▶ Founder of the re­gion’s first such plat­form tells Michael Fahy it is a ser­vice that is ben­e­fi­cial to UAE SMEs

The National - News - - BUSINESS -

Bee­hive, the Dubai peerto-peer lend­ing ser­vice, is set to see cu­mu­la­tive loans made through its plat­form reach­ing the Dh500 mil­lion mark this month, in which it cel­e­brates its fifth an­niver­sary.

“It’s a mile­stone we’re par­tic­u­larly proud of and I think we’ve been able to give in­vestors on av­er­age a very good re­turn against a back­drop of global rates [that are] very low,” says the com­pany’s founder and chief ex­ec­u­tive, Craig Moore.

Mr Moore says so far these loans have all been pro­vided by in­di­vid­u­als, back­ing small and medium-sized enterprise­s that have his­tor­i­cally strug­gled to raise cash.

“Only now are we bring­ing on in­sti­tu­tional cash. In five years, it’s been funded by peo­ple like you and me,” he adds.

In hind­sight, it may seem like suc­cess for a ven­ture like Bee­hive was in­evitable. After all, there were al­ready sev­eral hugely suc­cess­ful peer-to-peer lend­ing com­pa­nies such as Fund­ing Cir­cle in the US and

Zopa in the UK, and the Mid­dle East was an un­tapped mar­ket.

More­over, Mr Moore has the type of track record that gives it a strong chance of suc­cess.

“My back­ground is a mix­ture of fi­nance, tech­nol­ogy con­sul­tancy and sales,” Mr Moore says.

The combinatio­n of skills had helped the growth of a pre­vi­ous busi­ness, But­ter­fly Soft­ware. Mr Moore was one of three co-founders and chief strat­egy of­fi­cer of the UKbased en­tity, which helped com­pa­nies mi­grate their data in­fra­struc­ture to the cloud. It was even­tu­ally sold to IBM for an undis­closed sum in 2012.

“Once the ac­qui­si­tion had gone through I started to look for my next avail­able en­trepreneur­ial op­por­tu­nity and I became in­ter­ested in the whole peer-to-peer lend­ing space,” Mr Moore says.

“I thought there was an op­por­tu­nity to po­ten­tially set up a Mid­dle East plat­form and that was re­ally how Bee­hive was born.”

Yet de­spite the mar­ket op­por­tu­nity, and the founder’s ap­ti­tude, build­ing Bee­hive has not been easy.

Mr Moore ar­rived in the UAE in mid-2014, with Bee­hive launch­ing in the fol­low­ing Novem­ber. Within those few months, the oil price be­gan a down­wards spi­ral from more than $100 per bar­rel in June 2014 to be­low $40 by the end of the year.

“That had a big knock-on ef­fect­ing terms of con­fi­dence on the mar­ket,” Mr Moore says, par­tic­u­larly for peer-to-peer lend­ing. He was launch­ing a busi­ness try­ing to con­vince peo­ple to lend to SMEs at a time when lenders were post­ing higher non-per­form­ing loan (NPL) rates due to SME de­faults.

Se­condly, try­ing to cre­ate a mar­ket where one does not ex­ist proved dif­fi­cult.

“It can be good to be the first one out of the gate, but it means you carry all of that in­dus­try bur­den and cost. It’s your mar­ket­ing dol­lars be­ing spent on ed­u­cat­ing the mar­ket on what is peer-to-peer be­fore you are even ed­u­cat­ing them on what is Bee­hive.”

Thirdly, be­ing first meant Bee­hive was en­ter­ing into an un­reg­u­lated mar­ket, which can be dan­ger­ous when op­er­at­ing in fi­nan­cial ser­vices.

“We were al­ways very open to dis­cus­sions with the reg­u­la­tors, but the reg­u­la­tors weren’t ready to reg­u­late at that time. They wanted to un­der­stand the mod­els, and what was hap­pen­ing in other parts of the world.”

Mr Moore says he took so­lace in the fact that it was pro­vid­ing a ser­vice that was es­sen­tially ben­e­fi­cial to the UAE, in pro­vid­ing a quicker and eas­ier way for SMEs to ac­cess cash in a coun­try which is try­ing to de­velop its SME sec­tor as part of wider eco­nomic di­ver­si­fi­ca­tion plans.

“At some point, as an en­tre­pre­neur, you’ve got to make the call on it and say ’do we launch and hope we can make all of the dif­fer­ent stake­hold­ers com­fort­able? Or do you never get around to tak­ing the risk?’ We took the risk.”

It even­tu­ally became the first peer-to-peer lender to se­cure a li­cense from the Dubai Fi­nan­cial Ser­vices Au­thor­ity in March 2017, hav­ing built cred­i­bil­ity quickly, hir­ing for­mer Emirates NBD chief ex­ec­u­tive Rick Pud­ner as chair­man, and en­sur­ing its plat­form gained Sharia com­pli­ance within months. The lat­ter has been use­ful not only for mar­ket­ing the ser­vice to in­vestors in the Mid­dle East, but also for its push into South-East Asia.

The com­pany now em­ploys about 50 mem­bers of staff – 30 of whom are in the UAE and 20 in Thai­land. It has raised $15.5m in fund­ing and ex­pects to close its cur­rent Se­ries B fundrais­ing round next year.

As well as straight­for­ward loans, the com­pany of­fers an in­voice fi­nance ser­vice, where SMEs sell their re­ceiv­ables at a dis­count, of­ten to im­prove cash flow.

“They may be sell­ing to some of the large or­gan­i­sa­tions here, pay­ment terms are be­ing stretched out and they may just need ac­cess to work­ing cap­i­tal,” he says. “So we’re try­ing to match the right prod­uct to the right busi­ness.”

He says the fact Bee­hive of­fers fast (within 48 hours) ac­cess to cash at rates that are be­low those of­fered by high street banks means it can be se­lec­tive about which com­pa­nies make it onto its plat­form, with more than 80 per cent of ap­pli­ca­tions re­jected.

The in­vestors lend­ing to com­pa­nies, mean­while, can make re­turns of up to 10 per cent, which is con­sid­er­ably higher leav­ing money on de­posit at a bank, or buy­ing sav­ings bonds. There are also higher lev­els of risk, though, as when de­faults hap­pen it is the in­di­vid­ual lenders that take the hit, al­though Mr Moore says Bee­hive’s NPL rate of about 1.2 per cent is lower than most high street lenders.

“We’re the first to say we’re an in­ter­est­ing as­set class that would make up a small part of a di­ver­si­fied port­fo­lio. Never be putting more than 3 to 5 per cent of your net wealth in a plat­form like Bee­hive,” he says. “But it is an in­ter­est­ing al­ter­na­tive as­set class If you can be earn­ing 8 to 10 per cent on a plat­form like ours then it does makes up for hold­ing trea­suries at 2 to 2.5 per cent and ev­ery­thing in be­tween.”

Bee­hive’s growth plans are based around en­ter­ing new mar­kets, and of­fer­ing new ser­vices. Last month, the plat­form made its first loan in Bahrain,

and other GCC mar­kets are ob­vi­ous av­enues for growth. It is in talks with banks and fi­nan­cial in­sti­tu­tions about part­ner­ships both in the Gulf and South-East Asia, he says.

Al­though some Fin­Tech lead­ers see banks as in­cum­bents that must be de­feated, Mr Moore has more of­ten preached col­lab­o­ra­tion, liken­ing fi­nan­cial ser­vices to the Pelo­ton in the Tour De France. There are those who break away, but usu­ally they are ab­sorbed by the chas­ing pack.

“Fin­Tech are great dis­rup­tors and also change agents, but it’s about ul­ti­mately how you can work with the wider fi­nan­cial ecosys­tem,” he says, point­ing out that banks have a bet­ter un­der­stand­ing of the reg­u­la­tory side, longevity of cus­tomer re­la­tions, stronger bal­ance sheets an a more de­vel­oped in­fra­struc­ture.

We’re the first to say we’re an in­ter­est­ing as­set class that would make up a small part of a di­ver­si­fied port­fo­lio CRAIG MOORE

Reem Mo­hammed / The Na­tional

Craig Moore’s Bee­hive became the first peer-topeer lender to se­cure a li­cense in Dubai in March 2017

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