Every investment you make contributes to supporting hardworking entrepreneurs in emerging markets, striving to expand their businesses. However, before committing to a project, make sure to read about the risks associated with crowdfunding investments.
To mitigate the risks of your investment, Lendahand put an extensive Due Diligence and Approval Process in place to select and monitor borrowers. You can read through the whole process on the page: 'How does a new project come on the platform?'
As part of the risk mitigation, Lendahand utilizes a partly automated credit scoring model. The credit score assigned to each project determines its risk categorization, assisting you in making informed investment decisions. You can find more information about our credit assessment here.
Investing through Financial Institutions
This is the most common investment. If you choose to invest through a Financial Institution (FI), you limit your risk.
Investing through Financial Institutions, you diversify your investment across multiple Micro, Small, and Medium-Sized Enterprises (MSMEs) in emerging markets at the same time. This type of investment comes with a layer of protection, as the financial institutions cover most of the risk of defaults and currency fluctuations (in the case of euro projects).
The credit score of these loans is between A and B (on a scale of A to E), and the historical write-off percentage since 2013 for this type of investment is 0.37%. Investing in a financial institution is rewarded with an annual interest rate between 4% - 7%.
Invest in a single business
Investing in one (large) business means directly investing in a privately owned for-profit business in an emerging market. You will primarily have the opportunity to invest in impactful companies active in the clean energy and agricultural sectors.
With this type of investment, default risks are not covered, as there is no intermediary between you and the business. The credit score of these loans is B or C (on a scale of A to E), and the historical write-off percentage since 2013 for this type of investment is around 5%. Investing in a business is rewarded with an interest rate between 5% - 9%.
Advise from the AFM
The Autoriteit Financiële Markten (AFM) advises to commit only 10 percent of your investable assets via crowdfunding. It is also highly recommended to spread investments across different borrowers.
Important notice: Remember that despite all our efforts to mitigate risks, your money is not guaranteed. In the worst-case scenario, you could lose some or 100% of the money invested. So, never invest money that you can't afford to lose.