Let us introduce you to a new loan provider from Kazakhstan whose loans you can find on the Bondster investment portal from now on. We have interviewed its CEO Alexey Sidorov and asked him about his company, strategy and investment loans they offer on Bondster.
Could you please describe your company shortly?
Microfinance organization "Dengi Govoryat" with "TengeDa" brand name is a member of Silkway Group, a fast-growing fintech operating in Kazakhstan. We are on a mission to boost responsible lending through technology-enabled products and user-centric approach. We created an ecosystem which offers a better way for users to access credit than any other single lender can offer. Our Prodengi.kz marketplace connects consumers with multiple banks and alternative lenders including our own.
Unlike traditional online lenders, we offer our loan products amongst others on the same platform - transparently and with no extra charges. The company started its way in 2010 as a financial price comparison website and over the years grew to become a diversified business with 2 revenue streams: balance sheet lending and commission-based revenue. We have over 100 employees, 2.5 mln users, $5 mln loan portfolio and created $ 150 mln in loan originations for other lenders. Our newly established lender TengeDa (newly listed on Bondster) was created to meet the regulatory requirements introduced in Kazakhstan in 2020.
What opportunities people have to borrow money and what is specific for them?
Our group’s mission is to help people meet their financial needs by providing user-friendly access to credit and offering single use loan is not our priority. Instead of that we offer the possibility of getting and paying back a small loan and then getting the loan size increased over time, under our “credit ladder” concept. So, our borrower has an opportunity to borrow from us directly, and also can choose a bigger loan from any of our partners through the same platform. This creates added value for them.
What is your position on the market?
Our business model combines lending revenues as well as commission-based revenues, because when we do not lend to our users, we still earn a commission by referring them to our partners. So direct comparison to other lenders could be somewhat misleading. Our lending business’s market share is 5% of the online lending market. As regard to volumes, prior to the pandemic we would typically lend around $ 12 mln per year and generate $ 50+ mln in loan originations for other lenders (banks and microfinance institutions).
Is lending in Kazakhstan subject to any regulations?
Yes, consumer lending has been fully regulated in Kazakhstan since January 2020, which was not the case before - online lenders, pawnshops and credit cooperatives were unregulated in the past. We have 3 major areas of regulations in lending and financial services: 1. Consumer protection rules which define caps and limits for interest rates, late payment fees, currency, loan size, tenor, information disclosure, debt collection practices, etc. 2. Prudential rules which define such things as minimum capital requirements, lending limits, financial ratios and regulatory and financial reporting standards. 3. Anti-Money-Laundering (AML) and Terrorist Combat requirements which also are applicable to us. We meet all the regulations.
Which kind of loans do you offer in your country and which of them will you offer on the Bondster marketplace and for what interest rate and other condition?
We used to offer single payment loans (SPL) and installments loan (IL) but our installment loan product is currently on hold due to risk management's concerns over possible negative impact of pandemic on this loan product, which was new to us. We plan to resume IL business in 2021. For the time being will only offer SPL products on Bondster. We think that EUR loans should sell well on Bondster at around 10-12% p.a. with full buyback guarantee and 10% “skin in the game”.
What is the structure of your clients or target group?
As the group we offer services to all major customer segments: 1) Prime 2) Near-prime and 3) Subprime. Please note that, when I say “we provide services'' I mean that we offer free information about where it's better for them to get the loan and so we interact with them through our platform. But we lend only to Subprime and Near-prime consumers who are essentially underbanked, and this is why they are our target market. We don’t lend to bankable clients and don’t compete with banks.
What people usually borrow money for?
Typically, they borrow to cover small, short-term gaps and unexpected urgent needs, such as paying bills, medical expenses, to fix broken appliances, etc.
What is your average interest rate on loans?
On average our SPL interest rate is 30% for up to 45 days, for installment loan it is 50% per annum.
Have you been affected somehow by covid-19 pandemic? How did you cope with the situation?
I think there is nobody in this part of the world that was not affected by COVID-19. We’ve seen both good and bad effects from global pandemic. On the good side of things, we were forced to cut down all the costs, downsize headcount, optimize business processes and learn how to operate in the “new normal” environment. Which was initially very disruptive, but turned out to be a huge benefit for us, actually. On the other hand, we’ve seen a sluggish payback momentum on our portfolio in first half of 2020, a very sharp decrease of sales volumes due to concern of possible deterioration of loan portfolio quality. At the end of the day, we became a bit smaller but stronger company now and already rebouncing sales and keeping on the profitable growth with 2020 looking to end with twice smaller profit in comparison with year 2019. Given that some players in the market weren’t able to survive or will generate huge losses our 2020 results are not so bad.
Could you please describe your risk management policy briefly?
It's very data driven and automated. Over the past 6 years we’ve developed a number of machine learning algorithms run by our decision engine which power our credit scoring, lead qualification and debt collection scoring systems. Today, we process and make automated credit decisions for 98% of our loan applications with no human intervention in a matter of seconds.
What will you use the capital raised for?
We want to finance our loan book and keep on growing the portfolio and get back to pre-pandemic sales numbers of $1-1,5 mln of loan issuance per month and grow further.
Do you have any other idea an investor on Bondster should know about your company?
We stand for transparency and ethics, and want to do good for the consumers, so you and us can make money in a good way. I personally believe that only with high ethical standards the investor base can grow and so our business. Our strategy is to build long-term relationships with Bondster investors, no matter what the size of the investment is. Strong relationships and trust don’t happen overnight, so we are ready to earn your trust. You and we will benefit from these relationships in the long run. I’m also excited about the fact that when two fintechs collaborate, like our example with Bondster and TengeDa, this creates the opportunity for private individuals to benefit and earn extra money for their families.
You find more information about TengeDa in the Loan providers section.