In this article you will read:
- Highlights of the past 3 weeks;
- Performance of LO in Indonesia;
- Investment programs;
- Profit calculations and pay-outs;
- How does buy-back work for Loan Originator in Indonesia.
Another two exciting weeks have passed. We are thrilled to notice that we have managed to retain investors’ trust in us, and we noticed substantial increase of reinvested amounts as well as new investments coming in. These investments have been reinvested in the portfolio that has been structured given the experience of COVID19, as described below.
New investor registrations are going up into the direction of pre-COVID19 levels.
Loan issuing and portfolio performance
Loan issuing of Loan Originator – Kreditcepat is up by 30% from October, that was primarily funded by the invested funds of Singaporean investor.
The performance of loan portfolio that was issued after COVID19 pandemic crisis is the following: approximately 79% of loans are repaid at their due date, another 10-13% are repaid in the next 30 days, and the rest is sold to debt collection agency between 30-60 days after the due date. This implies very high quality and recoverability of new loans even in the new market conditions. Such performance was achieved primarily by adding new data sources and substantial adjustments to post-COVID19 scoring models.
At the moment, we are offering 3 different investment programs with varying interest rates and conditions:
11% – Investment program with minimum tenure 6 months. This is an investment program with the highest yield, however with the longest investment tenure;
9% – Investment program with a minimum tenure 4 months. This investment program allows shorter period of investment;
7% – DoFinance Secure® is an investment program where DoFinance puts its own funds in a segregated deposit to accumulate a special recovery fund that would ensure immediate liquidity in case of adverse events (please see our previous articles).
Conditions applicable to all investment programs (for existing and new investments):
- All investments are in loans exclusively issued in Indonesia;
- All loans are subject to Buy-back conditions as explained further in this article;
- Profit available for pay out monthly for all loans that are current;
- Profit available for pay out once they are recovered or sold for all delinquent loans as explained later in this article;
- Investment period end date means that at that particular date, all incoming repayments of loans are transferred directly to Investors virtual account, including cashflows from sale of delinquent loans.
These conditions are applied to all new investments in order to avoid cashflow constraints due to mismatch between Loan Originator cash flows and Investor cash flows and ensure sustainable performance of the platform.
Implementation of suggestions from Investors
As it was noted by few investors, pay out of profits for active loans should be available on a monthly basis in line with incoming cash flow from borrowers. It was temporarily unavailable but will be resumed soon. Please allow a few days for our IT department to reset this functionality for all investments pre-COVID19 and post-COVID19 alike.
How is Buyback enforced by Loan Originator in Indonesia?
Experience of different platforms have shown that Buyback is a term used with various and changing meaning and varying enforcement.
In order to ensure feasibility of Buyback, investors’ cashflows have to be aligned with those of the Loan Originator. In addition, Buyback is carefully defined when it comes to operating in a regulated market (with a license) where DoFinance is currently going to.
In order to avoid any room for manipulation and misunderstanding, the definition of Buyback for DoFinance is the following (in force for all loans issued as after 1st of May 2020).
Buy back is a commitment of the loan originator to Buy back delinquent loans that are delayed for more than 30 days, with conditions described below:
- According to agreements in place, all loans that were issued after 01.05.2020. and that are delinquent for 30-60 days are sold to debt collectors. The difference of the purchase price and full principal is what the Loan Originator commits to repay to the Investor.
- Loan originator has an agreement that debt collection company makes the payment within 7 days after the sale of the portfolio. After the loan originator receives the payment, it will transfer the funds, together with the difference, to DoFinance. In total the money transfer process can take approximately 8 working days from the date of sale up to DoFinance account. This procedure clearly shows the Investor the maximum term in any event when the investment in delayed loans can be recovered.
- Buyback is executed within normal market conditions. Normal market means that there are no extraordinary events like new spikes in pandemics, moratoriums, sudden regulations that come into effect and that negatively affect the operations of Loan Originator. Investor receives interest for the whole period until buyback.
- To protect the interests of the investors, only in case there are unprecedented changes in the market, the loan originator will:
- Inform all of the investors about the conditions that have changed. It will present the proof how this has affected the Loan Orignator.
- Only in combination with extraordinary events, Loan Originator will sell the portfolio, but in the same proportion as it did in the past 3 months. For example, if in normal market conditions out of every EUR 100 loans, delayed loans constitute 17%, but under extraordinary conditions, the default rate increases to 25%, then Loan Originator will still perform sale of the portfolio, but for 17% of the portfolio.
- Loan Originator is obliged to perform any measures possible to recover the remaining amount that was not bought back and repaid to the Investor.
The aim of this strategy is to ensure that interests of all investors are protected, irrespective of the severity of the unprecedented events. In this case Loan Originator is not pushed into legal and financial default, hence it must perform its obligation of still pursuing to collect the remaining portfolio. Secondly, investors’ invested funds are protected since the Loan Originator is the one who is performing further debt collection with its own means. There are no extraordinary expenses related to hiring of legal representative or dissolution of a Loan Originator. With this process, Loan Originator is forced to do whatever it takes to maintain its operations.
On 20th of November 2020, Loan Originator in Indonesia bought back all delayed loans that were delayed at the time of sale and were issued after 1st of May 2020.
As explained above, investments with very high yield carry certain risks. DoFinance is encouraging to use this opportunity with caution and diversify the risks!