Japanese peer-to-peer platform eyes global expansion

By David Tuckwell on Tuesday 18 October 2016

Alternative Lending

Japan’s oldest peer-to-peer lender, Maneo, plans to go global, following more than 100 per cent revenue growth in the last financial year.

The company’s massive growth owes mostly to real estate lending. After the financial crisis and property bubble in the 1980s—which created Japan's "zombie banks"—major asset managers and financial institutions have steered clear of property, creating a gap in the market.

“Maneo has the potential to be truly global”, said Mattias Karnell, head of international business development. “There is so much demand out there for these platforms.”

Launched in 2008 as Japan’s first-ever peer-to-peer platform, Maneo embodies the hybrid lending model. One of its great strengths is that it gets loans out quickly, usually within a fortnight following in-house evaluation, much faster than a bank. Unlike active asset management, investors are free to choose where their money goes.

The company profits from spreads, taking the difference between the interest paid by borrowers (typically 10-15 per cent), and the return paid to investors (typically 5-8 per cent)—leaving a profit of 5-10 per cent. The company boasts a solid track record, having lent close to US$500m to small and medium enterprises with no losses on principal or interest since 2011.

Part of Maneo's success owes to the peculiarities of Japanese finance. Following Prime Minister Shinzo Abe’s launch of ‘Abenomics’ in 2012, Japanese interest rates have hovered below one per cent. This, taken with Japan’s savings culture and relaxed regulation of retail investment, has given Maneo a huge potential investor base.

The overwhelming majority of Maneo’s investors are businessmen in their 30s or 40s (“salarymen”), who want higher returns on their savings. Maneo’s business model allows them to invest as little as $95.

The next step for Maneo is to bring Japanese money to the world. “The deals we have in Japan are very profitable, but we’re quite old school on the sourcing side,” said Karnell. “It takes time to find the deals” and investors “tend to be quite risk averse… they like collateral”.

Karnell rejected any suggestion that Maneo might make inroads into China. “You have quite a lot of fraud in China and there are capital outflow restrictions.” He believes Australia, the UK and US are more attractive to Japanese investors. As in Japan, investment would be mainly in real estate. “The challenge will be how can we present these products to our investors such that we fully vouch for the deals.”

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