With a loan of EUR 100,000 Umati can provide working capital loans to 400 e-commerce vendors in Kenya.
- Local partner investment
- 20 new jobs
- 400 people reached
NB: Local partner Umati is now focussing more on providing working capital loans to online sales companies in Kenya. Typical customers look to Umati to provide customised and collateral-free working capital using historical transaction data and a lien on their cashflows. Default risk and currency exchange risk still covered.
Mike and his crew make high end, modern furniture from a low-income area of Nairobi. They are now able to use the internet and such platforms to sell to middle-class consumers in richer neighbourhoods. In Mike's case, his first USD 300 loan was used to buy supplies enough to make 15 or so beds.
Mike like other Umati Capital borrowers uses an e-commerce classifieds platform to advertise their products online to a large audience increasing sales opportunities for their usually small and medium scale businesses in the country.
The small businesses will typically be run on a lean basis but have very professional high-quality storefronts and online presence on the e-classified's platform. In this way, smaller shops are able to make a sale to consumers that typically would never have physical contact with under normal circumstances.
It is worth noting that in this group of 400 borrowers, 55% of the borrowers are women. On average, the monthly turnover of the group is about 1000 $ per month per month, translating to an average take-home income/profit of about 100 $ per month.
Products sold on the platform are all legally tradeable goods sold in Kenya with the most popular categories being Mobile Phones and Accessories, Apparel and Home-Living (fixed) goods such as furniture.
The purpose of this loan is to provide short-term working capital USD 300 loans to a group of 400 small business borrowers aggregated on the platform.
In providing efficient, well-timed working capital to these businesses, we approximate that borrowers should see an increase in take-home income as the working capital.
This loan represents the first time these legally operating businesses will be assessed and provided credit based on data of their performance as businesses.
In Mike's case, "The banks allow us to open accounts and to keep the money we have, but as soon as they hear we are from the low-income neighbourhood, even standard small business credit is out of the question."
|Company name||Mike Irungu|
|Sector||Wholesale / Retail|
Impact of this project
- With this investment 20 jobs are created
- With this investment 400 people are reached
About the risks
What are the risks of investing money?
Our local partners cover the risk of currency exchange rates and loan defaults. They do this by maintaining financial reserves for this purpose . In addition, there is an option to claim their equity if needed. While these measures are intended to minimize the risk to funders, our local partners face risks of their own that could effect their ability to secure a loan. These include: - bankruptcy - currency exchange rates - fraud - operational risks - political and regulatory changes - natural disasters or epidemics.
If you invest direct in a company, hence not via a local partner, risks of default are not covered. As the risk that comes with direct lendings is generally higher than an investment through a local partner, the interest rate is also higher.
There is also some operational risk at Lendahand. An example might be that Lendahand is unable to find shareholders to finance their activities. In such a case, Lendahand will handle outstanding loans at the best of its ability. At the same time, our ability to legally address non-payment from local partners becomes understandably difficult.
How does Lendahand minimize the risks?
Local partners must adhere to our mission and work with us to provide loans that are affordable. This insures that local entrepreneurs have access to financing that allows them to grow their business. A local partner must also have a track record. In other words, they must have proven themselves as a meso-credit provider for SMEs. This means (for instance) that the partner must have a solid credit portfolio, along with enough buffers and equity to compensate for unexpected downturns. We also check the organizational structure of the partner and how robust their (internal) procedures are. Finally, the loans that a local partner receives via Lendahand must be in proportion to the partner's total balance sheet. A healthy balance between effectuating influence and independence is crucial. If you would like to receive more information on the financial indicators we employ, please contact us via firstname.lastname@example.org.
When currency exchange risks become too high for a local partner, Lendahand will urge the local partner to cover these risks. In some scenario's the local partner is contractually obliged to comply with these demands.
Lendahand will always conduct due diligence when a Company requests for a direct loan. To provide more insights on risks, an independent partie comes in to perform brief analysis on direct loans. The results can be downloaded on the project detail page of the direct loan. However, this analysis serves primarily as a tool for your own opinion and conclusion. Pay attention to the fact this analysis is not an investing advice.
Does Lendahand provide guarantee on the loans?
Normally we don't. Local partners take care of the repayment, even if (some) entrepreneurs are unable to do so themselves. If the local partner is for some reason unable to repay then there is a chance of partial or full loss of your money. For this reason Lendahand only selects financially solid partners based on strict criteria.
Also, for most direct loans no guarantee is provided. For these investments currency risks are covered however.
Sometimes - and only for some direct investments in Africa - our partner Sida, part of the Swedish government, will provide a guarantee with a maximum of 50%. If this is the case, it will be indicated explicitly.
Does Lendahand have a license or exemption?
Yes. The Dutch Authority Financial Markets (AFM) has provided Hands-on B.V. (with trade name 'Lendahand') in September 2016 with an investment firm license in accordance with article 2:96 of the Financial Markets Supervision Act (Wft). Placing orders on Lendahand's website is therefore an AFM regulated activity. Lendahand also meets its minimum capital requirements of EUR 125,000 following its license as required by De Nederlandsche Bank (DNB).
Lendahand uses an exemption from an approved prospectus that is available up to EUR 5 Million per year.
How safe are my personal details?
We adhere to strict safety requirements with regards to private and payment details. All sensitive data is sent through an encrypted connection (https). Also, data is stored (encrypted) in a secured facility provided by AWS: the world largest hosting service. Customer documents can only be retrieved by a secured connection and multi-factor authentication.
What happens if the local currency devaluates?
Our local partners and Companies bear the exchange rate risks. We settle the loan, redemptions, and interest payments in euro.
Does Lendahand use a third foundation fund?
What happens with my money if Lendahand goes bankrupt?
If Hands-On BV (containing the brand name Lendahand) would go bankrupt trades between Lendahand and payment service provider Intersolve EGI would cease immediately. Intersolve will then transfer the funds in your personal wallet to your bank account (Note: if at this time the project you have invested in has been fully funded and the money has thus been transferred to the local partner, these funds will not be transferred back to your bank account). Intersolve will then in consultation with a trustee handle all repayments between the investors and investees up until the final repayment of the last project has taken place.
Additionally, Lendahand is part of the investor compensation scheme (ICS). This scheme aims to compensate individuals and small businesses who have trusted money and or financial instruments (such as notes or options) to a licensed bank, investment firm or a financial institution in case the financial firm is unable to meet its obligations arising from claims related to the investment service (in other words, if Hands-On BV is not keeping track of the acquired notes by investors in the Wge depot correctly). The ICS guarantees an amount of up to EUR 20,000 per individual. For more information, go to www.toezicht.dnb.nl/en/2/50-202210
Why is my money going via Intersolve EGI?
What happens when a local partner goes bankrupt?
|Equity / total assets||41.28%|
|Write-off ratio last 12 months||14.99%|
|% investment amount in arrears (>90 days)||7.18%|