At the end of 2018, LF TECH launched on Mintos to offer short-term consumer loans issued in Kazakhstan. Relatively soon after the initial launch, the company took a pause for its new strategy adaptation and restructuring of the company for increased scalability opportunities. Now, LF TECH has resumed its activity on Mintos and starts to offer short-term consumer loans as an investment opportunity for investors.
LF TECH has been operating in Kazakhstan, their home market, as well as Russian and Philippian markets for multiple years, offering various consumer finance products. On Mintos, the company offers short-term loans issued by its brand Dengi Click. In the future, the company also plans to offer car loans issued by its brand Avto Zalog.
LF TECH customers
The company currently services around 250 000 clients in Kazakhstan. The typical client is male, married, 30 to 40 years old, working at a production site, and needs a loan for daily needs.
The company shares that the reason why their clients choose their service is due to the variety of choices in which to apply for the loan – online via the company’s website or mobile app, or offline via a branch, or what is locally known as a loan machine. If the application is successful, the client can also receive the loan the same way the application was made (online or offline).
Loan machines are like ATMs for lending and such machines are placed in several bigger cities of Kazakhstan. Also, the company shares that their clients have reviewed positively its loyalty system and quality of their service, thanks to the daily analytics of needs and behavior, available to clients themselves.
LF TECH and the impact of pandemic
LF TECH successfully overcame the challenges the company faced during the pandemic thanks to a cash buffer created at the start of the business, which is still maintained. During 2020, the company reviewed its policies and adapted them where necessary. The company shares it was aware that many people in Kazakhstan had either lost their job, were furloughed, or received a pay cut during the pandemic. They eventually looked to take out loans, therefore LF TECH reviewed its risk scoring to avoid issuing loans to clients with a high risk of default.
LF TECH loans on Mintos
| Annual interest rates | Up to 13% (in EUR) Up to 16% (in KZT) |
| Average APR* | 250% |
| Average loan amount | €113 |
| Non-performing loans ratio (PAR 90**) | 37% |
| Average loan term | 21 days (without prolongations) 3.5 months (with prolongations) |
| Skin in the game | 10% |
| Mintos Risk Score | 6 |
| Buyback obligation | Yes |
| Interest on delayed payments | Yes |
*Annual Percentage Rate
**Portfolio At Risk (overdue more than 60 days)
The Mintos Risk Score for loans issued by LF TECH is 6, with the subscores of 5 for loan portfolio performance, 5 for loan servicer efficiency, 6 for buyback strength, and 6 for cooperation structure.
LF TECH is implementing industry standards for the credit scoring of its customers, which consists of passing the mandatory biometric authentication procedure (biometrics) for all online applications, which the company has implemented at the legislative level since May 2021. Prior to the introduction of biometrics, the verification process was carried out through a video call between the verifier and the physical client to confirm the identity. The essence of biometrics is that when submitting an online application, the client must necessarily undergo a certain verification procedure related to face recognition along with an identity card or passport online. Further, the control process consists of 2 stages, where the first verification is carried out by the automated verification program itself, and then, with successful approval, the second stage begins – physical/manual verification by the verifier. Thus, with this implementation, the process has become more automated and less time-consuming (than with a video call).
Maxim Kobzev, owner of LF TECH: “We see that our market is very active at the moment in terms of pledged loans, and car loan issuance is working at around 30% of capacity. With the infrastructure we have, we could afford to issue 3 to 4 times more car loans in the future. Due to this high potential, we believe this is a great time to continue our partnership with Mintos, in order to offer the investors many new investment opportunities, and in turn, increase our lending power to serve even more customers.”
How to invest in LF TECH loans
Mintos has added LF TECH loans to the Diversified and High Yield strategies. If you want to invest in these loans with a custom automated strategy, make sure to adjust your strategy settings. If you’re investing manually, you can filter the loans on the Primary Market.
To obtain exposure to LF TECH loans, investors will be able to invest in loans issued by Mintos Finance to LF TECH, where repayments depend on the borrower’s payments. Each loan issued by Mintos Finance to LF TECH will be pegged to a respective loan issued by LF TECH to the final borrower. Mintos Finance is a Mintos group company. A detailed description of the new structure is available in the Mintos Finance loan agreement and assignment agreement.
About the Kazakhstan economy
According to the World Bank’s report¹, 2020 was the most challenging year for Kazakhstan’s economy in the last two decades. The spread of the pandemic halted global activity in the second quarter of 2020 and depressed global demand and price of oil, which is Kazakhstan’s main export commodity.
However, since January, oil prices have significantly recovered, reaching over pre-pandemic levels due to increasing demand for petrol, the result of high vaccination rates and increased mobility around the world. The rising demand for Kazakhstan’s main export product is viewed as a positive sign for its economy.
Some reports, such as Open Democracy’s², suggest that due to the unemployment situation that worsened during the pandemic, people in Kazakhstan are heavily reliant on short-term loans, leading to an increased demand for borrowing. In turn, that has also made the lending companies adjust their risk scoring models to protect the potential borrowers who are not eligible for a loan, and at the same time, identify borrowers who are eligible under the new circumstances of the market.
According to a recent reform of the regulatory framework in 2020, all lending companies in Kazakhstan have to be registered at the National Bank of Kazakhstan and hence are regulated by The Agency of the Republic of Kazakhstan for Regulation and Development of the Financial Market. According to the Association of Microfinance Organizations of Kazakhstan (AMFOK), in 2019, there were 214 microfinance organizations operating in the country with a loan portfolio totaling KZT 277 billion (approximately $547 million).³ A more up-to-date (April 2021) overview can be found in the Current State of the Microfinance Organizations of Kazakhstan report.
¹Kazakhstan’s Economy to Recover Modestly in 2021
²Kazakhstan is caught in a vicious cycle of debt
³Information of Sector position microcredit in the Republic of Kazakhstan
