An increasing number of inventive, early stage platforms are popping up all over continental Europe. The Netherlands in particular seems to be a hotspot. After last week’s catch up with innovative equity crowdfunder Symbid, we’ve now been chatting with another Dutch platform in form of “Lendahand”.
Lendahand is allowing Dutch investors to put their money to work in emerging markets all over the world – specifically by investing in SMEs. The platform is making use of local partners within those markets in order to select and underwrite every loan going through the platform. AltFi talked to Peter Heijen, Founder and CEO of the platform, for the full story.
Can you give us a brief introduction to Lendahand?
Many Small and Medium Enterprises (SMEs) in emerging markets lack proper access to finance. Especially SMEs in the segment just above the microfinance level and just below the bank lending level. This is very unfortunate since these SMEs play a crucial role in driving employment growth. Financing these SMEs leads to more prosperity and reduced poverty.
To help SMEs overcome this lack of finance, Netherlands-based crowdfunder Lendahand has launched a platform on which private funders can lend to these SMEs.
Is the Lendahand proposition unique – and if so – how is it unique?
As far as we know, we are the only crowdfunding that exclusively focusses on the segment above the microfinance level and below the banking level, also known as the missing middle. We call this segment ‘mesofinance’.
Tell us about the structure – you use local partners in the emerging markets to which you lend to underwrite every loan, is that right?
Loans are funded via local partners that also assume the credit risk to the SMEs. Lendahand carefully selects its local partners: they need to maintain a healthy portfolio and have strong financial fundamentals (well capitalized, good reserve policy, etc). They have a good governance structure in place and management is of high quality. Furthermore, they have an excellent track record when it comes to selecting suitable and financially viable SMEs.
What returns can investors earn via the platform? What do borrowers pay?
Private investors receive a fixed interest rate of 3% to 4% in Euro’s. Lendahand aims to provide the SMEs interest rates below 30% in local currency. As volumes grow we (and our partners) can operate more efficiently which should lead to lower borrowing rates. We always aim to facilitate loans with one of the lowest interest rates in the countries that we operate in.
Isn’t lending to SMEs in emerging markets a bit risky? How are you managing that risk?
Lendahand selects experienced and solvent local partners. These partners take the credit risk to the SMEs. Therefore if a SME defaults, the local partner takes over the payment obligation to our lenders. They keep a reserve for that, and in case that is not sufficient, they will use their equity capital.
FX risks are born by the local partner as well and they have a hedging policy in place so that FX risk is limited.
Where do you hope to be a year from now?
At the end of 2015 we should have 4-5 local partners across the different continents. By then we will be active in several other European countries. It is our ambition to become a key European player in the missing middle debt market.