In this article you will read about:
- Risk management and COVID-19 effect in Poland
- Risk management and COVID-19 effect in Indonesia
- Portfolio composition as of today
The main things that loan originators currently are doing, is closely monitoring the effects of COVID-19 on its target client base. It is constantly evaluating the viability of the current business model and considering several spin-offs. These spin-offs are other lending products that would be far safer, but also with lower returns.
On the side, all companies have managed, still to maintain the interest of few financial and technological investors. These investors see a potential to invest financial capital in combination with technological capital and know-how to up-scale the current business model of Alfa Finance Group. With the improving situation of the global pandemic and reduction of lockdowns in several regions, the company is positive about restarting the business at a bigger scale soon.
Risk management overview
The government of Poland imposed a very strict lockdown measures during initial phase of Covid-19 crisis. Stay-at-home was mandatory for wide range of businesses that caused significant decrease of loan repayments for most Poland’s Loan originators, including Tanikredyt.pl. Currently country is slowly easing the lockdown measures, and, in some industries, people are returning to their workplaces.
Another major event related to lending business was Polish government decision to impose extraordinary interest and penalty rate caps that, in combination with Covid-19 effect on the society, made lending very challenging. Interest income could not cover expected default rates of the customers.
In the light of this, risk team’s decision was to significantly reduce loan issuing volumes and put all efforts on collection processes. To ensure that all customers, who currently are unable to meet their obligations, will be kept on close communication loop with debt collectors and if necessary, court collection can be initiated. Currently, the Loan Originator is starting court collection immediately, in the case the borrower becomes irresponsive and has delayed payment for more than 90 days.
In parallel, Loan originator is continuously issuing very small batches of new loans to keep measuring potential quality improvements, and to keep the scorecards up to date and be ready to restart larger scale lending as soon as the data will suggest doing so.
The most recent data show a positive trend in improvement of the loan quality, which suggest that there is a good hope that market could return to a better state. Nevertheless, Polish Loan Originator is exploring possibilities to offer more secure loan products.
Indonesia’s response to Covid-19 was based on varying measures by province and includes lockdown for several provinces, restrictions for gathering, closed non-essential businesses, travel restrictions and many other measures. As policies are not always consistent and its implementation was not always predictable then country was significantly impacted in terms of preparedness to the effects of this crisis.
Repayment quality of the Loan originator Kreditcepat.id was significantly impacted. Risk management decision was to significantly reduce lending volumes right after start of the pandemic. Core activity now in Indonesia is to offer extension of payment date and restructuring to all clients that are unable to repay now. Most part of current portfolio constitutes clients that have extended the repayment due to Covid-19 effect. Such approach by the Loan originator currently seems to be rather effective, nevertheless borrowers’ ability to repay after extension period is at higher risk due to significant loss of income for many of our clients. We are closely monitoring current developments.
New loan issuing will restart after Loan originator will be able to prove improvement of clients’ creditworthiness. Also, Loan originator has started to issue new productive loans with lower risk levels and maturities up to 6 months as well as new consumer loans that are backed by the guarantee of their employers. These new business lines are under testing now and if successful, will be made available for new investments. Furthermore Loan originator received a certificate by the local regulator allowing to connect to Fintech Data Centre (national database of loans issued by registered P2P platforms).
Snap shot of assigned loan portfolios in platform as of 20.05.2020
|Current||1-30 Days late||31-90 Days late||91+ Days late||Total|
|Indonesia||1 580 680||205 542||436 196||23 570||2 245 988|
|Poland||100 646||232 272||432 048||543 721||1 308 687|
|Total||1 613 178||437 814||868 244||635 439||3 554 675|
|Reserved amount*||251 163|
|Available amount**||115 156|
|Profit transferred to investors||669 992|
|Invested in platform||7 348 493|
*- Amount available in Active investment programs (waiting for originator loans)
** – Amount available in virtual accounts