1.7% cash return in August
In August, our P2P portfolio again generated 1.7% in cash return. ROI for this year is 13.6%. The bad news is that 2 loans may turn non-performing this month. In a worst case scenario, we estimate a 4-5% write-off.
3 loans missed their August payments. Out of the 3 loans, 2 are considered to be more ‘serious’ – as they have not yet cleared their July repayments.
Across the different crowdfunding platforms, there is no consistency in what constitutes a loan default or a non-performing loan (NPL). For simplicity’s sake, we will write off the two problem loans if the borrowers fail to make any payment by end of September. If that happens, we estimate a 4-5% impact.
For the month of August, we have invested in 27 invoice deals with Capital Match. One invoice has had a small partial repayment. The other invoices should come due over the next several months.
Investing in invoices requires a slightly different approach to investing in loans. Firstly, a large part of the risks reside with the debtor (and less on the invoice seller). So the focus should be on the debtor’s credit profile and the seller-debtor’s relationship. Secondly, some debtors tend to drag their feet on payment (even going beyond the credit terms). Hence, having a low advance ratio is important as it allows the invoice to continue accruing return even if the payment is delayed. Finally, invoices – unlike loans – are small in quantum and short in duration. This makes managing a portfolio of invoices tedious. Automated investing is a good solution.
We also started investing in Crowdo’s Indonesia p2p loans. Our first month (Aug) portfolio return is a miniscule 0.4%. We were busy diversifying our cash into different loans. As a result, some of our bids were confirmed late, which means the loans earn interest only in September. Nonetheless, subsequent performance should be better. All our current p2p loans are secured with gold or jewellery collaterals, hence we do not expect any defaults. We’ll have more to share for this portfolio at a later date!