Consumer lender TWINO has just gone live in the Baltics, instantly opening up the marketplace to international investors from over 15 different countries. The Baltic states have been surprisingly prolific at churning out cross-border peer-to-peer lending platforms. The region is already home to Bondora,Investly,EstateGuru and Mintos. Those models have thrown up a fair amount of innovation between them. Mintos, which we recently profiled on AltFi, offers secured lending to consumers. The platform’s loans are financed via the Mintos balance sheet initially, before being syndicated out to its private investor base. Mintos always retains some skin-in-the-game.
Now TWINO is causing a splash with an inventive feature of its own. The platform talks (perhaps rather rashly) about “completely minimising” investor risk, and refers to the success of deals as “guaranteed”. Why? Because every loan originated by the platform comes equipped with a “buyout guarantee”. In other words, TWINO will buy out any loan that falls more than 60 days behind on its repayment schedule.
Ieva Ozoliņa-Bērziņa, Executive Director of the new platform, explained:
“Our initial goal is to become market leaders in the Baltics, and later — in all of Northern Europe. By expanding our activities and offering our clients investment opportunities in consumer loans with a buyout guarantee, we provide a unique opportunity to those lenders who have been reluctant to take the risk and try investing.”
The language and the mechanisms may differ, but the buyout guarantee feels fairly similar to a “provision fund” – a tool employed by each of the three largest consumer lending platforms in the UK (Zopa,RateSetter and Lending Works). RateSetter’s provision fund, for example, is comprised of a multitude of miniature transaction slices, and recompenses private investors in the instance of borrower default. The difference with the "buyout guarantee" model is that TWINO itself acts as the purchaser of overdue loans. Of course, it’s possible that TWINO’s fee structure takes into account the potential need to buy back overdue loans. And if the buy-back capital is indeed sourced in this way, it’s hard to discern much operational disparity (save for in the field of transparency) between the “buyout guarantee” and the “provision fund” structure at all.
From a practical standpoint, TWINO provides loans of between €400 and €3,000 over 6 month to 3 year terms. Its minimum investment stands at a mere €10. The projected average ROI is a punchy 15-20% per annum. In Funding Circle-like fashion, TWINO assigns a risk rating to every loan listed on the platform. TWINO describes its typical borrower profile thusly: individuals, aged between 20 and 65, with regular income, positive credit history and without any overdue liabilities, who are seeking a loan for the sake of funding a significant purchase.
The Baltics have emerged as an unexpected hub of cross-border alternative lending activity. We don’t expect TWINO to be the last Baltic platform to join in on the race for Europe.