Some time last year, I wrote an entry about social lending and briefly mentioned Crowdcredit, an Itochu-backed social lending startup. That was also a couple of months after I first invested with them with about 300,000 yen capital.
It’s been 13 months now and I finally have one completed funding project, and thus, I’m back to talk more about it.
The platform allows investments starting from 10,000 yen in increments of 10,000 yen and so, I decided to study a few of their available funding projects and split my 300,000 yen to 3 separate funds at 100,000 yen each.
As I’m fairly risk-averse, it took me a long while before I set my eyes on the three funds I want to invest in, two of which were loans to eastern European nations with currency hedge and one was an automotive loan to Baltic states. The first two funds are for 13 months while the last one is for between 6 to 66 months, depending on where my fund is used.
While funding periods used to be from 7 months to 3 years, most of the funds I see recently are from 13 to 37 months with such periods as 13, 19, 25, 31, 32, 33, and 37 months. Car financing and property loans typically do not follow these schedules and can range from 6 to 36 months or 6 to 66 months.
Most of the funds pay you the interest + your capital at the end of the funding period while a tiny few pay out a little bit every month. Among the three funds I invested in, the two for eastern Europe pay out at the end of the term while the Baltics loan pays me every month.
The benefit of getting paid every month is that, although I only put in 300,000 yen and invested all the funds into projects already, the monthly payment allowed me to use those returns to fund other projects since they only require a minimum of 10,000 yen to invest in. It’s only been a year since I invested in it and although I only have 1 funding project completed, I’m already invested in 8 other projects without having to pump in more capital.
The fund that was completed estimated a return of about 9.1% p.a. and a Profitability Index (PI)—otherwise known as Profit Investment Ratio (PIR) or Value Investment Ratio (VIR)—of 1.094. Because the funding project runs for 13 months instead of 12, and there’s a 2% management fee + 5% currency hedge, it is very cumbersome to estimate how much you can expect to receive from the investment by manually calculating based on those percentages. The PI here, thus, is very important because it is a very convenient indicator to tell you how much you can expect to make out of investing in each project. In this particular fund’s case, if I put in 100,000 yen, I should expect to receive 100,000 * 1.094 = 109,400 at the end making a profit of 9,400 yen.
The actual amount I received was 9,302 yen, which isn’t too shabby. For a 13-month period, that would mean the actual return was about 8.58%. However, there’s tax withholding of about 20.4% on the profit so my final take home profit of 7,403 yen was really about 6.83% p.a. Taking this into account, it would make very little sense to invest in funds that offer returns of under 5% given the risk one has to undergo just to get that 3-4% final profit.
Most of my invested funds are placed in the eastern European market with the remaining in other parts of Europe although there are several other options available such as the US, Brazil, Russia, Mexico, Peru, Georgia, and Pakistan markets. I haven’t had much time to go through the prospectuses of the newer funds and assess the risks but I don’t see any urgent need to do so since the eastern European funds are performing decently. Automotive loans, however, aren’t doing as well as forecasted but hopefully I can still get some bit of profit out of it. So far, I’ve only managed to go through a couple of Russia and Peru funds and find them too risky to get my hands on.
All in all, I find Crowdcredit a pretty decent platform so far. Should my opinion change someday, I’ll update here again. So if you’re interested and don’t mind taking the risks, you might want to give Crowdcredit a try since bank interest rates are so disappointing.
One gripe I have about it though, is that for the automotive loan funds, even though the sum I put in is already loaned out and I’m receiving the interest every month, I wasn’t informed how long a loan my investment was used on and the actual interest I should expect to receive. The prospectuses did say it’s for between 8 to 14.5%, but still, I’d prefer to know how much and how long my investment will be locked away for.