Returns, Interest & Risks at Lendahand

Understanding Returns, Interest & Risks at Lendahand

Your investment contributes to supporting hardworking entrepreneurs in emerging countries. But what is the expected return on your investment? And what about the risks? That's what we explain on this page.

Returns

At Lendahand, you invest in loans for entrepreneurs in emerging countries. This almost always happens through an intermediary: a local financial institution with a social focus and strong knowledge of the region. The local institution repays your investment during the loan term. With each repayment, you also receive an interest payment. The financial return on your investments is therefore a simple calculation: repayments plus interest minus any write-offs.

The average annual interest rate in 2024 is 6.71%. The historical average write-off percentage for projects with a credit score of A or B is 0.37%. This brings the current expected net return to 6.34%. On top of this, there’s the social return.

Curious about the interest rates available today? View our projects here

Interest

Most loans you provide with your investments have a maturity of 24 months. Typically, you receive a repayment of part of the loan every 6 months. Along with this repayment, an interest payment is also made.

Interest rates vary per project and currently range from 5% to 8% annually. The differences in interest are the result of several variables. The most important variables are: international and regional interest rates, risk, loan term, fluctuations in currency exchange rates, the popularity of the borrower (competition with other financiers), and negotiations with the borrower.

See here the variation in interest between different projects.

The interest rate that the borrower pays for the loan is higher than the interest you, as an investor, receive. On average, this fee is 3% annually. This fee covers Lendahand's operating costs. For clarity: this fee is not deducted from your interest.

How much interest does an end borrower pay? The end borrower is the person or entrepreneur taking out a loan from the local financial institution. The interest the end borrower pays equals the interest you receive plus the Lendahand fee plus the margin charged by the financial institution. The financial institution charges a margin to cover costs (such as currency conversions and operating expenses), manage write-offs in their portfolio, and a reasonable profit margin. Lendahand only works with financial institutions that make a positive social impact, charging defensible costs and modest profit margins. We find it important to work with profitable financial institutions, as this increases the likelihood of your loan being repaid.

Risks

Investing involves risks, that is also the case for investing with Lendahand. It is possible that a borrower cannot repay the loan, repay it in full, or on time. In such cases, you may receive the loan later or lose your investment partially or entirely.

The risk of investing at Lendahand is best explained through past figures (from 2013 to now). Note: past figures do not guarantee future outcomes. These figures consider only investments with a credit score of A or B, the only investments Lendahand offers since 2023.

97.4% of investments are repaid on time. A payment is considered 'on time' if it is received within 30 days of the due date.
0.37% of investments have been written off. This means the loan will no longer be repaid.

With the projects on our website, we aim for a healthy balance between social and financial returns. We want your investment to make an impact and be repaid properly. That’s why all projects you invest in have at least a credit score of A or B.

View the credit scores of available projects, starting from €10 investment.

Many beginning Lendahand investors think that investing in developing countries is highly risky. This perception is not accurate. This is because most of our investments are facilitated through established financial institutions:

The institutions do not pass on missed repayments by an end borrower to Lendahand investors.
The institutions are supervised by local financial authorities. This means they are required to maintain financial reserves, which are also monitored.
The institutions and Lendahand agree on thresholds for the institution’s financial metrics. We review these metrics every three months. If an institution no longer meets such a threshold, Lendahand will no longer provide new loans to the institution. In some cases, we even require accelerated repayment of outstanding loans.
The institutions are experienced in working with international financiers. This makes the collaboration process relatively smooth and secure.

Avoid a negative return with advice from the AFM: do not invest more than 10% of your freely investable assets in crowdfunding. Additionally, it is strongly recommended to diversify your investments across different borrowers. As a final rule of thumb: never invest money you cannot afford to lose.