Mintos is my favorite P2P lending platform and I have invested a significant amount in this platform, so I am monitoring the situation carefully to see how they are handling the difficulties in the market.
With the COVID-19 situation taking its toll on the global economy, many investors may feel unsure about how to react to the current market downturn.
Let’s take a look at how the lending companies on Mintos are prepared for this possible recession
The prospect of recession is daunting for every investor, who will be wondering how their investments will fare in the long run. While no one can control the trajectory of the global markets, lending companies on the Mintos platform have considerable experience dealing with recessions. Some lending companies – like BB Finance– set up their business prior to the 2008 financial crash, and successfully leveraged the global reaction to the market change in a way that allowed them to grow their businesses even further.
In their own words, BB Finance explains:
Since the ‘Credit Crunch’ was a financial sector crisis, and our company had been well-capitalized beforehand, its impact to us was limited in that regard. Of course, it was still important to act fast around higher default rates and new regulations. This time around, we’ve taken that lesson to mind and aim to adapt even faster to changes in the financial environment. A professional and experienced senior team is crucial – if the situation is well managed, the financial crisis may even provide new opportunities towards achieving our long-term goals.
As well as valuable insights based on past experience like this, Mintos is keeping in daily communication with lending companies/originators and monitoring their performance to ensure close collaboration. All lending companies are now taking practical measures towards safeguarding the future of their business ahead of a possible recession.
Here’s how they’re doing it:
- Cutting back on operational costs and ensuring continuity
As well as introducing remote working to allow work to continue in spite of COVID-19 restrictions, most lending companies have optimized operational costs where possible. - Tightening credit and risk policies
The demand to borrow money is bound to increase around times of economic pressure. To ensure that future borrowers are held to even higher standards of creditworthiness, lending companies are tightening the eligibility criteria borrowers must meet, and adjusting their risk policies to reflect this. - Increasing focus on collections from borrowers
Lending companies are proactively working with borrowers who are experiencing difficulties in meeting repayments, by extending or revising repayment schedules.
Likewise, Mintos are taking a proactive approach themselves:
- Improving flow of pending payments and compensation for delays
One of the biggest concerns voiced by investors is that due to current market dynamics, the volume of pending payments from lending companies has significantly increased. To protect investors’ interests, Mintos is ensuring interest is added on top of the pending payments as compensation for the transfer delay. - Reviewing Mintos Ratings and joining criteria
At a recent investor Q&A, CEO Martins Sulte also added that there would be even tighter checks for lending companies joining Mintos: “We’re not disillusioned about the increase in non-performing loans, so we’ll be looking at them closer before onboarding to ensure as little disruption as possible.”
To make sure that both current and future investors have the most up-to-date information possible that will help them to make informed choices about their investments, Mintos has promised to review each lending company’s current Mintos Rating and revise accordingly to reflect the lending company’s current profile, where applicable. - Cutting back on operational costs and ensuring continuity
Mintos has scaled back on operational costs by 40%. This was mainly done by shedding part of the workforce that had been hired recently to achieve a higher rate of growth. Things have changed rapidly and now the focus is on minimizing the possible impact of the current economic developments for investors, lending companies and the platform overall. CEO Martins Sulte said: “We feel comfortable that we made fast decisions that have put us in a good position to weather the storm”.
At the moment, with the adjustments made by both Mintos and lending companies, the future outlook for the business is positive, even in light of the economic downturn.
I don’t have any doubts about Mintos surviving this period and resuming its growth once things are back to normal.
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