P2P Lending in Israel: Catching Up with TARYA

By Georgina McCreadie on 7th May 2015

P2P/Marketplace Lending

Can you tell us a bit about your background and why you decided to start the platform?

P2P Lending in Israel: Catching Up with TARYA

TARYA is an Israeli P2P lending platform developed alongside a modern credit-scoring solution with novel underwriting algorithms.

The platform founders have previously worked in both the technology and banking arenas, and observing the state of the economic environment – local and global events and trends, we sense that conditions are ripe for fresh financial offerings to be accepted by the general public. Local politics are turbulent over increasing prices and the “cost of living”, peaking during the recent elections.

TARYA is headed by experts in fraud technology and banking regulation, and have become a major player in the Israeli Crowdfunding transformation. We are tackling the regulatory, business and cultural challenges – and are satisfied of the progress so far.

Can you give us a brief introduction to Tarya?

TARYA is a unique and pioneering initiative that facilitates the direct connection between borrowers and lenders, using an online platform. This platform bypasses existing credit entities - banks and credit card companies, and allows borrowers to obtain credit at significantly lower costs and enables lenders to yield far better interest rates.

TARYA's online marketplace is user friendly, while meeting the most stringent standards of information security. The platform is built from the ground up with underwriting and credit rating processes that combine banking know-how, statistical modeling and technology professionals with extensive expertise in online fraud and information collection from social networks and other sources.

In regard to the Israeli market, TARYA has developed two new financial tools for investors– which enable greater use of the platform by more diverse investors -  

-Loan Resale (Alternative Market) – One of the major hurdles of investing in P2P is the inability to “cash” your investments in time of need. This new tool will enable investors to sell active, healthy loans to other investors when a withdrawal is necessary.

-Passive Income “Pocket Money” – In order to make it easier to manage the monthly family budget, this new tool enables families to invest in P2P loans and receive a monthly return as passive income.  

Why is there a need for Tarya in the Israel market?

We believe the venture has the potential to change the structure of the credit market in Israel: It is widely accepted that the Israeli banking sector is concentrated and not competitive, especially in regard to the household and small businesses sectors.

Developing an option for those sectors is in line with the country’s social-justice protests and we believe that the effects of P2P and crowd funded FinTech is substantial and radical.

Tell us about the regulatory framework that applies to peer-to-peer lending in Israel.

There is no regulatory regime for P2P platforms in Israel. There are, however, statutory provisions pertaining to loan agreements dealing, among other issues, with disclosure and limiting the interest rate, all those as part of consumer protection rules.

Looking at the specifics of the platform- what are the borrowing rates, fees and average interest yields?

The interest rates for borrowers on TARYA range from 3.5%-8.0% depending on the borrower's credit rank. Loan Origination Fees range between 0.9% - 5.5% and depend on both the credit rank and loan term. Then again, non-banking (credit cards) interest rates for borrowers are, on average, 11%.

Lenders investing in diversified and micro-financed portfolios average between 5%-6% returns after fees. Lenders pay a fee of 1.0% on returns.   

What type of consumer and investor are attracted to your platform?

Since setting up shop in May 2014, TARYA has been growing in both borrowers, lenders and partner organizations – totaling over 5M NIS in money borrowed through the platform. TARYA’s unique model grants upgraded loan terms for borrowers which are vouched for by their employers. This practice benefits all employees of the organization, who can receive loans at rates above their personal credit rating.

Borrowers accepted during the first stage of platform operation will are in part employees of partner organizations, and the rest – from the general public. Lenders include the general public or institutional entities. An organization that is interested in offering loans to its employees through Tarya confirm personal details of the employee (after they have been entered online), supplementing the underwriting process and deducting (with the approval of the employee) the monthly loan repayments from the employee's salary. The organization's involvement is merely technical – it is not obligated to finance the loans and does not have any liability to either the employee or TARYA.

To date, TARYA has signed partnership agreements with over twenty organizations that allow their employees/clients favorable borrowing conditions and a quick and easy process. TARYA has also partnered with various additional organizations that comprise an additional stage in the underwriting and approval process of the borrowers in the system.

How do the investors pick their loans? Is it via an auction model or are the funds auto-diversified?

TARYA Lenders may view new loan applications on the online platform, and if interested are provided further details regarding the loan such as the Borrower's online profile (without any identifying information), loan amount, purpose, credit score and credit history.   

Lenders may utilize the following investment strategies:

  1. Manual-invest Loans - that is, individual selection of loans in which the lender desires to invest, or
  2. The "Automatic Investment Agent" algorithm which invests in loan applications based on a pre-defined set of parameters (such as the borrower's credit rating, maximum loan duration, purpose of the loan, or any other pertinent characteristic).The algorithm is designed to automatically disperse funds on the basis of these parameters and enable maximum portfolio diversification.

In any case, all lenders must invest in a minimum number of borrowers and are limited to a maximum loan amount per application – These limitations will require lenders to disperse their portfolios over large numbers of borrowers, reducing risks and minimizing loss due to late payments (Borrower Defaults and Charge Offs).

What is the minimum and maximum loan sizes you can accommodate?

Loans originated by the platform start at 1,000 NIS and up to 50,000 per borrower. Loans may be taken for up to 5 years. Borrowers on the platform are encouraged to ask for the amount they currently need, and in the future may ask for further loans if needed (up to the maximal amount) – thus encouraging financial responsibility and planning.

What is the minimum investment amount?

Investors can start saving with TARYA from 5,000 NIS, or start a monthly savings plan with a monthly amount of 500NIS transferred for savings.

Investors which devote more than 1,000,000 NIS receive lower commissions and premium status.

Where do you see the platform in a year’s time?

We hope to see by next year TARYA's portion in the Israeli credit volume grow by 20 times as it is today, enabling many thousands more of borrowers and lenders to rely on our platform, creating a supplier-consumer financial community.

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