We've take a second look at the lenders on Mintos
We recently covered the problems faced by the Mintos lender Eurocent. Eurocent made a filing for a debt restructuring only a few months after joining the Mintos platform. That made us decide to check whether the financial disclosures, and financial condition of the other lenders on the Mintos platform were satisfactory.
We remain big fans of the Mintos platform. There are some very attractive investment opportunities on there. However, our analysis has created some doubts about the quality of due diligence that is being performed before introducing new lenders, and the suitability of some lenders to be on such an important platform.
Here are 9 Mintos lenders that we would steer clear of, and why
We are almost not sure where to start with this one. It's not entirely clear whether Mintos really know what this lender is and what it does. It seems to be a finance subsidiary of a Chinese steelmaker that lost a lot of money last year. The only information provided is about the steelmaker - not the Pangmaobao finance subsidiary. Supposedly Pangmaobao provides invoice financing in China. There is mention of Amazon and Disney. Why are Amazon and Disney big consumers of steel in China? Why does a Chinese invoice financing company need to go to a Latvian P2P site to raise money? Does Pangmaobao have any equity or make any money? We will probably never know. We don't think Mintos does either. If you see any Amazon or Disney invoices available to fund on Mintos, make sure to let us know.
Get Bucks!! Great name. It's a subsidiary of My Bucks! That well known Luxembourg based financial services giant. What financials are available? 2015 figures. Are they audited? No. At least they are profitable right? Well, not in 2015. What about the equity? Well, about one euro was invested into the business in 2014 and then it went on to to lose 1.3 million PLN in 2015. Will My Bucks bail it out? Is it doing well now? We don't know.
For some reason we think the people at Nord Lizings are probably nice people. Maybe it's their scandinavian style logo or their nice management presentation. However, Nord Lizings is a rather small business. How small? It made €1,000 profit in 2014 and ramped that up to €60,000 in 2015. What about 2016? They are not saying. Nord Lizings and Mintos seem to know how many loans were outstanding at Dec 2016 (all of €1.6 million) but that's it. The company is so small it's unlikely to ever create too much damage, but it's very puzzling how it was able to join a platform like Mintos in the first place.
What is ITF group? It's a Bulgarian pay-day lender. How much does it charge to borrowers? Mintos says it can be 41% or 2500-4000%. They don't seem sure. ITF must be making a lot of money then? Well, no one knows. The financials for 2016 are not available. ITF broke even in 2015 and 2014. We are willing to overlook all the spelling mistakes and 1980s graphics in the management presentation, but the lack of actual numbers that matter is concerning.
There's a nice story behind Agrocredit. It's been set up to help fund Latvian farmers. Similar to a social enterprise. It's something a lot of investors would like to be able to support. Unfortunately, almost zero information has been provided about how their loans work, how big the company is, and whether it makes money. It also fails to explain what happens if there are crop failures. To give the management of Agrocredit some credit, they have uploaded some 2016 financial statements. However it is a very poor quality pdf entirely in Latvian. It appears to show they are losing money. We think Mintos should help Agrocredit with their disclosures and explain the risk profile better to investors.
Kredito Garantas has such a nice logo it's actually quite surprising that it is a lender with almost no equity, no profits and no loans. Unless we are mistaken it has a total loan portfolio of around €1 million. How on earth it managed to secure a lender slot on Mintos, we're really not sure.
For some reason Mintos appear to know how many employees Acema had in March 2017 (31) and the size of the loan portfolio at Dec 2016 (€32 million). Unfortunately when it comes to things like P&L and balance sheet, the best they can do is produce some financial statements from March 2015. We actually like some of the loans originated by Acema, so we hope that this oversight can be rectified quickly. They at least appear to be a company of substance.
Debifo is actually one of the few companies on our list that have taken the effort to produce up to date investor presentations and financial information. Unfortunately though, their figures show that this is a business with less than €300,000 of equity. That is tiny in any context. We wish them well, but we would not buy any of their loans until they get to scale.
Mano Unija is a Lithuanian credit union with a total of 20 employees, which must make it one of the smallest credit unions in the world. Mintos have provided a fact sheet explaining things such as the year of incorporation (1996), average loan size (€3,500), and loan types (pretty much anything). Whether Mano Unija has a successful lending track record, makes any money, or has any equity behind it, we will probably never find out. It would be nice to know.
We are worried that many investors will assume that Mintos has properly vetted the lenders appearing on the platform. We are not 100% confident that is the case, particularly with the recent Eurocent failure. We do not understand why lending firms with close to zero equity or profit history are appearing on the platform. We also think there should be minimum financial disclosure standards maintained. Until this happens, we think it is important to properly vet any new lender and steer clear of the highest risk situations.
The good news is that the lenders above are generally quite small and represent a small share of the loans offered on the Mintos platform. We continue to believe that Mintos is one of the best platforms available right now for European investors, but it pays to be selective about which loans to purchase, and from which lender.