Rainfin forecasts growth after doubling up lending over last year

RAINFIN, a South African peer-to-peer lender part owned by Barclays, forecasts further growth after it more than doubled loans in the past year by tapping the needs of small businesses.

Daily lending directly from RainFin had increased to about R1 million from about R400 000 in August last year, RainFin chief executive Sean Emery, said in an interview.

The amount lent

through Barclays was “significantly more”, Emery said, while declining to state the total.

“I really feel we have just pulled the Ferrari out of the garage,” Emery said last week on the sidelines of a banking conference in Johannesburg. “We are very much at the beginning of our growth cycle.”

RainFin, South Africa’s largest peer-to-peer lender, is among online businesses seeking to win market share from traditional banks in areas such as credit, insurance and remittances. RainFin wants to copy the success of US Lending Club by offering services via cellphones and the internet without branches to cut costs.

Barclays, whose South African unit bought 49 percent of RainFin last year, had helped the company cope with regulation that often stymied the growth of small lenders, Emery said.

After three months refining credit models with the bank, RainFin starts advertising on radio this week.

The company would expand loans to small businesses by matching them with idle capital at institutions such as insurers pursuing higher returns than bonds, he said.

“It’s a completely under-lent market,” he said.

“Our strategy is to convince institutional capital that we can deliver the returns that we predict in our models.”

The company began in 2012, has 50 employees, and will expand to Kenya, its first location outside South Africa, during the first half of next year by partnering with Barclays.

Then it would turn to Zambia, Emery said.

RainFin was in talks with about four peer-to-peer venture capital companies to buy a stake in the company, Emery said. Barclays Africa Group would not increase its share to more than half because of regulatory constraints, he said.

Default rates ranged from less than 1 percent on the least risky loans to as much as 11 percent in the most hazardous category, Emery said.

Borrowers can raise as much as R500 000 for terms as long as 48 months and the annual interest rate for a loan is 10 percent to 33 percent.

A survey by RainFin showed that 93 percent of respondents expected lower costs on a loan from a company like RainFin than from a conventional bank, Emery said.

Lending Club, the largest peer-to-peer lender in the US, started in 2007 and last month forecast its revenue would grow to more than $405m (R5.5 billion) this year. – Bloomberg