services for the unbanked population, to businesses and individuals that are not served by the commercial banks and that in many cases don’t have access to traditional financial services. On the other hand, many companies that work in the developed countries have achieved their share of the market because of the agility and customer-centric approach with the help of data processing technologies and AI.
Lending companies on Mintos have their business operations in more than 50 countries around the world. Meanwhile, on our marketplace, they’re offering loans for investments from 33 countries in Africa, Europe, North and South America and South-East Asia. Serving millions of clients in these geographies, according to our data the lending companies have issued in total almost €16 billion in loans to individual borrowers and businesses alike, of which more than €5 billion have been funded by investors on Mintos. From Mexico to Indonesia, and from Estonia to Kenya, investors on Mintos have contributed to banking the unbanked, and in doing so have earned more than €100 million in interest.
Seniority can often mean durability
The longevity of the lending company can indicate the company’s (and its staff’s) expertise within the alternative lending industry, accessibility to various sources of funding, and ability to adapt to changing market conditions.
75% of the lending companies on Mintos have been in the lending business for 5 years and longer, e.g. ID Finance (Spain) and Watu Credit (Kenya) since 2015, Lime Zaim (Russia) since 2013. Some of the lending companies were established during the economic crisis in 2008, or during its aftermath: Iute Credit (Estonia) and Mikro Kapital (Russia) in 2008, and Delfin Group (Latvia) in 2009. Out of these companies, 36% have been in business for 10 years or longer. Some of them have gone through a complete business model transformation, from paperwork driven offline lenders to fintech companies that use AI and are accessible for their clients online. Such examples are Polish Everest Finanse established in 2000, or Russian lender Dozarplati established in 2011.
On average, 300 employees per lending company on Mintos
The number of employees in a lending company can correspond with the market share and size of the company – but not necessarily. It can correlate to the number of clients, geographical location and labor market status, number of physical points of sale, level of automation or the extent of IT operations involved in the business model, etc. One fact can serve almost as a rule: the more employees the company has, the more developed are its internal processes across all functions of its business.
Together, lending companies on Mintos employ more than 20 000 people, which translates to an average of 300 employees per lending company on Mintos.
Of course, the number of employees varies. Some lending companies, especially those that are working in the smaller local markets, have fewer employees. Companies who have operations in multiple countries or in bigger markets, employ more people. For example, Sun Finance Group that operates in Denmark, Kazakhstan, Latvia, Mexico, and Poland has more than 700 employees. Mogo, a company that has operations in 17 countries, also has around 700 employees. On the other hand, while Kredit Pintar operates only in two countries – Indonesia and the Philippines – the company is the leading regional online lender with 600 people. Overall, 33% of the lending companies on Mintos have more than 250 employees.
Due diligence of lending companies
Before they join Mintos, all lending companies undergo our stringent due diligence. Companies that have a limited track record and a small loan portfolio without a clear growth outlook and those with negative references on management or shareholders fall out of our consideration already in the first phase. We gather plenty of information about each of the lending company and here is what can indicate red flags when it comes to allowing the lending company to place loans on the Mintos marketplace:
– Loan portfolio: how does the loan performance look like, what are companies’ historical default rates, and how effective are its debt collection processes
– Financials: looking into the asset quality, company’s earnings and profitability, capitalization and leverage (tangible equity/assets ratio), funding, liquidity and coverage (sources of funding, debt maturity profile, ability to cover buyback, unsecured debt/total debt)
– Management team: who are people running the company, who are the shareholders, and what’s their past experience and the level of expertise in finance
– Legal requirements: does a company comply with local regulations, do they have necessary permissions and licenses obtained
– Future plans: the company’s marketing strategy, client acquisition plans and market position can indicate future potentials of the company’s growth.
Keeping up with the challenges
Lending companies on Mintos are big, established, and international. They are providing financial inclusion globally, working with borrowers underserved by traditional financial service providers. Mintos makes thorough due diligence of each and every lending company before it starts offering loans for investing on the marketplace, looking to offer diversified and solid opportunities for international investors.
Despite the current crisis, the largest one since the Great Depression in the 1930s, most of the lending companies on Mintos are remaining strong, keeping up with challenges caused daily by the new market conditions. We believe that the agility and innovative character of the fintech industry will open new opportunities in the future, just like it did after the crisis in 2008.