ENG
MOCASH
THE ARTICLE PREPARED UNDER THE SPONSORSHIP OF USAID'S FINANCIAL SECTOR TRANSFORMATION PROJECT
WHAT DOES THAT MEAN?
SVITLANA SKOSYRSKA, MOCASH:
"The p2p lending market will
definitely grow and develop"
ENG
MOCASH
SVITLANA SKOSYRSKA, MOCASH:
"The p2p lending market will definitely grow and develop"
THE ARTICLE PREPARED UNDER THE SPONSORSHIP OF USAID'S FINANCIAL SECTOR TRANSFORMATION PROJECT
WHAT DOES THAT MEAN?
WHAT DOES THAT MEAN?
Цей матеріал підготовлений журналістами AIN.UA за редакційними стандартами і опублікований за підтримки рекламодавця
SVITLANA SKOSYRSKA
MoCash is a Ukrainian p2p lending platform that brings together private borrowers and investors. Using MoCash, natural persons may raise up to UAH 500,000 in business loans directly from other individuals. Compared to bank deposits, the service offers investors more favorable terms. Borrowers are able to access funds at interest rates comparable to bank loans, but receive funds faster and under a simpler procedure. However, loans are granted only to develop a business that has been operating for at least a year.
The project was launched in 2006 by five co-founders who have by now invested USD100 thousand in MoCash. The service's earnings come from the commission fees — as soon as the borrower is granted the requested amount, he/she must pay the platform 4% of the total.
We talked with Svitlana Skosyrska, the project's co-founder, about recent developments in the p2p lending in Ukraine and abroad, the challenges faced by the company, and what it would take to achieve its breakthrough.
The project was launched in 2006 by five co-founders who have by now invested USD100 thousand in MoCash. The service's earnings come from the commission fees — as soon as the borrower is granted the requested amount, he/she must pay the platform 4% of the total.
We talked with Svitlana Skosyrska, the project's co-founder, about recent developments in the p2p lending in Ukraine and abroad, the challenges faced by the company, and what it would take to achieve its breakthrough.
— What were you doing before MoCash?
— I had been working in the banking sector since 1995. I was the Chairperson of the Board in two State-owned banks —the recapitalized Kyiv Bank and State Land Bank, Deputy Chairperson in several commercial banks. For two years, I was a Deputy President of the Independent Association of the Banks of Ukraine.
— What does the p2p lending market in Ukraine look like? Does MoCash face strong competition?
— In fact, we are the only company that offers such services. Apart from us, there are financial companies that offer payday loans to natural persons at annual rates of hundreds of percent, but they do not lend to SMEs. Of course, there are banks that lend to businesses. {Editor's Note: "Payday loans" are short-term, high cost loans and frequently charge in the range of 500-750% in Ukraine}.
— What makes your company preferable to banks? Your annual rates are 25‒35% — higher than in many banks.
— First, unlike banks, our platform raises funds for borrowers without any collateral. When dealing with a bank, borrowers have to pay for collateral assessment and notary services, which increases their overheads significantly.
Second, compared to us, banks charge higher commission fees. Third, banks sometimes have an annuity system, which makes the effective interest on loan much higher than the declared one.
As a result, our interest rates match those of the banks. We charge interest on the outstanding amount that is constantly decreasing, and effective rate is actually 22% at a nominal rate of 30%.
Second, compared to us, banks charge higher commission fees. Third, banks sometimes have an annuity system, which makes the effective interest on loan much higher than the declared one.
As a result, our interest rates match those of the banks. We charge interest on the outstanding amount that is constantly decreasing, and effective rate is actually 22% at a nominal rate of 30%.
— And what about the timeframe? How fast can you raise funds for borrowers?
— It usually takes the borrower a week to gather all the documents, then we will be reviewing the documents for three days, agree the conditions with the borrower and raise money between 1 and 14 days. It used to take us a month to raise funds when we started operation, but currently, with so many registered investors, we raise money within a day and a half or two days. We have about 400 investors registered. However, there are not enough borrowers, especially since we're screening them quite carefully. We need investment into marketing now. We've run out of money for promotion, advertising, raising financial awareness, explanations.
— PrivatBank used to have a fairly successful p2p lending business prior to its nationalization.
— They had raised 4.5 billion hryvnias, but loaned out 1.5 billion hryvnias only. This suggests that they were not actually a p2p platform. We transfer funds directly between the investor and the borrower, while they had used a financial company for that. By advertising their "Country of Successful Business", they were raising funds at the annual rate of 26%, while offering loans at annuity rate of 45%, the effective rate for borrowers as a result being 62%. They granted 9,000 loans in six months. The significance of these figures is that, with a proper advertising campaign and cooperation with good banks, 9,000 loans can be made in six months by channeling cash from the pockets into financing the economy, to support small businesses.
— Who has been investing via the platform?
— IT professionals mostly, as well as owners of medium-sized enterprises.
— Are investors well protected against financial risks?
— We strongly urge the investors to insure their financial risks. We currently work with Ridna insurance company that has been on the market for 12 years now and is among Ukraine's top five in terms of payments. Nevertheless, our objective is to have 10–15 insurance companies, so that the investors would have an opportunity to choose the one to their liking.
— And how is the borrower protected?
— Our rules say that each business must be financed by at least ten people. This reduces the risks for the borrower. If only one person finances the borrower, a threat of raiding may occur.
— Are agreements between investors and borrowers signed remotely?
— Yes, they affix their e-signatures.
— Do you meet your clients in person?
— No, we identify clients remotely. They send us the scanned copies of documents that we verify to open databases. And we make live Skype calls at all times. We plan to work with Kyivstar and Vodafone to identify contract clients by phone numbers, and for creditworthiness checks of all borrowers. If the law that links SIM cards to specific persons is adopted, most of the risks will be removed.
The operators created BigData that allows creditworthiness checks and making a client's risk profile. They use the information like the top-up amounts, international travel, for how long the number is in use and other metrics. They even have a database of phone numbers that were used in the fraudulent activity.
The operators created BigData that allows creditworthiness checks and making a client's risk profile. They use the information like the top-up amounts, international travel, for how long the number is in use and other metrics. They even have a database of phone numbers that were used in the fraudulent activity.
— How do you monitor loan repayment?
— We do not handle any funds; however, we get receipts, monitor the entire cash flow and see whether the loan has been repaid or not. Besides, we generate payment orders for the borrower, which are kept in his online account. We also get notified of each payment made.
— Will you lend money in the absence of any credit history?
— We will, and there is nothing contradictory about it. We do business only with those who work officially and at least one year. I could assume, of course, that someone might found a company to run cash through it for a year, but we also check all other aspects — not only financial statements, bank statements. We check both the reputation and assets; we look into previous employment and whether any lawsuits were filed against the person.
— In 2018, according to the World Bank, Ukrainians working abroad transferred $14bn to Ukraine, or 11% of the country's GDP. We are currently conducting research, trying to identify investing modalities that may be offered to people in Ukraine in order to support economic growth not only through consumption, but also through investment in small and medium-sized businesses. Can p2p platforms become one of the tools here?
— In Canada, Poland, other countries, there are our compatriots who are willing to support Ukraine. Our mission is to enable foreign currency transfers for the purpose of financing. Hedging of forex risks should also be provided. People who have found employment in Poland could finance projects in Ukraine, but their transfers from there will be received in a foreign currency — in euros. Suppose that we have implemented the acceptance of foreign currency payments, and people will be able to remit foreign currency to a natural person or a company. There is a question of the borrower being able to repay funds in foreign currency. More restrictions are imposed on transfers in foreign currency out of the country, and the problem of splitting payments may arise. Financial monitoring service scrutinizes each instance when a person makes 10 small transfers at once. Still, we are ready to work on it, and we are very interested in it.
— How do you feel about the fact that p2p lending is not yet regulated by law? Does it interfere with doing business?
— It doesn't. I asked many foreign experts if p2p were regulated in their countries, and the answer was overwhelmingly negative. We want to be engaged in the development of regulations for our market. We intend to accumulate 10% of profits in a special account to cover risks, to pay lawyers' fees, if necessary, or to pay certain expenses. And, secondly, it is essential to invest in raising financial awareness.
— How do you see the development of the Ukrainian p2p market? Where will it be five years from now?
— It will definitely grow and develop. The land market is about to be launched, and crop receipts already function well there. We are looking into an opportunity for us to raise funds for farmers, to be secured by crop receipts held by MoCash. MoCash, in turn, would provide guarantees to investors. We know the land under crop and its future cost can always be estimated. There will be a single receipt for the crop, which cannot be issued to ten investors simultaneously; there is no way for them to split it. We at MoCash could take it on ourselves and ensure repayment of investment from the borrower to the investors, secured by this crop receipt. This mechanism is in development now.
— Do you believe that Ukrainian investors could be interested in equity crowdfunding? In the United Kingdom, for example, crowdfunding platforms can raise millions of pounds for a single company.
— We will come to that eventually. Laws must be amended, and awareness must be raised to ensure public trust.
People used to invest in deposits until recently. With many banks going bankrupt, trust in deposits has been undermined to a certain extent. It will recover gradually, unless any new bankruptcies occur. This is as far as banks are concerned. Now look at what's been happening in the real estate development sector in recent months: several major developers have frozen their assets. People, who invested in the construction, intending to let these apartments, might now lose their money and time. As a result of undermined trust in deposits and the real estate market, another mass of cash will remain in people's hands. What to invest in? It will probably make sense to invest through us — in the businesses we have screened, the real sector of the economy, because we select the best projects, the best borrowers.
People used to invest in deposits until recently. With many banks going bankrupt, trust in deposits has been undermined to a certain extent. It will recover gradually, unless any new bankruptcies occur. This is as far as banks are concerned. Now look at what's been happening in the real estate development sector in recent months: several major developers have frozen their assets. People, who invested in the construction, intending to let these apartments, might now lose their money and time. As a result of undermined trust in deposits and the real estate market, another mass of cash will remain in people's hands. What to invest in? It will probably make sense to invest through us — in the businesses we have screened, the real sector of the economy, because we select the best projects, the best borrowers.
— What is stopping foreign investors from joining the Ukrainian p2p platforms and financing Ukrainian companies through such platforms? Is there any chance that foreign investors will enter our p2p lending market in the near future?
— We must first adapt this product properly to the current Ukrainian environment. It all depends on financing the sales promotion. We also need to automate scoring — it is only partially automated now. Without this, we will not be able to go any further and attract investors.
— You need initial financing to build a stable business that can be presented before investors?
— Very much so. We model ourselves on the UK-based Funding Circle. Their loan portfolio is currently GBP 5.4bn. Our mission is to create a Funding Circle in Ukraine.
— Funding Circle raises proportionally more funds from financial institutions, rather than from individuals. This can be an indication of the platform turning into a new intermediary between small businesses and large liquidity providers. In fact, Funding Circle has been providing the latter with the origination service. Could the Ukrainian market work under such model?
— Indeed, the largest partner of Funding Circle is Barclays PLC. Of course, we dream of such a partner. However, I think this form of attracting resources for small and medium-sized businesses will be relevant when we show consistently good results, and p2p and p2b lending is regulated by the state.
The views and opinions of the author expressed herein do not necessarily state or reflect those of the U.S. Government or USAID.
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© 1999-2019 AIN.UA
При использовании материалов сайта обязательным условием является наличие гиперссылки в пределах первого абзаца на страницу расположения исходной статьи с указанием бренда издания AIN.UA. Материалы с пометками «Новости компаний» и PR публикуются на правах рекламы.
При использовании материалов сайта обязательным условием является наличие гиперссылки в пределах первого абзаца на страницу расположения исходной статьи с указанием бренда издания AIN.UA. Материалы с пометками «Новости компаний» и PR публикуются на правах рекламы.
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