uCredit - fast and profitable lending

Project summary

The microcredit niche is one of the most profitable niches in our country, showing positive growth dynamics every year. In 2018, the growth in the PDL market (Pay Day Loans, the so-called payday loans) was 35%, compared to 2017; in 2019, the increase was 30% compared to 2018; in 2020, the growth has already reached 28% (and this is not the end of the year). For 9 months of 2019, financial companies issued loans for UAH 51.15 billion, which is 57% more than in 9 months of last year. In January-September 2019, financial companies signed 8.86 million loan agreements, of which 8.3 million were agreements with individuals (for comparison: for 9 months of 2018 - 5.2 million). For the period January-September, 67.9% of loans to the population in the amount of UAH 17.8 billion were issued by financial companies remotely. Growth compared to the same period in 2018 - by 144.3%. This market is rapidly gaining momentum, and new "players" are not closely next to the "kings" of this business sector. According to experts, in 2021, the number of issued PDL loans will increase by 35-40% compared to this year - this explains the fact that new microfinance organizations regularly appear on the market.

Microfinance is a highly profitable business with a minimum level of risk for the investor. Average APR (Annual Percent Rate, real annual lending rate) for PDL loans in Ukraine is 550%; average percentage of problem portfolio in this segment ~ 17-20%; the average check of one borrower is 8290 hryvnia. The combination of these factors makes investing in "quick loans" for the investor attractive in terms of profit and reliable in terms of the risk of default.

80% of the back office staff of our startup consists of professionals in this area of the market (verifiers, credit consultants, sales department, collection department). Each member of the team thoroughly knows the business processes of the MFI from the inside, has the necessary knowledge and knows how to apply it and, in our opinion, the most important factor: each of us loves what he does. We love what we do and approach work with a soul - this is what allows us to achieve high performance in work, relationships in a team, a non-standard approach to a number of tasks.

Problem:

In the microcredit niche in Ukraine, there are three main problems for the client:

1) High interest rate (~ 630-650% per annum)

2) Short loan term (up to 60 days)

3) Huge penalties for delays

The main problems for creditors are:

1) Huge competition in the PDL market

2) Over time, dynamics decreases and non-return increases

3) Rapid decline in customer loyalty

Decision:

Our service covers the needs of regular clients of other MFOs, providing an opportunity to consolidate several loans at 650-720% per annum into one loan in uCredit at 220-360% per annum. Regular revision of lending limits upwards, the possibility of "additional" funds, a decrease in the rate after each closed loan increase customer loyalty, the dynamics of customer base growth, and the business reputation of the service. uCredit lends up to UAH 50,000 for up to 12 months, which, in comparison with traditional MFOs, allows to reduce the burden on the client's budget and, as a result, significantly reduce the chance of default.

Current state of the project:

A full-fledged website for the service was developed The client's personal account is under development for additional crediting and processing of repeated loans online. Payment of credit by card (online) and through PrivatBank terminals has been implemented. There is a client base. Autoscoring has been implemented + the verifier's workplace has been equipped. An advertising campaign has been prepared and configured. Loan packages and a loyalty program for regular customers have been worked out.

Customer segments and market:

UCredit's client is a regular client of several MFIs, 70% of the monthly budget of which is spent on servicing existing loan agreements. When we receive an offer from our service to consolidate several loans into one, with a high degree of probability, our client will refinance current loans with one issued in uCredit.

Sources of income:

1) Income from% on loan agreements

2) Income from partners on "rejected" applications (CPS)

3) Income from cross-selling (insurance, legal aid, etc.)

Business model:

uCredit is not an independent legal entity and operates under the license of a large Ukrainian financial company. The service pays a small commission to this FC from the net profit (client's payment - the body of the loan - the costs of verification and execution of the contract). The loan portfolio and customer payments are accumulated on the accounts of the FC. Tax and accounting services are included in the commissions. This business model allows you to "enter" the market with minimal investment and, accordingly, set a small entry threshold for an investor.

Competitors and alternatives:

Closest competitors by niche and region:

FinX (TOV "KREDІPLYUS"), Mikrokredit (TOV "MIKROKREDIT").

Competitors lose significantly in terms of the variety of loan products, interest rates and ease of processing.

Competitive advantages:

1) The interest rate is significantly lower than competitors

2) Signing a contract at the client's home

3) The possibility of on-lending to MFO

4) Possibility to raise funds within the limit

5) We consider clients with a low credit rating

6) Three stages of borrower verification

7) Low competition in the region

Risks:

The risk of a high percentage of non-returns during the first 3 months of work, this is how much time is needed for machine scoring for self-study and risk analytics for correcting score cards.