IMP Matrix Rating: C4
What: Lendable provides capital to emerging and frontier market fintech companies. It invests across five fintech categories: micro, small and medium enterprises (MSME) lenders; asset lenders; consumer lenders; payment platforms; and marketplaces . In its early days, Lendable was a risk technology company, selling a proprietary risk platform called Maestro. This technology catalyzed fintech models in emerging markets by allowing for direct data integration between investors and alternative lenders, including loan portfolio data analysis and cash flow predictions. In 2016, the Firm transitioned to issuing financing itself, and has already raise three vehicles in addition to this latest one we’ve invested into, the “Segregated Investment Vehicle (SIV) I”.
Who: The main beneficiaries are MSMEs and the estimated 1.7 billion base-of-the-pyramid population in emerging and frontier markets, who face exclusion from financial services. Affordable and accessible credit is needed for both individuals and MSMEs to grow and prosper.
How Much Impact: As of Q3 2021, Lendable had financed 1,384,996 consumer and MSME loans; 34,434 SME loans; and 118,683 productive asset loans. In 2020, 29.70% of end users were women and 30.78% resided in rural areas.
Our Contribution: We invested in the senior credit tranche of the fund after the first but before the final close, helping the fund reach its target size.
Impact Risk: The primary impact risk given the emerging market context is predatory lending practices, and some of the underlying loans that Lendable’s fintechs make might have really high interest rates. This is particularly true of asset financing, such as moto-taxi lending, where rates can be as high as 50%. The fintech lenders justify these rates because of the borrower’s opportunity to earn a higher net income due to the loan, but it remains a risk that Lendable needs to constantly monitor. The secondary impact risk for this strategy is that Lendable - as a result of continuing pandemic, economic, and political crises - is not able to deploy the fund’s cash due to excessive risk, thereby not supporting the credit providers on which the impact thesis is built. This has been an issue for other private credit funds since the pandemic, but Lendable seems so far to have been able to deploy all capital committed.
Sample Investment: Amartha, which provides loans to unbanked female entrepreneurs in rural areas of Indonesia.