P2P-Banking.com

After the Loanio launch yesterday, already some more loan listings are up at Loanio.com. Right now I count 8 listings. Probably more are in the making. No bids yet, which is not surprising as the lenders have to sign up and transfer money to Loanio first.
Michael Solomon, the CEO and founder of Loanio had a lucky week according to the Loanio blog - not only did he launch Loanio, but he also won $1,000 in the New York State Lottery.

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Zopa reached 25 million pounds in loans. Zopa states cash depositers received an average 8.3% return after charges at a default rate of 0.04 percent. (Sources: Zopa, Financial Times)

About a year ago I started lending money to African entrepreneurs via MyC4.com.  So far it did meet my expectations. The process of uploading money worked without problems, there were always enough loan applications to select from and the offered interest rates were high enough to allow for good returns despite the risks. The only point, where the usability need to be vastly improved is a better status overview for the payment status of all loans in the portfolio. MyC4 does show the payment status in detail for each loan, but its hard to get an aggregate overview.

I invested at 13.8% average nominal interest rate. 194 loans are currently running, 29 are repaid in full, 12 are open/pending (not yet disbursed), 1 defaulted and 4 were cancelled.

To roughly calculate estimate my ROI I looked at my account display at MyC4

About 12-13 months ago I uploaded 1,506.94 Euro. Now my account value is 1,625.24 Euro (9,09 Euro available + 124,62 Euro pending bids + 1.491,93 Euro Outstanding principal). That results in an ROI of 7.9% so far. Naturally it would drop, if the outstanding principal is not repaid in full due to defaults.

The ROI is much lower then the average interest rate, since it does take weeks before an investment in a loan becomes active - and unlend money does not yield interest. A further point is that several late loans affect the ROI.

Read all MyC4 posts from the past months.

Lenders at MyC4.com do not have an easy task, when trying to check which of their loans are late on the repayments. The account page does not offer a comprehensive overview page. If a lender really wanted to check in detail he has to click through to the detail page of each loan he invested into.

Officially only one loan has the status ‘defaulted’ so far. However MyC4 so far has no standard policy when a late loan is to be declared defaulted. MyC4 has stated that there will be a default policy by the end of August.

Researching the situation, there are more than 320 loans that are late (fully or partly) with at least one repayment. Of these 72 loans are 3 payments late, 64 loans are 4 payments late, 30 are 5 payments late and 22 are 6 or more payments late.

Another issue that raised some concerns are the first impacts of the changed rules regarding currency risks.

… as some of you might have noticed already the first repayments are now posted on the investors accounts from Kenian investments where we investors are now taking the risk of currency fluctuations.

Within the first period from disbursement to the first repayment the KES has devalued from 97 to 104.5 = 7.2% already. … (Source: see discussion here)

To help lenders selecting loans to invest in, a column with the information whether a loan open for bidding is issued in local currency or in Euro was added to the wiseclerk MyC4 statistic pages.

(Source: uses information from Status der … MyC4 Kredite)

Monetto.pl, one of the three p2p lending services active in Poland has financed 1450 loans applications resulting in 440 loans totaling 1 million Zloty (approx 0.5 million US$) in 4 months. The average loan amount is 2300 Zloty. The service claims 8000 registered users and a repayment rate of 97% so far (which is said to be a good result).

Borrowers are usually aged 35 to 50, and live in rural areas or small cities. Lenders on the other hand are typically aged 25 to 30 and live in the major cities.

Monetto plans to introduce new features, including guarantees for lenders.

Lucas Banach, CEO of Prender the company that runs Monetto, says that cooperations with e-commerce sites (e.g. Kupujemy.pl) are essential for the growth of Monetto.pl.

Competitor Kokos.pl claims 13000 registered users and 1.2 million Zloty loans on its website. Kokos launched 5 months ago.

(Sources 1, 2, 3, 4, 5, 6)

I have lend money in over 170 loans on MyC4.com. My average interest rate is 13.8%. There are no defaults yet (not only in my portfolio, but overall). But lately there are several loans that are late (usually up to one month).

In the account balance late loans are recorded as repayments with zero value:

Latest borrower who went late is Sarah Akany, who runs a computer training and internet center in Uganda. I don't really worry, since she went late once before and caught up again.

The provider (CMC) posted the following notice to lenders on the blog:

Dear investors,

We have contacted the client and she has promised to clear the late payment. We shall continue tracking the client and ensure payment.
Thanks.

Today MyC4 presents itself in an all new shiny layout. On MyC4 lenders can give loans to small businesses in Africa. Unlike at Kiva, lenders at MyC4 earn interest. So far 1.8 million Euros (approx. 1.2 million US$) have been invested in loans and there are no defaults yet - only several late payments. With the new release …

… three key elements have been prioritized on the new website; usability, design and communication. We have made it easier to understand what MyC4 is all about, how to join, how to upload money, how to find a Business, which fits your criteria and lastly how you invest and re-invest.

According to MyC4 the changes in today's release are:

• The look of MyC4.com has been updated
• Improved navigation making it easier to find your way around via a top menu and a left hand menu with sub-levels
• “Opportunity” changed to “Business” – to access the overview of Businesses, click on “INVEST” in the top menu
• MyCredits is now changed to EURO (€)
• The Investor now carries the Currency Risk
• Withholding tax

I also noticed that MyC4 is no longer marked as "beta".
The handling of currency risk is a major change. The announcement email says:

At MyC4 we want to offer a sustainable and easy to understand solution for the African Businesses. The currency Risk has until now been carried by the African Business, but this has uncertainty for their loan conditions.

To ensure that MyC4 and the African Businesses are sustainable in the long run a new model for the Currency Risk has been developed. We now transfer the Currency Risk to the Investor, which has to be covered by the size of the interest rate you demand.

As a consequence please be aware that going forward there is a Currency Risk on your new investment when investing in some African countries. MyC4 cannot advise on the daily currency development, but based on the last 3 years currency fluctuation we suggest as a guideline that your add the following percentages to your normal wanted interest rate to cover for the potential Currency Risk;

Uganda 6%
Kenya 2%
Côte d’Ivoire 0%

This means that if you where planning to Bid on a Business in Kenya with an interest of 8% in mind you now add the 2% - so you Bid 10%, but will properly get 8% depending on the currency fluctuation over the period of the loan.

 Screenshot of MyC4 in new design
 

Credit card issuer Advanta entered into a partnership with Kiva. The initiative is called KivaB4BProject and Advanta will match the loans made by business card holders with up to 200 US$ per card. Card holders simply select a business owner to sponsor through Kiva and make a grant using their Advanta Business Card. Advanta matches that grant, dollar for dollar, and Kiva distributes the total resulting funds.

The loans funded by this project can be seen on this Kiva lender page. Already contributed to more than 500 loans.

When the project was announced at Advanta's headquarters, Advanta flew in Kiva borrower Senerita Lilli a dressmaker from Samoa to share her story. 

German p2p lending service Smava.de made some changes:

• Borrowing for business purposes is now allowed. The borrower still is an individual person but is no longer limited on private purposes of the loan
• Borrowers may borrow up to 25,000 Euro (approx 39,200 US$), previously the maximum was 10,000 Euro
• Maximum amount any lender can invest in the marketplace is raised to 100,000 Euro (previously 25,000 Euro)
• Loan terms are now selectable 36 or 60 months (previously only 36 months); the insurance pools (Anleger-Pools) are seperated by credit grade and term. This complicated construct will influence lenders when deciding to bid on loans that are otherwise comparable but differ in loan term, since the level reached in the insurance pools directly impacts each payment rate.
• Bad debt sales rates have been lowered for lower credit grades (previously it was 22.5% to 25%, now it is 15% to 25% depending on credit grade)

(Source: P2P-Kredite.com)

Since it's launch in February 2007 Smava has funded 457 loans with 2 million Euro (approx 3.14 million US$) loan volume. 8 loans have defaulted and currently 9 loans are late.

MyC4 has successfully funded 1000 loans to entrepreneurs in Africa since launch in May 2007. So far none of the loans has defaulted and average interest rate for lenders is 11.7%.
Tim Vang, one of the co-founders of the Danish startup told P2P-Banking.com that the MyC4 will release a new version in May with a new design and better interface. MyC4 also plans to provide loans in additional countries (currently Uganda, Kenya and Cote d'Ivoire).

MyC4's annual report 2007 is available on the Internet (English and Danish). While the company realised a loss of 2.8 million DKK (approx. 0.6 million US$) in 2007, it aims for break even in 2009.

 
(Source: MyC4 loan statistics, Wiseclerk.com, Apr. 19th)