Last updated - 10 December 2018
A Mintos lender blew up last year
In 2017, Mintos lender Eurocent failed, and defaulted on its Mintos ‘buyback guarantee’ commitments. This is likely to lead to signifcant losses for Mintos investors as a high proportion of Eurocent customers defaulted on their loans.
This has inevitably led investors to pay more attention to the quality of the other lenders on the Mintos platform. Last year, we listed 9 lenders that we would not touch right now. We have now broadened our analysis to cover all of the Mintos lenders. We highlight the lenders with the strongest features.
It has been difficult up to now to compare each lender on the Mintos platform
Unfortunately, the information provided by Mintos about each lender is not consistent. Some lenders have not provided any information since December 2016. Others provide very regular updates. Information is provided in different currencies, languages and accounting policies. The quality of information provided varies enormously. Some information is audited, in many cases it isn’t. There should be minimum standards of reporting and disclosure. At the moment, Mintos allows the lenders to choose what they disclose. This results in lenders failing to disclose important information that may not be convenient for them, such as a history of losses, or rising levels of bad debts.
Key financial information of each Mintos lender
The table below captures the key financial information for each lender. This can be useful to quickly lookup the profile of each lender, and compare the strengths and weaknesses of each one.
All Figures in EUR million (annualised where appropriate):
Our Mintos lender ratings
Our Mintos lender ratings are based on 5 characteristics – profitability, capitalisation, size, track record and the quality of their reporting. We have allocated marks out of 20 for each metric, giving a total score out of 100. Mintos have recently introduced their own ratings – from A (best) to D (default), which we have included as a comparison.
Top rated Mintos lenders
Mogo and ID Finance earned the equal highest scores. Mogo is a popular lender on Mintos as the loans are both secured by vehicles and most receive buyback guarantees. Mogo has been reporting good results up to Q3 17. Mintos have informed us that they will publish updated results shortly, but performance remains good. ID Finance is another lender that is well capitalised and has produced strong results over the last 2 years.
We think investors can have some confidence in any lender achieving a score of 60 or better. Lenders meeting this benchmark include Credissimo, 1pm plc, Credit Star, Capital Service, iute Credit, Vizia/Banknote, Cream and IFN Extra Finance.
Our views on the new lenders
Lenders that have joined during 2018 and scored well include tech focused lender Credissimo (85), British lender 1pm plc (77), small but profitable lender Lime Loans (73) and Placet Group (71) and Credius (70). In October 2018 Kazakhstan lender LF Tech joined Mintos. It achieved a fairly strong score of 66 due to its profitability and strong balance sheet structure, although we note that Kazakhstan is a higher risk country for investors.
Many of the other lenders that have joined are high risk, as many have poor financial disclosures, weak balance sheet structures, a history of losses, and are exposed to currency risks.
We are surprised for example, that a company like Bino, that only started lending in 2017 would be invited onto the Mintos platform, particularly when no information about the capitalisation of the company is available. Several companies have not provided any information on their profitability, which implies to us that they are likely to be loss making currently. It is almost impossible to determine how likely these businesses will be able to honour their buyback guarantees in the future.
In November 2018 Mintos introduced 3 new lenders. The first, Tengo.kz, scored a record low score of 13/100. We really wonder how any Mintos investor could explain to their friends and family how they got comfortable deciding to invest in loans based in Kazakhstan, from a new startup lender with a very young CEO with 3 years of financial services background, and who is not willing to provide a balance sheet. If you are bullish on this we would love to hear why in the comments below…
The second new lender to launch, Cashwagon, was awarded a low initial rating of C+ by Mintos. We can see reasons why Cashwagon would attract a low rating. Rather than launching in one country, and making sure their credit models were performing well, they decided to launch in 5 different major countries within a year. That is very unusual and creates a lot of extra risk and complexity. The business has been suffering losses each month. Very few lending businesses have ever opened successfully in so many countries so quickly. There are however two reasons why Cashwagon gets a higher score than Tengo. Firstly, real money has been invested into the business – US$12.1m to date, and the debt to equity ratios are reasonable at the moment. Secondly, the company has provided up to date monthly financial statements, which is rare amongst Mintos lenders, and we have awarded them for their disclosure quality.
Another lender to launch with a C+ rating was Albanian lender Kredo. Kredo is similar to many other lenders that have joined Mintos in 2018 – a startup operating in a ‘frontier’ country with no real track record to speak of. The one positive thing to say about Kredo is that it had strong capital ratios as of September. However they did not provide any data at all on their lending performance to date or their profitability, so it’s not really possible currently to know whether they can be a viable business.
In December 2018 Mintos introduced Peachy from the UK (17/B), and Efaktor (45/B-) from Poland. We find it difficult to understand how Mintos was able to assign a ‘B’ rating to Peachy. It is a business with a track record of losses, and it currently has a negative equity position (it owes more money than it has in assets). There is a lot of volatility in their past financial figures that has not been explained anywhere adequately. We are more positive on Efaktor. This is a factoring business that has demonstrated stable performance and has moved into profitability as it has grown. The reason that it has not achieved a higher rating is that it is one of the more highly levered businesses listed on Mintos, with only 6.3% of equity backing for each loan that is held compared to the average of 34%.
Recent rating changes
In July 2018, several lenders published new financial reports, which has resulted in several rating changes. Lenders with rating upgrades included iute Credit (up 7 to 69) and Debifo (up 9 to 34). Lenders with notable rating downgrades included Capital Service (down 10 to 62), Mozipo Lithuania (down 9 to 47), Cash Credit (down 7 to 35) and BIG Microfinance (down 5 to 54).
We have reviewed the recent bond prospectus issued by Mogo that contains financial information that has not yet been published by Mintos. We have downgraded our rating from 83 to 76. While the company continues to be very profitable, it has also increased its leverage significantly over the last 12 months.
Now you’ve reviewed our latest Mintos lender ratings – what’s the fastest way to choose the best loans on the Mintos Primary Market? Check out our new Mintos Loan Scanner page, which allows you to compare very quickly the current interest rates, loan availability, and ratings for each lender on the platform. We will keep it updated, so check it next time you are thinking of buying more loans, or adjusting your auto-invest settings.