Welcome to DoFinance Insights and outlooks! Yet another month has passed.
In this blog DoFinance mostly focuses on the future developments of DoFinance in the licensing process as well as operational issues related to funds availability, payout requests and on the overall Loan Originators loan collection process.
Licensing process
It has been a while since DoFinance has started its licensing process with Latvia Financial Capital Markets Commission (FCMC) to become a licensed Investment Brokerage company (IBC). In this process DoFinance has updated all its internal systems and procedures.
Furthermore, one of activities during the licensing process is strengthening the shareholders base of DoFinance. After completing this process that is planned to be finished till the far end of October DoFinance will be able to restart operations as a licensed financial market player, which will bring several benefits for our investors.
After licensing DoFinance will start cooperation with several experienced European Loan Originators to offer their products to the investors. Products will be offered in the form of securities issued by the specialized issuer in the form of debt notes that are considered to be a full fledged financial instrument in every sense. Notes will be linked to loan portfolios issued to private individuals. These notes will be issued under terms and conditions described in the special prospectus supervised by FCMC, that will also be made available to the investors before financial instrument purchase.
Before starting to provide portfolio management services under IBC license all investors will be bound to fill out a questionnaire. The aim of it is to define investor appropriateness pertaining to the offered product, namely – whether the portfolio management services are suitable for the investor in question.
The aim of the Suitability & Appropriateness evaluation is to determine if the appropriate product and/or service is suitable for the specific investor. It is DoFinance’s obligation to ensure that the investors are informed of the associated risks with investing that derive from portfolio management services. In case the investor is not experienced or knowledgeable in the respective field of investment finance, DoFinance has to provide information about the associated risks, so that the DoFinance investors can determine if DoFinance services are appropriate for them. During this process investors will be assigned to specific categories as retail client, professional client, or qualified partner. Each following category provides more investment possibilities and less risk-protection respectively.
After obtaining the IBC license DoFinance will become a member of the national investor compensation scheme established according to the requirements of EU Directive 97/9/EC. If DoFinance will fail to meet its obligations towards the investor, retail investors will be entitled to a compensation of 90% of the resulting loss, up to a limit of €20 000. The investor compensation scheme does not compensate investors for losses resulting from:
- Changes in the price of an investment
- The default of a borrower, lending company, or issuer
- The lack of a market for the purchase or sale of an investment.
- The investor protection scheme does not apply to current investments in loans via assignment agreements.
One of preconditions of becoming part of this scheme is ensuring sufficient funding of all available amounts in DoFinance accounts. Dofinance is determined to ensure fulfilment of this condition according to activities described below.
Operational issues
Besides the licensing process DoFinance is putting its main effort in collecting the funds from current Loan Originators and monitoring the loan collection process from end borrowers. Currently it is known that DoFinance experiences a delay in processing of payout requests.
According to DoFinance internal classification all funds retrieved from end borrowers are classified as Available amount in Investor’s profile in platform automatically due to direct passing of data from LO to Dofinance. These available funds by its nature consists of three main sources:
- Money in a special segregated account in DoFinance that holds only client invested amounts and used for investing or payout to investors.
- Money in transit – after collection that is transferred to DoFinance.
- Money that the Loan Originator currently holds – after collection from borrowers LO’s must transfer it to DoFinance.
DoFinance is processing every payout request immediately after receiving funds from LO’s. Current delays in payout are related to not receiving all available funds from LO’s, after reviewing the situation in depth, there is the following cause – As we have informed it in our previous blog posts, Loan originators are currently active only in the collection process and are not issuing new loans due to reasons described earlier. Their current collection amounts of portfolios that are not assigned to DoFinance investors are not sufficient to cover all of their debt collection costs.
According to the assignment agreements Loan Originators obligation is to provide service to the assigned portfolios and running of all systems necessary for Loan Originators ability to service and collect DoFinance investors loan portfolios. Therefore, this causes Loan Originators inability to transfer all collected payments from borrowers to DoFinance. To solve the situation, DoFinance has requested Loan Originators to actively look for opportunities to sell their portfolios to ensure cash availability to be transferred to DoFinance for available amounts.
According to the latest communication, Loan Originators plan to sell part of their portfolios within approximately one month. This transaction should provide necessary funding to recuperate funding shortage on Loan Originators side.
As soon as any funds are recollected, DoFinance proceeds with distribution among existing investors taking in account the received amount relative to the total amount due.
Last month recollection report
As for the general collection process from end borrowers DoFinance is providing reports describing initial investments and status of collection.
Poland for the last period:
Indonesia for the last period:
This sums up todays blog entry.