AmoCredit is a young start-up with foreign capital (Israel), which provides financial services in the sphere of microloan. Our product is micro loans in the form of loans to salaries (PDL). They are used by low-income people, who do not have access to the full range of banking services. Lending is carried out online, 24/7, and the process of obtaining the loans is instant. The ratio of the average market profit and the risks, associated with its obtaining, makes this business attractive, even for conservative investors.
Macroenviron. Ukraine – is a large European country with a population, that in 2017 by various estimates was - from 38 to 42 million people. It's no secret, that now Ukraine is in the deepest crisis. According to statistics from 2013, the country significantly reduced industrial production (more than 70%) and GDP (almost twice). According to the CIA, more than 60% of Ukrainians are below the poverty line (5 USD per day according to the UN standard).
In the coming years, there is no reason to expect a change in the emerging negative trends. In August 2015, the government of Ukraine signed an agreement with the lenders committee, which limited the possible growth rates of the country's economy to 4% per annum over the next 20 years. At this rate, it will take at least 20 years to reach the pre-crisis level of GDP (2013). This is in case, that economic growth will begin immediately. But considering the growth of the debt burden of Ukraine, the pace of economic recovery in the country can significantly increase.
In total, in Ukraine there is a huge number of poor people who need short-term loans. And this creates all the conditions for the development of the PDL segment, which successfully develops in a crisis. Therefore, now in Ukraine, microloan is experiencing explosive growth. And the outflow and extinction of the population that take place (according to the CIA in 2017, according to the rate of population growth in the world, Ukraine took 221 out of 235) can not take negative affect on the development of microloan. First, the potential of the country is too great, which, to date, occupies the 7th place in Europe for the population. Secondly, wealthy people leave the country, and the elderly are dying out. Neither one nor the other is the target audience for microloan services.
The development of the PDL segment take a positive effect on the country's banking system crisis. The number of banks operating in Ukraine over the past few years has more than halved (from 180 in 2014 to 89 in 2017). The remaining can not expand into the sphere of microloans because of restrictions of the NBU. In addition, the process of making a bank decision to issue a loan requires a series of internal approvals, and usually takes 2-3 days. In the PDL segment, obtaining a loan is much faster, and requires minimum efforts from the borrower.
Microenviron. Most AmoCredit’s clients are low-income people; people who can not plan their expenses; those who are amenable to the influence of circumstances, for example, spend a lot of money for the entertainment. The most attractive category of potential customers is "loan addicts", which according to actual statistics available in the credit history bureau, take a loan more than 15 times a year.
Despite the huge competition in the PDL segment, the strategy of work of the majority of companies, which are represented in this market, is approximately the same. Among the main players: Ccloan, Moneyveo, MoneyBoom, CreditMarket.
Factors of success. Steadily and successfully developing companies that managed to achieve a monthly turnover (no less than 2.2 thousand extraditions per month). Companies that have not reached the turnover of 1 million / month (on average, about 450 extraditions) are closed in the majority. Most newly created companies incur losses during the first 6-9 months. Usually the first 4-5 months after launch, the amount of losses increases, then starts to decline.
The most important factor for the success of a microfinance organization operating in the PDL segment is the risk management system. Its function is to minimize the "failures" of the financial performance of the company's operating activities.
The values of indicators for timely repayment of microcredits companies are significantly lower than for banks (on average, about 50% of users of PDL products are in arrears for the delay). In addition, there are important the other patterns of behavior of "undisciplined" borrowers. In the banking sector, delinquencies are formed mainly due to insolvency of customers (for example, due to deterioration in their financial position). Most of the delinquencies in the PDL segment are a consequence of the reluctance of permanently insolvent customers to repay their debts. With the collection help, you can convince most customers to find or recharge the amount that corresponds to the size of the microloan. The exception is mainly fraudsters, who are more in the online lending sector than in the banking sector, on which is focused our Anti-fraud system.
The main component of a positive response to a loan is the passage of the scoring procedure. Scoring is a system for assessing the client's loanworthiness. AmoCredit company uses traditional scoring, that called fraud scoring (fraud forecasting), as well as application (conducted on the basis of personal data) and behavioral scoring (takes into account the accumulated loan history of the client). In the work of our company is used the careful forecasting and monitoring of the solvency of potential customers . This ratio is obtained using indicators such as: accept rate and default rate. These indicators are used to match the risks and financial reserves projected in our direction. That is, with a lack of funds - we reduce accept rate, and when scaling components and pouring the market - we increase this figure.
An equally important element of the risk management system is the subsystem for the return of overdue loans that called "collection". Most companies, that are represented in the PDL segment have a two-level "collection". With overdue loans for up to 80-100 days, relevant specialists work inside the company. The effectiveness of their work ranges from 50 to 75% of the size of the loan portfolio transferred there. After the expiration of this period, we assign overdue loans to professional collection companies at a price of 50% of their nominal value.
The effectiveness of the subsystem "collection" excludes the company's losses in the part of the body of loans that are in arrears. A more realistic scenario assumes that the company receives 25-40% over the body of overdue loans at the time of sale of the debt portfolio.
The main driver of cash flow generation in the sphere of microloan is marketing. The tasks of attracting and retaining clients are solved through a variety of marketing communications tools. The retention of an existing customer in AmoCredit is realized through a loyalty program, situational actions and an affiliate program. The amount of the budget for advertising costs depends on the volume of working capital reserved for issuance.
Risks. The risk management system in a financial company that issues microloans at its own expense is significantly different from that in the traditional banking business. The lack of customers, transactions and profits on the side of passive attraction makes the company immune to the manifestations of many financial risks. In particular, there is no need to manage the reconciliation of assets and liabilities by amounts and maturities. Therefore, there is no risk of losing liquidity. Without depositors, reputational risks that are manifested in the influence of unpredictable incidents (with clients and the public) or reactions (clients and the public) on the initiatives, actions or current activities of the loan institution become insignificant.
Loan risk. In the condition of attracted funds, there are not problems of sufficiency and adequacy of capital and reserves for the company. Specificity of microlending excludes the problem of concentration of capital. Nevertheless, loan risk is the main financial risk of those to which the microfinance company is exposed. It, in turn, consists of risks of fraud on the part of clients, non-payment and country risk. To reduce the risk of fraud, an automatic internal anti-fraud system was developed; services for verification of application form data and applicants' phone numbers. To assess borrowers for anti-fraud, we use information from the loan history bureau (UBCH, FCBU, IBCH). The process of managing the risk of non-payment is based on the statistical models of application and behavior scoring developed by the company's specialists (the latter, if necessary, are supported by the loan reports and scoring scores of the loan history bureau), as well as a two-tier system of collecting overdue debts. To reduce the risk of non-payment and increase the company's immunity to systemic loan risk, AmoCredit limits the sum of maximum loan amount.
Of all market risks, interest rate risk is the most dangerous for microloan. Possible changes in the level of market interest rates in the PDL segment may pose a threat, but only if this process turns out to be unidirectional (declining), essential and protracted. An essential limitation of the size of interest rates at the legislative level in the foreseeable future is also unlikely. Due to the good scalability of the project, there is no reinvestment risk.
Operational risk in the conditions of a high degree of automation of the online lending process is largely reduced to technological. To minimize it, the company uses modern advances in information technology and cyber security, adheres to clear rules with respect to outsourcing, access control to computers and role-based information, reserving capacities in case of accidents, autonomous process support, protecting equipment from power outages, protecting computers from viruses. Own electronic online loan system is located on a "cloud" platform, based on a network of global data centers (Microsoft Azure).
The human factor is controlled through an integrated system of standardization and process automation, training, recruitment, advanced training, promotion and remuneration of staff, corporate ethics. The objectives of countering the risks of fraud on the part of employees are internal control and audit systems, motivation, warning signals and early detection of fraud.
Legal risks. The company is a member of the All-Ukrainian Association of Financial Companies (WAFC), working in close cooperation with the regulator (National Financial Services). The WAFC constantly studies the business processes of its participants and develops recommendations for their optimization. Within the frameworks of the built-in cooperation scheme, the WAFC, among other things, undertakes to warn participants about the prospects for changing laws and regulatory acts (regulatory risk). Within the framework of the agreements reached, the association also bears responsibility for the company to ensure compliance with regulatory laws and regulations, the violation of which leads to negative judgments or sanctions, including cash payments (compliance risk). AmoCredit is a licensed financial company that is under the regulation of financial control authorities. Based on this, we can guarantee a clear control of our work, normalized by the letter of the law.
AmoCredit company has created one of the best products on the ukrainian loan market - it is a high-tech business that combines modern models of income generation in lending and necessary elements of insurance against associated risks. The basis for creating our product - the business of microloan, with the concept of "3 pillars" that support, supplement and insure each other:
• The first pillar of the construction is creating the maximize effect of the experience of using similar businesses in Ukraine. It's about using "Anti-fraud" (anti-scam) systems. In fact, this is a unique, accumulated by banks and loan bureaus statistical data array, which is based on a 10-year history of loans and behavioral experience of borrowers. Such block allows minimizing the risks of an outspoken bad-quality borrower already at the start.
• The second pillar of building our business is the high-tech models of mathematical scoring. This is a software solution based on statistical technologies and the experience of previous borrowers, which allows selecting quality borrowers from among those who have passed anti-fraud filters in several stages. Scoring allows us to distinguish from the broad masses of borrowers someone, with a higher potential to fulfill their obligations.
• The third pillar of the sustainability of our business development is the competently organized service - the subdivision of collection. This is a professional division of the company, which deals with the repayment of overdue loans. Most companies, represented in the PDL segment, have a two-level collection. The effectiveness of their work ranges from 50 to 75% of the size of the loan portfolio transferred there. And this, excludes the company's losses in the part of the body of loans that are in arrears.
All components of this concept of our business product harmoniously complement each other, contributing to development, and making a risk-balanced financial project.
Technologically, all modules are integrated into a single "loan conveyor" - a high-tech software solution, that combines sophisticated math processing of databases and aligned chains of business processes. For a long time, the group of IT professionals worked for the creation and improvement of this "loan line". During creation, we combine the experience of domestic and foreign developments of similar solutions. As a result, we have a very functional resource, with an easy-to-use interface and a personal account of the user, in which all processes are simple and fast: registration, formalization and verification, and further work with repayment of the loan.
A huge plus is the company's work online. This allows you to work distantly, which makes the process of lending more operational. This expands the circle of potential customers throughout Ukraine, not limited to the scale of a certain city. The issuance of loan funds also occurs online: the requested amount is sent to the borrower's bank card. Also, a number of advantages of our company include the multi-variant repayment of the loan. You can pay for the loan with the help of: auto-schedule, affiliate network terminals, a web-site or cash desk of any bank.
In addition, our product is distinguished by a very developed internal management system. It includes: an established CRM system - allowing you to store all the information about the client and perform the necessary monitoring of its data, and developed the ACP (Admin Control Panel) for each of the departments of the company office.
The attractive conditions of our company for the client consist not only in the flexibility and loyalty of making decisions on loan issuance. AmoCredit offers to the client such services as: prolongation and restructuring, - allowing to repay the loan regardless of the circumstances of the borrower's solvency.
AmoCredit's office is equipped with all the necessary security features, and moreover, we have a high level of cybersecurity. The office is equipped with armored glass and a video surveillance system. And data protection realizes through access control - each employee has individual access to information using a personal card, and also, we use a special system of passes and corporate data carriers inside the company. Thanks for that, we make the control of information leakage is carried out.
The company AmoCredit organized its work exclusively in the legal field required by law. We have a license to carry out activities for the provision of financial services, and a certificate of registration of a financial company. All our activities are regulated by the National Commission of Financial Services, which ensures the legitimacy of our work. AmoCredit is a member of the All-Ukrainian Association of Financial Companies, which ensures the relevance of informing our company in the legislative aspect.
A huge additional advantage of the company AmoCredit, are our profile development, that called - marketing programs and use a modern mathematical and statistical approach, similar to that used in scoring systems, when filtering reliable customers. These developments allow us to accurately targeting our target audience and react quickly to map changings. This improves the primary portrait of incoming customers, which has a very positive effect on the company's profit and reduces further defaults.