Direct lending, much like the internet itself, is a global phenomenon. While many of the biggest names are based in the U.S., online loan origination is growing rapidly on nearly every continent. The Orchard Blog has mostly focused on LendingClub and Prosper, the household names of U.S. P2P lending, as both of these companies have made vast amounts of data accessible to the public. Fortunately, the spirit of open data is alive in parts of Europe as well, and today, we will explore the loan data made available by isePankur, a young yet rapidly growing consumer P2P originator based in Estonia.
Growth Trend in Loan Volume
In the graph below, we show the cumulative balance originated by month to borrowers on isePankur. As we can see, the site recently passed €10MM is loans issued, growing from €175K in January 2013 to €1.7MM issued in January 2014.
While isePankur is based in Estonia, it claims to serve customers “in all 28 EU member states and Switzerland” on its website, showing clear aspirations for expansion. In 2013, the platform funded its first loans to borrowers outside its home country, expanding into Finland, and then into Spain. As the graph below illustrates, this increased geographic reach has accounted for a large portion of its recent growth.
Loan and Borrower Details
isePankur offers personal unsecured term loans that amortize over a fixed period at a fixed interest rate, much like the products offered by its American counterparts. Let’s take a look at some of the other characteristics of these loans.
As we can see from the graphs below, nearly half of isePankur loans are for a borrower-stated purpose of Loan Consolidation, with Home Improvement a distant second at under 20%.
If nearly 50% of the borrowers on the platform are doing so for the purpose of consolidation, this would indicate the importance of interest rates. For consolidation loans on isePankur, the mean annual interest rate is 26.4%, and as the graph below indicates, rates appear to be tightly clustered in the high 20s. As borrowers would conceivably only want to refinance a loan at a lower rate, this would mean that the loans being refinanced in these countries have relatively higher interest rates than those to which US. borrowers are accustomed (for reference, the average interest rate on Prosper for 2014 to-date has been 15.4%).
Credit Ratings & Performance
While many direct lending investors are familiar with the alphabetic credit grades of the various major originators, isaPankur has a somewhat different rating system, perhaps owing to the availability of credit data in the markets where they operate. The table of potential credit scores is as follows:
As one would expect, delinquency rates are substantially higher for borrowers with more recent payment problems:
Conclusion & Outlook
As with any new dataset, there are a variety of interesting analyses to perform, and in future posts using the isePankur data, we will examine borrower demographics, credit history, and loan performance in greater detail. Of course, the big story here is about access to information. The transparency and availability of data from Prosper and LendingClub has certainly helped investors to become confident in those platforms, and with great results. While isePankur’s dataset may not be quite as comprehensive as those of its American counterparts, its very existence and availability are major steps in the right direction. We hope that all direct lending originators will come to see data transparency as a core tenet of their businesses, one that will continue to propel the growth of the entire industry.