As we announced here on the blog last week (in the post Impact Investing – Utilizing MYC4 as an Investment Vehicle for Socially Responsible Investing), we are currently looking to increase the available liquidity on the MYC4 platform. One important step in that direction is to engage our Providers in fundraising through their networks – and even for them to participate directly in funding their own loans.
The largest MYC4 Provider, Gatsby Microfinance Ltd, has made the first move this week by opening an investor account that holds 60,000 euro. The account has been set up with an auto bid to ensure that Gatsby bids 10 % of the loan amount on all their loans. So far, they have made 6 bids. While this definitely increases the chances of their loans funding, it is far from enough – they still need help from other investors.
One alert investor, Peter Dörrie, has already picked up on this development and writes about it on his blog:
I think that this is a generally positive development. This way, providers can put money where their mouth is and build trust with other investors, by committing some of their resources into loans on the MYC4 platform. Depending on how providers manage their investment portfolio, this could also lead to fewer underfunded and cancelled loans.
But herein lies a certain danger as well. Providers could be tempted to use their investor status to push down the interest on their own loan portfolio. After all, they are already getting a fixed share of the profits, so why not lower the interest rate just a bit further to make their offer more attractive to borrowers?
What do you think? Go to Peter’s new blog MYC4 Investor to discuss this and other questions with him.
New investors are always welcome and especially now since liquidity is currently.
I wonder … where does Gatsbys investor funds come from. It is is from their network (i.e. people and companies that they know) then I think it is a good idea – since it brings new capital to the market.
If it is their own capital … then why not use it for their own growth?
Just my 5 cents
One anoying thing about autobid is that it makes it almost impossible to get at positive return of your investment.!!
Why– isn’t it just what we all are here for – helping African entrepreneurs – and isn’t a low interest good for the lending business.
Well a positive return is by far most a result of currency gain. Interest is nothing. Even with investor rates at around 20% it is difficult to get a return. ( my average is 16- and only few – I would guess 10% – makes a small positive return) .
I see Myc4 as a place to help Africa in a different way than by donation- so I demand a return- not necesserily huge, but one or two percent would be OK. In fact I think that It would be the fastest way to help Africa- securing the the return would attract far more investors- The African business is demanding the possibility to borrow more than donations- and they are willing to pay.
So – a “nice” bid with an interest about 20 % or higher is almost all the time outbid by autobids- once repayments is send to all accounts- two minutes later all the Loans closing that day gets an even lower interest rate. Is that good- I don’t think so- an already funded loan-with interest below the wanted gets overfunded- and the investors seeking return is beaten out- Who is the winner . In my opinion no one- since one of the attractions of MyC4 is gone- Other loans might have been funded with the surplus money from autobids, and even though it is nice to have a loan with a small interest- it is creating a false expectation from the borrowers. I heard Johnny from Growth Africa stating that as a problem- It takes a lot of explanation to tell why some gets low interest.
So what do we do—I don’t know- but one way could be a faster closing of already funded loans- and- setting the closing time before repayments.
I think you have a good point. Maybe MYC4 could tweak the autobids, so that they only get applied towards underfunded loans. That would be fairer towards those who try to micromanage their portfolio.
I think by plainly investing a standart 10% into each of their loans, Gatsby is giving away lots of the potential this development has (see also my blog post).
I would prefer if they targeted the money specifically at loans that are in danger of being underfunded. That way the impact would be far greater.
Well, Gatsby helped here … https://myc4.com/Invest/Loans/View/9747
Had Gatsby not invested 700 + 500 Euro I doubt that this loan would have been funded.
(And other investors still had a chance of getting a reasonable interest rate).
OHH Claus NEver say never- was just about to post this loan– I noticed it earlier- but didnt have the opp to bid
Well as long as they meet there requirement under there risk sharing agreement. Because from what I have seen when it comes to loans uploaded from Gatsy they seem to not manage them that well.. In my portfolio the loans that are overdue seem to be only theres….
To me from a financial point of view it would make more sense for them to do there job and better manage there current loan book.
I think it´s good that their loans get fully funded but it´s
the way that this is done that bothers me.
They have set their bids at 20% no matter what the investor interest
rate is set at (for example 12, 14, 18).
1.This sends out a message that this is the interest rate that other
investors should ask for.
2. They do not have a minimum interest rate which means that in the
end it´s other investors that make sure that the loan get funded when
interest rate is above the asked investor rate when bidding close.
Could we not expect them to have a minimum interest rate that
correlates with the set investor rate?
With more loaners and more money on myc4 this wouldn´t be a problem
and their bids would get cancelled, but this is not the situation