Tag Archives: Bondora

Why you should consider investing in Bondora Go and Grow

Bondora Go&Grow

Bondora Go And Grow

Bondora was founded in 2008 and is one of the oldest and most trusted peer-to-peer platforms on the market. Until a couple of months ago, the only way to invest your money with Bondora was by investing in consumer loans directly through Portfolio Pro or their Portfolio Manager.

In May 2018, Bondora released Go & Grow. The big advantage of Go & Grow compared to other crowdlending offers is that you can access your money at any time, which is not possible if you’re lending your money out on other platforms (although you might be able to sell loans on the secondary market). Bondora automatically invests your money into a well-diversified bucket of tens of thousands of different loans across all credit ratings (AA-HR).

If you invest for the first time at Bondora don’t forget that you can get € 5  signup bonus for your first investment, more details HERE.

What is Go & Grow?

Go & Grow works as easily as (if not easier than) traditional investment methods whilst giving you an impressive return of 6.75% p. a. You simply add money to the account, then you can view and track your return on a daily basis. What’s more, there is no minimum term to hold your investment— meaning you can liquidate your account with ease.

A fundamental difference between Go & Grow and the products of other peer-to-peer lending platforms is the liquidity. If you’re looking for a short-term product in which you can liquidate your investment quickly, this is difficult to do with other existing platforms.

Reasons to use Go & Grow

The P2P industry has gained enormous popularity over the past few years. However, some investors have felt excluded from the incredible opportunity due to thinking they lack enough experience. No matter your experience level, Go & Grow offers market-leading benefits for all:

  • 6.75% p.a. return
  • Faster liquidity, meaning you can cash out your investment with minimal effort
  • Lower risk than other existing products, achieved via a diversified portfolio of investments backed by advanced and reliable technology
  • You only pay taxes when you make a withdrawal over your initial capital investment
  • There is a flat withdrawal fee of €1, regardless of the size of the account
  • No annual management fees
  • Share your account access and invest with people you trust to achieve a common goal
  • Ideal for beginners, as no previous investment experience is necessary
  • Automated features

A very important aspect for Bondora Go & Grow and which is not explained very clearly is that INTEREST is added DAILY to your account, so you do not have to wait a certain amount of time to benefit from the growth. This way, within a short period of time, you can clearly see the progress you are making towards your goal and how much Bondora has contributed to your total progress.

Other features of Bondora’s Go&Grow

  • Invite the people you trust: you can invest in cooperation with your friends and family members. To add authorized users to your Go & Grow account, click on the blue arrow in the upper right-hand corner of your account next to the settings wheel. You will then see the option “Invite to Go & Grow” appear. Once you click on this, enter the name and e-mail address of the person with whom you want to start investing. You can also select whether you want to grant this person the authority to withdraw from the account. You should only enable this feature for the people you trust.
  • Sub-accounts: you can create multiple accounts within Go & Grow (or “sub-accounts”) which will be independent of one another.
  • Setting goals: you can set goals for each sub-account within Go & Grow. You enter your starting capital amount, the amount you plan to invest monthly, and the duration of time for which you plan to invest. Bondora then combine this with the offered return rate to give you the “potential gain” figure.

 

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Bondora today launched its “Go & Grow” program for all users

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Bondora today launched its “Go & Grow” program for all users on the platform and for new users, offering a return of over 6% per year and the ability to liquidate the investment instantly, thus providing a new tool that has never been met at any  peer-to-peer platform, to have almost instant access to the investments made and a much higher return than the bank deposits (similar to the liquidity of this investment facility).

Go & Grow is an incredibly simple and automated service that allows you to earn 6.75%* p.a. on your investment and take your cash out at any time. This is for the people who want low risk and ‘no-hassle’ investing with a predictable net return.

The main benefits of Go & Grow is that you can withdraw your funds at any time. You can set up a new account and call it a unique name, whether you’re using Go & Grow for your new dream home, your emergency fund or enev for that trip to Asia you’ve always wanted to do.

You can share acces to your Go & Grow account with someone you trust. Once you have created your own account, simply select “Invite to Go & Grow” then add their name and email address. You also have the option to give this person the authority to withdraw from the account, but this is not mandatory.

What are the benefits?

  • 6.75%* yield
  • Instant liquidity
  • Low risk –  A diversified portfolio of investments supported by advanced and reliable technology
  • You only pay tax when you make a withdrawal over your capital amount invested

Additional benefits?

  • Transfer your existing Bondora investment portfolio to Go & Grow
  • You can set up an auto-transfer from your existing portfolio to Go & Grow
  • A flat €1 withdrawal fee, no matter the size of the account
  • Great for beginners
  • No annual management fees
  • Share access to your Go & Grow account with the people you trust

How to transfer the existing Bondora investment portfolio to Go & Grow?

All you need to do is create a new Go & Grow account, then click on the small settings icon an click on “Add existing investments”. Then you will receive an offer from Bondora to liquiidate your existing portfolio based on the current portfolio value, however, it may be at lower amount. If you accespt, Bodora will transfer your portfolio to Go & Grow.

Is the rate of 6.75% guaranteed?

The rate is not guaranteed, however, the average net return on the Bondora platform is much higher than this. With this and our 10-year track record in mind, we’re confident the rate of 6.75%* is achievable with the benefit of instant liquidity to investors.

The net return is capped at 6.75%* – all excess returns over this percentage are reinvested to ensure you can earn the rate of 6.75%* going forward, despite there being no guarantee in place.

How investors will be taxed for this?  

You only pay tax on the money you withdraw which is over the total amount you have paid in. For example, if you invest €1,000 then anything you withdraw up to €1,000 is considered as a principal withdrawal, anything above €1,000 is considered as interest.

All payments made to your Go & Grow account are regarded as one investment, although the funds have been used to acquire individual claims. This is irrespective of when and in how many parts you paid cash into your Go & Grow account.

Bondora “Go & Grow”, announced a long time ago, was reserved for a number of existing investors. There’s been a huge amount of excitement around this product within the P2P community. As it stands, approximately 1,000 investors have deposited an average of € 1,000 each in their Go & Grow account.

The best part? You do not need any prior experience in investing or P2P to use Go & Grow, so whether you’re a retiree living in the Estonian countryside or an 18-year-old student in Berlin who’s new to the world of investing, Go & Grow is for you.

What’s more, you can invite someone you trust to join your Go & Grow account with you so you can invest for a shared goal, like a trip around the world, a wedding or even your child’s future.

 

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Bondora introduces fractional calculation starting 27 of april 2018

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What is it?

This is a major update to Bondora system which will ensure an equal distribution of a loan repayment to investors. It’s easy to forget that the loan you funded with your investment is likely to be jointly funded alongside the investments of thousands of other investors – when a borrower makes a repayment to this loan, it’s important that each investors receives an equal amount of that repayment based on their total share of the loan. Even more so, this applies to payments received from our collection and recoveries process too.

What are the benefits to you?

  • The even distribution of debt servicing fees – Making it easier for you to manage and keep track.
  • Faster website and services – More specifically the overall speed of reporting, especially for users with a large number of loans.
  • More precise calculations – With results calculated up to 10 decimal points, ensuring fairness for everyone.

Why have Bondora changed this?

You may notice that from time to time, the debt servicing fees applied to your investments in recoveries may not show an even amount each month. The Bondora engineering team has been working hard on an update to the system called ‘fractional ownership’ which will now make all loan repayment distributions equal across all payments for each investor.

Currently, the distribution is equal but the equality is achieved over multiple payments (by recording how ‘unfair’ the previous payment was and then correcting it the following time for the customers who received more or less). Now, such fluctuations with payments will be eliminated.

How does it work?

All calculations regarding past and future investor shares in the cash flows will be based on a loan schedule multiplied with their share (known as fractional ownership) with results calculated up to 10 decimal points. Payments to your Bondora account will also be made in amounts with up to 10 decimal points, however withdrawals to real cash are still limited to 2 decimal points as smaller increments are not yet supported by the traditional banking system (Not surprising…).

Thanks to this, even investors who own a €1 part of a €10,000 loan will always get their fair share of the repayment.

How will this affect your portfolio?

For a small number of investors, the present value of their portfolios will slightly change due to the added precision of the calculations. These changes are extremely small, nevertheless for those whose portfolio value decreases by any amount, Bondora will compensate them the difference.

The average compensation amount will be €0.25 and the largest being €25. With this in mind, the planned principal and interest amounts will also be recalculated in the cash flow reports to reflect these changes. This will be done automatically, so no action is needed from you.

The estimated release date for this update and the compensation is Friday 27th April.

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What is Cash Flow? Find out how you can use it to your advantage

Cash, and more so the lack of it, can be a determining factor in whether you will achieve your goal of financial freedom. In short, cash flow is the net amount of cash that is flowing in and out of your accounts each month. Traditionally, this has been an important measure for business owners as they can keep track of how much money they are generating from customers that they offer their services to. It’s also important for them to know how much they are paying out each month for things like business loans, office rental and many other expenses.

However, the same cash flow measures can be used by individuals like you and me. Let’s say that each month you earn €2,000 net per month from your employment, €500 from your side hustle and €200 from your investments. But you need to live, so you can deduct your mortgage payments, car costs and any other expenses you have. The result of this will be either a positive or negative cash flow.

cash flow money

Cash Flow from P2P, Real Estate and Income vs Accumulation Funds

One of the most popular asset classes today is Peer-to-Peer (P2P) lending, notably for the opportunities it gives investors to become the bank and receive a monthly cash flow. Let’s say you invested €10,000 across thousands of loans from a range of risk ratings, loan durations and countries. Every month, the borrowers will make their loan repayments which consists of principal and interest, you then have the option to withdraw this cash flow or reinvest your profits to compound your interest and maximize your overall returns.

Quite similarly, real estate investments work in a comparable fashion. If you buy a rental property for €100,000, each month you will receive a payment from the tenants (e.g. €600 per month). You might use some of that to pay the remaining mortgage on the property or add it to a growth account to save a deposit for another property. An important difference between this and P2P is risk, as previously mentioned you can spread your risks across thousands of loans where as you rely on the payment from a tenant in a single property – if they default then there is no other cash flow. Protect your cash flow by diversifying within your chosen asset class.

If you are familiar with investing in equity funds, it’s likely you have come across the accumulation vs income conundrum. Simply put, an accumulation class fund will reinvest any cash generated from the investments within back in to the fund, over time this can significantly increase the size of your total pot. On the other hand, an income class fund will pay any cash generated from the investments back to you to use as you wish. This is for those who are looking to increase their total monthly cash flow amount and are not necessarily focused on the long-term growth of their investments. Almost always, the accumulation fund will be the most profitable in the long run.

Take a look at the graph below:

income vs accumulation-en

The same principle can be applied to your investments with Bondora, as the only difference is the underlying asset (consumer loans rather than equities). In the graph above, we have compared the growth of a portfolio with the same interest rate, starting capital and duration, the only difference being reinvesting your monthly cash flow compared to withdrawing it each month. Using our Portfolio Manager, starting with €10,000, an outlook of 5 years and a respectable interest rate of 10% per annum, there’s a stark differential in performance.

In fact, by simply allowing the Portfolio Manager to reinvest your monthly cash flow, your account value at the end of the 5 year duration would be 33.9%, or €4,462 larger (€17,623.42) than if you did not (€13,161.42). This is literally how you can “Make your money work for you” with minimal effort.

Cash for thought

Cash Flow Quadrant

Do you recognize the quadrant above? If you do then you are most likely well accustomed to the benefits of having a positive cash flow, congrats! For those who are still puzzled, this peculiar yet simple diagram is the brainchild of Robert Kiyosaki, the king of cash flow. As the creator of the Cash Flow Quadrant, Kiyosaki divides the general population and their mindset in to 4 separate categories:

  1. E: Employee – This person values job safety and security over everything.
  2. S: Small business owner/Self-employed – An independent person who wants to do everything related to their business by themselves.
  3. B: Big business owners – People who create a large business run by intelligent people.
  4. I: Investor – Those who make money work for them.

His main theory is that people should learn how to become big business owners and learn how to become investors, as the people on the left side of the quadrant only have active income compared to those on the right earning passive income. Creating a viable and sustainable source of passive income is seen as a core principle of achieving financial freedom.

Source: www.bondora.com

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Be a Pro, with Portfolio Pro from Bondora

Bondora logo

The peer-to-peer lending marketplace Bondora announced the launch of a new feature called “Portfolio Pro”. This has been developed based on the feedback received from the Bondora investor community over the recent months.

Bondora - Portfolio Pro

What is Portfolio Pro?

Simply put, it is a tool for people who like to have more control over the level of diversification in their investments. You can now use this Pro feature to create a portfolio according to your own rules. For example, you may choose to select loans from specific countries, with different duration and Bondora risk ratings.

How much does it cost?

It’s free! Unlike many other platforms, investing with Bondora is free and using the new Portfolio Pro feature is exactly the same. Enjoy!

To get started, simply log in, click on the Portfolio Pro link in the menu and get started today!

Don’t forget about the free 5 EURO sign-up bonus from Bondora!

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Bondora peer-to-peer lending marketplace overview

Bondora logo

NEW: The peer-to-peer lending marketplace Bondora offers now a free 5 euro bonus on sign up. To receive it, you must register and comply with the terms and conditions. After signing up, the bonus will be found in your account and you will be able to use it to make your first investment.

About Bondora

Bondora has been in business since 2009 and is one of the leading non-bank digital consumer loan providers in Continental Europe. The consumer loans that Bondora offers are marketed in Finland, Spain and Estonia through a fully digital process supported by advanced credit analytics and in-house servicing. Bondora has historically financed the loans it originates by selling the associated receivables to a retail investor base drawn from 40 countries around the world.

Bondora focuses on unsecured consumer loans with principal amounts of EUR 500 to EUR 10,000 and repayment terms ranging from three to 60 months. Bondora is licensed as a credit provider by the Estonian Financial Supervision Authority, the primary regulatory body in Estonia governing and overseeing banks, credit providers, credit intermediaries, insurance companies, insurance intermediaries, fund managers, investment and pension funds, investment firms, e-money institutions and payment service providers.

Bondora has a strong executive and operations team with backgrounds in consumer credit, retail banking and asset management. Aside from Management and Supervisory Board members, key shareholders include subsidiaries of Valinor Management LLC, a US-based private investment firm with more than $3.4 billion under management, and Global Founders Capital GmbH Co. Beteiligungs KG Nr.1, a subsidiary of Global Founders Capital, one of the largest shareholders in Rocket Internet.

Strategy

Bondora strives to provide borrowers with a seamless and fast user experience, fair rates and transparent costs, and personalized offers. Bondora focuses on middle-income consumers who need mid-sized, mid-term financing that neither banks nor payday lenders are able to provide due to regulatory, balance sheet or technical restrictions.

Geographically, Bondora targets euro area countries that have not developed competitive credit markets owing to their size (e.g. Finland and Estonia) or adverse macro events (e.g. Spain), and hence have lower consumer debt to GDP ratios than elsewhere in the region, according to ECRI Statistical Package 2015 data.

History

The following table highlights Bondora’s milestones since founding the company:

2008
Bondora is founded.
2009 Bondora establishes the first Nordic marketplace lending platform.
2011 Winner of the “Best Estonian E-service of 2011” award and a quarterfinalist at the World Summit Awards.
2012 Loan marketplace opened to retail investors across Europe, making Bondora the world’s first cross-border lending platform.
2013 Launch of loan products in Finland and Spain, making Bondora the first marketplace providing credit seamlessly across multiple countries.
2014 (Jan) Raised EUR 1.3 million seed round, led by Global Founders Capital, a private investment vehicle of the Rocket Internet founders.
2014 (Apr) The UK Financial Conduct Authority grants Bondora an interim license.
2014 (Sep) First version of Bondora’s fraud detection process implemented.
2014 (Sep) Winner of the “Alternative Finance Platform of the Year (EU)” and “P2P Consumer Platform of the Year (EU)” awards from AltFi, the world’s leading news site for the alternative finance space, which includes crowdfunding, P2P lending, marketplace lending and invoice funding.
2015 (Jan) Rollout of scorecard and risk-based pricing, with the latter replacing auction bidding-based interest-rate setting.
2015 (Jan) Raised EUR 4.5 million Series A round, led by Valinor Management LLC, a EUR 3.5 billion, US-based private investment firm, which was an early backer of Lending Club.
2015 (Jul) Authorized as a consumer credit provider by the State Administrative Agency of Southern Finland to provide consumer credit in Finland.
 2015 (Sep) Bondora begins originating loans using its own balance sheet to comply with consumer credit legislation across the three locales where it operates.
2015 (Nov) Receives runner-up award for “Alternative Finance Platform of the Year (EU) 2015” from AltFi.
2016 (Jan) Bondora rolls out the second version of its scorecards and risk-based pricing, increasing the performance of its Finnish and Spanish models.
2016 (Feb) Bondora opens up its API to all of its investor base, making Bondora the first marketplace in Europe with a public API.
2016 (Mar) Licensed as a credit provider by the Estonian Financial Supervision Authority, the primary regulatory body in Estonia governing and overseeing all banks, credit providers, credit intermediaries, insurance companies, insurance intermediaries, fund managers, investment and pension funds, investment firms, e-money institutions and payment service providers. Bondora’s balance sheet model is extended, with credit risk partially maintained on the balance sheet.
2016 (Apr) Bondora rolls out update to its pricing models designed to take account of adverse trends in the global business and economic climate.
2016 (May) Bondora splits out and shifts its (i) debt-servicing activities to Servicer and (ii) loan marketplace activities to Capital in order to make its different activities legally and financially self-sustainable.

Business model of Bondora

Bondora earns it revenue from financing and servicing consumer loans. As of date, revenue is sourced from five services:

  1. Contract fees charged to borrowers when the principal amount is paid out.
  2. Monthly account fee charged to borrowers over the course of the loan repayment period.
  3. Debt collection fees charged to borrowers, where laws permit, or which are deducted from cash flow recovered from delinquent loans that went through the collection process.
  4. Fees received for B Secure that affords borrowers flexibility in managing loan repayment schedules to take account of changes in their financial circumstances.
  5. Interest earned on unsold loan receivables.

Competitive advantages of Bondora

Bondora intends to use its core strengths and the assets that have been built over the past seven years to capitalize on what it believes is a good business opportunity.

Experience in serving lower and middle income borrowers

A clear focus on creating cost effective ways to serve lower and middle-income borrowers and payday loan borrowers has allowed Bondora to deliver strong risk-adjusted net returns on its loan portfolio while keeping customer acquisition costs under control.

Proprietary underwriting, collection and recovery processes

Unlike many other lenders, Bondora conducts thorough background checks, which include income and expense verification, on prospective borrowers. Combining transactional, credit bureau and big data allows Bondora to assess credit and fraud risks quickly and cost effectively to identify Bondora loan products that meet customer needs. Servicing practices that have been optimized and developed over several years provide complete control over accounts, helping to ensure loan repayments are made in as timely a manner as possible.

Single platform for borrowers across Europe

Bondora has developed and implemented technology designed to maintain a single technical platform for its products and services, regardless of borrower residency, language and currency. This proprietary technology affords Bondora extensive economies of scale; functional improvements and costs are shared across all markets in which it operates.

International business architecture

Bondora seeks to capitalize on the unique and best-in-class skills available across multiple jurisdictions, combining cost-effective, efficient and skillful assets and people into a single organization. Bondora leverages Swedish banking infrastructure, German technology management, Estonian application development skills, cost-effective Fintech back-office operations and American marketing know-how.

Advantageous legal entity domicile

Bondora’s legal entity is based in Estonia, where corporate taxes are not paid when income is generated, but when profits are distributed through dividends. With a public debt-to-GDP ratio of 9.7% and solid credit ratings from the three main rating agencies, AA- (S&P), A1 (Moody’s) and A+ (Fitch), Estonia represents a sound eurozone economy. Its level of economic freedom is viewed as being among the highest in the world, and the business environment is progressive. Estonia has an ample supply of qualified IT workers with experience at companies such as Skype, Grabcad and Transferwise, and relatively liberal labor laws in comparison to other European countries. It also has close cultural and economic ties with Finland, including a similar language, which enables Bondora to effectively operate its Finnish business without having a local office.

How is Bondora regulated?

As of 21st March 2016 Bondora AS (mother company of Bondora Capital OÜ) is regulated by the Estonian Financial Supervision Authority (FSA) and was granted a Credit Provider license. The FSA is the main regulating body in Estonia which governs and oversees all banks, credit providers, credit intermediaries, insurance companies, insurance intermediaries, fund managers, investment and pension funds, investment firms, E-money institutions and payment service providers. The supervision authority helps to ensure that financial institutions are able to meet their obligations towards their customers and that the companies provide service that is of highest of standards. In addition, Bondora AS is regulated by the regulators in Finland.

Bondora‘s technology

Bondora‘s primary asset is the intellectual property of IT systems that power its websites and business operations. Bondora IT operations are integrated with its commercial activities and there is no separate IT department. Bondora engineers, overseen by three technical architects but reporting directly to specific business unit or project team leaders, are collectively responsible for the software applications that are used in its business operations. They ensure that the quality of the code is within Bondora’s guidelines, deploy and manage infrastructure, and make sure that Bondora’s systems function smoothly and remain operational. All development teams work in the same physical location, helping to facilitate smooth communications and know-how sharing.

Bondora develops and maintains the core IT architecture for its business, which refers to the IT platforms, technologies and solutions that enable its websites to provides services and products to customers. Bondora possesses the full scope of internal IT support systems that facilitate delivery of:

  • (i) a full cycle of IT service development, such as website creation for new markets and hardware configuration;
  • (ii) transition, which includes software and hardware transition and adjustments for new markets and scheduled or accident maintenance; and
  • (iii) management, such as website administration and data center management.

In developing its websites and infrastructure, Bondora incorporates the most sophisticated technologies and solutions available on the market today. Moreover, Bondora continually evaluates new technologies and approaches that may help to improve efficiency.

Bondora has developed and utilized proprietary and custom-designed technology platforms designed to be (i) powerful enough to process the large volumes of data required to evaluate borrower applications and (ii) flexible enough to capitalize on changing borrower preferences, market trends and regulatory requirements. Moreover, the information gathered from these technology platforms allows Bondora to target current or prospective borrowers who it believes are more likely to provide Bondora with better credit performance. Using this approach, Bondora can create a valuable list of consumers who use its products and to whom it can market new product offerings.

Does Bondora invest in loans it originates?

Yes, Bondora invests in every loan it issues, unless the single investor wants to buy 100% of the whole loan.

Operational management overview

The operational management of Bondora and its subsidiaries is overseen by the Management Board. Operations are structured into multiple business units, with each managed by a dedicated business and technical owner. At this time, there are three business units structured around certain activities:  consumer credit, loan marketplace and shared infrastructure. The compliance function is outsourced to multiple law firms to ensure compliance with laws and regulatory requirements applicable to Bondora and its operations.

Activities across business units are coordinated by Bondora’s Head of Operations who, prior to joining Bondora, managed an IT team responsible for the maintenance and performance of the structured credit (“FICC”) department’s credit analysis platform at UBS’s investment banking unit. The Head of Human Resources reports to her.

The loan marketplace unit has been spun off into a separate subsidiary, Bondora Capital OÜ, and the debt servicing function within the consumer credit unit has been spun off into Bondora Servicer OÜ.

Consumer credit

The consumer credit unit has six separate functional teams: borrower acquisitions; fraud-detection and KYC/AML; underwriting; scoring and pricing; and loan servicing and support. Each team is comprised  of technical and business people responsible for achieving the respective functional area’s objectives.

The consumer credit unit, with 26 full-time employees, is managed by a four-member management team with marketing, technology, credit operations and credit risk backgrounds. The Head of Borrower Product is responsible for the user experience and marketing through online and offline channels and is one of the most experienced online marketers in Estonia. The Head of Borrower Technology oversees engineering within the unit and is a leading technical architect who previously worked at Microsoft and various enterprise software houses. The Head of Servicing is a banker with extensive experience in consumer lending, leasing and insurance product development who held various leadership positions at Swedbank, the leading Swedish retail bank, over two decades. The Head of Credit Risk has extensive experience developing credit models and internal capital adequacy algorithms for banks, including Swedbank, leasing providers and non-bank consumer lenders.

Credit risk-related activities are supported by six data engineers, including one PhD (in economics), two PhD candidates (in machine learning/computer science), and three senior software engineers.

Loan marketplace

Bondora Capital’s loan marketplace unit, with 15 full-time employees, has two cross-functional teams: investor acquisitions and investor relations.

Audit function and internal financial reporting in Bondora

FINANCIAL AUDITOR

AS Deloitte Audit Eesti, in Tallinn, Estonia, provides audit services to Bondora. AS Deloitte Audit Eesti are chartered accountants, members of the Estonian Board of Auditors in the Republic of Estonia, and qualified to practice as auditors in the Republic of Estonia.

Bondora had its 2014 and 2015 annual reports audited by Deloitte. The audits were carried out according to IFRS and were issued with an unqualified opinion in both years.

INTERNAL AUDITOR

Erki Mägi, of AS PricewaterhouseCoopers, in Tallinn, Estonia has been named as Bondora’s internal auditor, reporting to the Supervisory Board. Erki Mägi is a certified internal auditor and qualified to practice as an internal auditor in the Republic of Estonia.

To date, AS PricewaterhouseCoopers has performed one full-scale review of Bondora’s internal processes and controls and will continue to undertake regular independent assessments of Bondora´s processes. The aim of such audits is to assess whether Bondora, its management and staff members’ activities comply with applicable legal requirements, Estonian Financial Supervision Authority rules, the Company’s internal rules, the Management Board’s and Supervisory Board’s decisions, and Bondora’s contractual agreements with third parties, and whether these activities are in accordance with industry best practices.

INTERNAL FINANCIAL REPORTING

Rein Ojavere, Bondora’s Chief Financial Officer, is responsible for overseeing financial planning and control, tax, accounting, audit and shareholder relations, including reporting.

Bondora Management Board

BOARD STRUCTURE

Bondora’s articles of association set out a two-tier management structure consisting of the Supervisory Board and the Management Board. Briefly speaking, the Supervisory Board’s role is to supervise certain activities of the Management Board in the best interests of Bondora and its shareholders; the Management Board’s role is to serve as the executive body of Bondora, with the authority to manage the business.

MANAGEMENT BOARD

Bondora is managed by the Management Board. As of the date of this Memorandum, the Management Board is comprised of two members, Pärtel Tomberg and Rein Ojavere. The details are set out below.

Pärtel Tomberg (Chief Executive Officer)

Pärtel Tomberg is the founder and CEO of Bondora AS. Mr. Tomberg has transformed Bondora into a leading pan-European marketplace lender from a dorm room startup he founded in 2008. He has helped Bondora establish a new standard in marketplace lending by being first in a number of areas:

  • first marketplace open to investors across Europe;
  • first marketplace providing credit seamlessly across multiple countries;
  • first rating system designed to allow loans originated is different markets to be comparable;
  • first marketplace open to accredited investors globally; and
  • first marketplace in Europe with a public API and granular performance data.

Mr. Tomberg was previously a member of the Nordic, CEE and Baltic region management teams of Quelle AG and, subsequent to that, Halens AB. Both companies sold fashion bundled with up to a 36-month installment plan, placing them among the largest non-bank consumer lenders in their target markets. He graduated summa cum laude from the Oxford Brookes University with a BA.

In addition to the directorship roles described above, Mr. Tomberg holds or has held the directorships (or, in certain cases, what were once members of partnerships) detailed in the table below, at some time during or over the past five years.

Current directorships/partnerships  Past directorships/partnerships
 Member of the management board: Bondora AS (chairman), Bondora AS, Bondora Capital OÜ, Bondora Servicer OÜ, Tomberg Management & Consulting Group OÜ, Social Developments OÜ Member of the management board: Elektrooniline Vahekohus OÜ
Rein Ojavere (Chief Financial Officer)

Rein Ojavere is the CFO of Bondora AS and is responsible for all of its financial matters, from investor relations to internal financial management.

Mr. Ojavere is a seasoned finance and investment professional. He was previously Head of Corporate Banking and a board member at DNB Bank in Estonia; Partner and Head of Research at asset management company Northern Star (formerly Limestone Investment Management); and Fund Manager and Head of Research of Hansa Investment Funds. He has also held several investment banking positions at Suprema. Mr. Ojavere holds a master’s degree in economics and business administration from the University of Tartu and is a CFA charterholder.

In addition to the directorship roles described above, Mr. Ojavere holds or has held the directorships (or, in certain cases, what were once members of partnerships) detailed in the table below, at some time or over the past five years.

Current directorships/partnerships  Past directorships/partnerships
Member of the management board: Bondora AS, Bondora Capital OÜ, Bondora Servicer OÜ Member of the management board: DNB Pank, OÜ Front Consulting, OÜ Limestone Partners, OÜ Limestone Advisors.
Member of the supervisory board: AS Limestone Investment Management. Director: Limestone Opportunities Fund S.A.

MANAGEMENT BOARD RESPONSIBILITIES

The Management Board is responsible for representing Bondora and directing its daily activities in accordance with the strategy set out by the Supervisory Board and Bondora’s articles of association. The Management Board also controls the daily activities of Bondora employees. The Management Board has a joint representative right: transactions must be approved by two members, one of whom must be Pärtel Tomberg.

Members of the Management Board adopt resolutions at board meetings. Such meetings are considered to have a quorum if over half of the members take part. Resolutions are adopted if a majority of the votes of all Management Board members are in favor. Each member has one vote; in the case of a tie, the Chairman of the Management Board casts the deciding vote. Management Board meetings may be held through electronic means, provided that all members participating in the meeting can hear and communicate with other participating members.

The Management Board is also responsible for creating and presenting the following at the general meeting in accordance with applicable law: the management report; the annual report, together with its appendices the auditor’s report; and the profit distribution proposal.

Bondora shareholders

As of date, 100% of Bondora’s issued shares are fully paid and duly registered. The holders of the shares are entitled to receive the remaining profits, if any, as declared from time to time in accordance with Bondora´s articles of association. They are also entitled to one vote per share at Bondora’s general meetings; however, the shares are divided into three classes, with each having somewhat different rights. Moreover, as a shareholder of Bondora, the subsidiary of Valinor Management LLC has certain specific rights that are prescribed in the articles of association, including, for example, veto rights over a limited number of shareholders’ resolutions. Bondora’s share register is maintained and held by the ECRS.

The general meeting of shareholders is Bondora’s highest governance body. An annual shareholders’ meeting must be held every year; an extraordinary shareholders’ meeting may be called by the Supervisory Board on its own initiative or at the request of the Supervisory Board or shareholders holding in aggregate not less than 5% of Bondora’s share capital. Each Bondora share carries the right to cast one vote at any shareholders’ meeting.

Bondora Supervisory Board

SUPERVISORY BOARD STRUCTURE

In accordance with Bondora´s articles of association, the Supervisory Board, which oversees the Management Board, is currently comprised of three directors who were appointed at a general meeting of shareholders. Joao Monteiro, Mati Otsmaa and Phil Austern. The details are set out below.

Joao Monteiro (Chairman of the Supervisory Board)

Joao Monteiro is an international manager with a primary focus on strategic repositioning and restructuring of business operations and supply chains. He is Head of Global Business Development of Contract Logistics at Kuehne+Nagel. Previously, he was involved in organizational development at LSG Sky Chefs as well as Roland Berger, the leading European management consulting firm. Mr. Monteiro holds an AMP certification from the Harvard Business School.

In addition to the directorship roles described above, Mr. Monteiro holds or has held the directorships (or, in certain cases, what were once members of partnerships) detailed in the table below, at some time during or over the last five years.

Current directorships/partnerships  Past directorships/partnerships
Member of the management board: Mosaic Capital Partners Ltd Chairman of the Supervisory Board: Bondora AS
Mati Otsmaa (Supervisory Board Member)

Mati Otsmaa is a C-level management executive from San Francisco with extensive experience in building e-commerce and financial service businesses. He has worked in a senior marketing capacity internationally, with focus on consumer credit lending, for American Express, Barclays, Citibank, Chase, Experian, HSBC, Hyundai and Providian. Mr. Otsmaa has an MBA from the University of Southern California.

In addition to the directorship roles described above, Mr. Otsmaa holds or has held the directorships (or, in certain cases, what were once members of partnerships) detailed in the table below, at some time during or over the last pive years.

Current directorships/partnerships  Past directorships/partnerships
Director: Market Direct Inc. Member of the Supervisory Board: Bondora AS Director: AffiniCorp Inc.
Phil Austern (Supervisory Board Member)

Phil Austern is a Partner and founding member of Valinor Management LLC. Prior to that, he was an analyst at Bridger Capital. From 2005 to 2006, Mr. Austern was a vice president at Francisco Partners and a member of the team that launched the firm’s London office; from 2000 to 2003, he was an Associate at the firm. Earlier in his career, Mr. Austern was an analyst at DLJ Merchant Banking Partners, the leveraged buyout arm of Donaldson, Lufkin & Jenrette.

Mr. Austern graduated cum laude from New York University’s Stern School of Business with a BS in finance and economics and received in 1998 and earned an MBA from the Wharton School of the University of Pennsylvania in 2005.

In addition to the directorship roles explained above, Mr. Austern holds or has held the directorships (or, in certain cases, what were once members of partnerships) detailed in the table below, at some time or over the last five years.

Current directorships/partnerships  Past directorships/partnerships
Member of the Supervisory Board: Bondora AS

SUPERVISORY BOARD RESPONSIBILITIES

The Supervisory Board is responsible for planning Bondora’s business activities, organizing the management of Bondora, supervising the activities of the Management Board and making decisions as stipulated by applicable law and in Bondora’s articles of association. In addition, the Supervisory Board has such functions and competencies as are provided for in Bondora’s articles of association and by applicable law.

Meetings of the Supervisory Board are held whenever necessary, but not less than once every three months. The Supervisory Board has the right to adopt resolutions without calling a meeting if all members consent to it.

The following measures and/or transactions require a ratifying decision by the Supervisory Board, which, to be valid, must have (i) the approval of a majority of its members and (ii) the approval of the member of the Supervisory Board appointed by the subsidiary of Valinor Management LLC:

  • adopt and/or change the strategy/business plan and the budget;
  • appoint and/or dismiss the CEO and/or chairman of the Management Board;
  • approve any material transactions (including, but not limited to, acquisitions and the issuance of debt) not previously included or provided for in the approved budget;
  • approve any asset disposal with a monetary value in excess of EUR 50,000;
  • initiate or settle, including by way of compromise, any legal proceedings outside of the ordinary course of business where there are claims with a monetary value in excess of EUR 50,000;
  • make a material tax election or alteration of the tax status of Bondora other than as required by changes in law, regulations or accounting principles;
  • enter into any related-party transactions, other than in the ordinary course of business and on an arm’s-length basis;
  • increase the annual compensation of any employee making in excess of EUR 75,000 by more than 10%;
  • enter into any contracts with a monetary value of more than EUR 50,000 not previously included or provided for in the approved budget;
  • enter into employment, service, consultation or cooperation agreements with an annual monetary value of more than EUR 50,000 not previously included or provided for in the approved budget;
  • authorize or grant participation in an equity incentive or similar participation program, including any option pool.

It should be noted that the Supervisory Board confirms the strategy/business plan and the budget in writing for a year and reviews updates quarterly as it sees fit.

How to start investing on Bondora?

To start investing on Bondora:

  1. Open an investor account
  2. Fill out the identification form
  3. Choose your strategy for the Portfolio Manager
  4. Add funds to your account and start investing

When you have activated the Portfolio Manager it will immediately start searching for loans that fit your selected strategy. The starting bid size is €5 which will double after every 200 unique investments. You can also set a custom bid size to override the automatic bid size set by the Portfolio Manager.

What kind of documents do accredited investors need to provide?

If you are an accredited investor based on your net worth we ask you to send us bank statements, brokerage statements, other statements of securities holdings, certificates of deposit and/or tax assessments and appraisal reports issued by third parties in order to verify assets, a consumer report from at least one of the nationwide consumer reporting agencies to verify liabilities and also a written confirmation that all liabilities necessary to make a net worth determination have been disclosed (all information provided may not be more than 3 months old).

If you are an accredited investor based on your income we ask you to send us tax forms that report revenue (for example in US: W-2, Form 1099, Schedule K-1 or filed Form 1040) for the last two years and also a written confirmation that you have reasonable expectation of reaching the same income level in the current year.

You don’t need to provide above-mentioned documents if you send us written confirmation from a broker-dealer, a registered investment advisor, a licensed attorney or a CPA that you have taken reasonable steps to verify that you are an accredited investor within the prior 3 months and that it was determined that you are an accredited investor.

Provided that all necessary information have been sent we will review the documentation within 5 business days. In case of successful verification you can start investing via our platform.

Who can invest on Bondora?

Anyone over the age of 18 living in the European Union, Switzerland or Norway and businesses registered in the EU or from any other country approved by Bondora. If you are an investor from Australia, Brazil, Canada, Hong Kong, India, Japan, South Korea, Mexico, Singapore, South Africa or The United States of America then we need to verify that you are an “accredited investor”. As part of the verification process we ask you to send us different information and documents.

How much time do ivestors need to spend on investment management?

PASSIVE INVESTORS

If you have little free time to spend on your investments and are expecting to earn the market’s average return rates, you can automate your investments with our Portfolio Manager. All you need to do is select your preferred strategy (from Ultra Conservative to Opportunistic) on the Portfolio Manager settings and add funds to your Bondora account and let the Portfolio Manager do the rest, including reinvesting repayments from your investments, thus saving you time and increasing the likelihood of your money getting invested as quickly as possible.

ACTIVE INVESTORS

If you want to take a more active approach to your Bondora investments, then you get programmatic access to the loan listings to make investments using the API. The API is accessible on live site at //api.bondora.com/. If you are interested in learning more about the API, please send us an email to api@bondora.com

What is Portfolio Manager?

You can use Portfolio Manager to automate the investment process. In order to set up or edit your Portfolio Manager you need to navigate to Dashboard, scroll down and choose your preferred strategy and settings, click Activate Portfolio Manager button and agree to its terms and conditions (Portfolio Manager agreement).

Features:

  • Investment size calculation tailored to meet your targets
  • Advanced settings that let you over-ride each individual variable in our investment size formula
  • Option to split your investment into multiple smaller bids to make it more liquid
  • Control through granular risk-return strategy options
  • More inventory as Portfolio Manager will be also buying from the Secondary Market

Investment size calculation

The suggested investment size calculation takes into data specific to your portfolio and strategy to arrive at the suggested investment size. The algorithm includes six variables: (1) point of diversification (X – by default 200); (2) the desired capital deployment period (Y – by default 2 weeks); (3) the number of loans expected to be available for investment over this period (Z); (4) your total deposits (T); (5) your available cash balance (C); and (6) your expected cash inflow over the defined deployment period (CF).

The suggested investment size is calculated by dividing your cash balance and expected cash inflow over the defined deployment period with the number of loans expected to be available during this period. In simple terms the suggested investment size equals (C + CF) / Z. The minimum investment is 5 EUR. The maximum investment is calculated by dividing your total deposits with point of diversification (T / X). Point of diversification is the number of loans that you should include in your portfolio to have a reasonably diversified portfolio.

Advanced settings that let you over-ride each individual variable in our investment size formula

Investors who feel that the default settings do not suit them can override most of the individual variables in the formula above. You can override point of diversification and capital deployment period. You can of course set your own minimum and maximum amounts instead of using our formula. Additionally you are able to define the free cash balance you would like to keep on your account for withdrawals.

Option to split your investment into multiple smaller bids to make it more liquid

Investors on Bondora are not all investing with the same amounts of capital. Therefore some investors are making considerably larger investments into single loans compared to others. We have an option to split your investments into smaller bids in order for larger investors to be better able to liquidate parts of their portfolios. In case your investment per loan is 100 EUR and you have defined the bid size to be 15 EUR then the system will make 7 bids into a loan, 6 bids of 15 EUR and 1 bid of 10 EUR.

Control through granular risk-return strategy options

Investors looking to increase or decrease the available investment pool will be able to do so by choosing among 9 strategies. We are adding Ultra Conservative as well as Opportunistic strategies as well as options in between the 2 new and 3 existing strategies.

Please remember that these strategies remain within the context of Bondora and therefore an Ultra Conservative strategy cannot be compared with an ultra-conservative stock or bond strategy (e.g. blue chips or German bonds). Bondora should be viewed as higher yield part of your portfolio and total portfolio allocation towards Bondora should be set based on this assumption.

Expected portfolio distribution charts include existing loans to improve estimates

The expected portfolio distribution charts calculation includes both your existing and new loans. The loans that are expected to be added to your portfolio over the desired allocation period are added to the existing portfolio to arrive at the estimates. The estimates for new loans are calculated based on your chosen risk-return strategy and recent market statistics.

Portfolio Manager will be also buying from the Secondary Market

We have been steady increases in secondary trading since we introduced our API. However the trading still considerably lags behind Primary Market volumes and available inventory as most investors are not using the Secondary Market. We are addressing the liquidity constrain by adding Secondary Market inventory to the pool available for the Portfolio Manager. This step will both increase the liquidity for existing investors as well as allows new investors to buy into seasoned and lower risk assets.

The Portfolio Manager will buy only loans that are not overdue (principal nor interest) at a price equal to the principal balance or below. No trades will be made above par or on overdue loans until it’s possible to completely harmonize the Primary and Secondary Market pricing.

In case you are interested only in new originations then you can turn off this option through the Portfolio Manager Advanced Settings.

What is Bondora API?

Bondora API supports the more active, trader type of investors by allowing granular reporting and customized investment strategies. It gives active investors the flexibility that the Portfolio Manager does not. API is an interface for accessing the functionality of Bondora platform without the user interface (UI). Bondora API provides information and exposes Bondora’s functionality for other services and applications. Investors benefit from the API by having access to data and services that cater to their individual wishes and by getting the ability to bid on specific loans that fit their personal investment strategy. Investors can use Bondora API in common programming languages.

Recommended starting amount?

Bondora generally do not make any recommendations but they have seen that investors generate a more stable return when they diversify their investment across many different loans. It is also best practice to keep your investments continually active and systematically add funds to reach your investment goals. Bondora return models are built on an assumption of a portfolio having minimum of 200 unique investment with equal exposure.

Why is it wise to have a minimum allocation of 200 loans and €1000 for your portfolio?

The minimum bid size is €5. The bid size is doubled after each time your portfolio increases by 200 loans. Or you can use our “Bid Size” feature that enables to set your own bid size to any amount as long as it is divisible by 5. 200 is an important number because analysis of the investors’ portfolios shows that the risks of a portfolio substantially decrease after reaching 200 unique loans. This means that your portfolio return becomes stable and on 91% of cases is above 10% of return. Therefore increasing the size of the investments after each 200 new loans allows you to lend your money faster without increasing risks.

Can I liquidate my portfolio before final loan deadline?

Yes, Bondora has an active Secondary Market for selling loans with discount or mark-up.

Selling investments manually on Secondary Market

To sell your investments on Secondary Market log in with your Bondora credentials to see an overview of your investments on Invesments page. Choose the loans which you would like to sell by clicking on cart icons. When finished picking the loans and adjusments are made confirm the selling from Sell all button and the loans will be put on sale.

Faster liquidity with one-click sell button

Selling your investments is made extremely easy. You will be able to define the amount of capital you need and the system will do the rest. This feature is neatly packaged on the Dashboard. Loans will be put on sale with current loans first and overdue ones thereafter with newest loans sold first before seasoned ones. The sale price will be calculated as the principal balance less principal payments overdue by schedule. In other words if you put your entire portfolio to sale then it will be priced the same way as the account value is calculated.

How does Bondora safeguard my money?

The money borrowers and lenders transfer to Bondora is held on a segregated client account. No interest shall be paid for money held on the client account. We bank with SEB Bank, one of the largest banking groups in Scandinavia. You can find additional information about their credit ratings on SEB Group’s home page.

The money transferred to Bondora may only be used pursuant to Terms of Use and for performing the obligations of the loan agreements. The respective amount in the bank is by its nature a claim (against the bank) that Bondora has acquired in its name but on behalf of the customer and only with the purpose of using it for performance of the mandate. Therefore the respective money does not belong to the bankruptcy assets of Bondora and a claim for payment cannot be made for the money in enforcement proceedings, and it shall likewise not be reflected in the balance sheet of Bondora. This above all means that by transferring money to Bondora you do not completely transfer it to the assets of Bondora but instead retain the necessary rights concerning the money in order to recover it fully in case of financial troubles of Bondora.

All payments made to the Bondora account shall be reflected as receipts on your client account. You will receive an email notifying you of an arrived deposit or a repayment. Bondora keeps records and accounts of every payment to and from Bondora account as well as payments between different customers. A daily internal and external reconciliations are made to ensure the accuracy of the records and accounts.

You have the right to withdraw your funds to an account in your name that you have used to make payments to Bondora account. You need to verify all withdrawals using two-factor authentication. All withdrawals will further be reviewed by our accounting team before submitting to our bank over a secure electronic payment order.

How can I add funds/deposit to my Bondora account?

ADDING FUNDS FROM WITHIN THE EUROZONE

You can add funds to your Bondora account either through a SEPA bank transfer or through third party services such as TransferWise, Currencyfair and EVP International. As Estonia is within the Eurozone, please make sure you specify that the payment is to be made in euro when initiating the payment through your internet bank or a local branch.

The SEPA payments take a maximum of 3 business days to arrive and the costs are generally the same as for domestic payments for the Eurozone customers. However, please make sure to verify this with your local bank before making the payment. In case your bank also levies a charge on the receiver of the payment, then these charges will be passed onto your Bondora account.

All details required for making the payment can be found on your Dashboard when clicking on ADD FUNDS tab after you have completed the initial identification process. Please note that withdrawals are only possible to the same account from which the funds were transferred and currently only a single bank account can be tied to your Bondora account. These steps are required to ensure that your funds are not compromised even in case someone manages to get hold of your Bondora account access details.
ADDING FUNDS FROM OUTSIDE THE EUROZONE

TransferWise is useful when making payments outside the Eurozone allowing you to save money and time. If you use a third party service provider such as TransferWise, Currencyfair and EVP International to add funds to your Bondora account for the first time we require some additional information to verify your account before you can start investing.

Please send us proof of your personal bank account details to investor@bondora.com. This can be an account statement or screenshot of your personal online banking page, which would cover the following information:

  • Bank account IBAN
  • Bank BIC/SWIFT code
  • Your name
  • Bank name

We are only able to verify your bank account as soon as we receive the mentioned information above. Please note, that you will not be able to withdraw funds until your account is fully identified. Please note that transfers through TransferWise may take up to 5 business days to receive.

How do I withdraw funds from my account?

If you are making a WITHDRAW request for the first time then we need to fully identify your account before you can withdraw money from your Bondora account.

The identification process is required for ensuring safety of your personal information and simplification of money withdrawal process. Please go to your settings page on the top right corner link and complete the missing steps. Once your identity and address has been verified, please follow the guidelines below to withdraw money.

  • Go to your Dashboard
  • Click Withdraw funds and insert the amount you would like to take out from your Bondora account and click “Withdraw”

Can I also withdraw funds using TransferWise?

Yes, TransferWise withdrawals are made easy through the Dashboard.

Our customers outside of Eurozone or who do not have a euro account can now easily withdraw money through Transferwise. Simply enter the withdrawal amount, choose your currency and use the Transferwise option. Transfers through TransferWise may take up to 7 business days. Everything else will happen automatically.

PS! Please notice that TransferWise service can be used only for cross-currency payments, EUR to EUR transactions are not supported. Please also make sure that your bank accepts TransferWise payments.

What performance reports are available to investors?

You will be able to download on-demand performance reports for freely chosen periods that cover:

  • Investments dataset: Performance data on every loan in your portfolio
  • Portfolio Cash Flow, P&L Statement and Balance Sheet: Allows you to see the total portfolio cash flow, P&L and Balance Sheet as of the end of each month.
  • Historic payments: Includes all received payments in euro, categorized by payment type, date and loan ID.
  • Secondary market transactions history: Includes all of your transactions on the Secondary Market.
  • Future cash flows: Includes all scheduled payments in euro, categories by payment type, date and loan ID.

The data is available for your portfolio as well as for all loans issued on Bondora that you can use as a benchmark.

In our dataset updates in the past year we have consolidated all our different data sources and thereby made the exact same data and information available to each investor regardless of the channel they use.

Today there are differences in available data points as well as the definitions behind different data points with similar labels. These differences are due to having our technology built over 7 years. Therefore we need to consolidate the data sources through a new technology that will allow us to resolve all data conflicts and discrepancies. Shortly it will be very easy to navigate in the vast sets of information Bondora makes available.

You can keep track of the changes through our data map available on the Public Reports page. This map shows which data points are available through which channels, the label in Data Export as well as the description. We have also included the previous label if there has been a change (highlighted in italic). Descriptions of removed data points are all set to [OBSOLETE].

Cells marked in green indicate that this data point is already available in the particular channel whilst yellow means that it’s going to be released shortly. Most white cells will soon also be colored green. This is unless the particular data point is not available at the time of the data source in question is polled (e.g. it is not possible to show loans active late category when it is still on the Primary Market).

Please note that there might still be label changes in Data Export to harmonize it with labels used in the API. Thereafter the labels in the API and Data Export will match. All used labels, including the label in our web user interface, will be made available through the legend to make cross-referencing easier.

How to calculate net return?

Bondora use the XIRR function (extended internal rate of return) to calculate the net return. XIRR is used to return the internal rate of return for a schedule of cash flows that are neither necessarily periodic (payments are not made on a single day each month) nor always positive (portfolio has both outgoing and incoming payments).

Internal rate of return is a discount rate that makes the net present value (NPV) of all cash flows (repayments minus initial investment) from a particular portfolio equal to zero. Discounting cash flow means that you are reducing the future cash flow projections to arrive at its present value (how much 100 euro in a year from now is worth today). This is mathematically done by dividing the future cash flow by 1 plus internal rate of return in the power of the fractional period (e.g. if you are using an annual internal rate of return and a payment is 4 months from now then you would take 1 plus internal rate of return to the power of 4/12).

XIRR uses the loan issue date and amount, loan actual repayment dates and amounts and sum of scheduled future principal repayments (this is assumed by us to equal the present value of the portfolio) to calculate the internal rate of return of your investment portfolio on Bondora. This approach writes off all overdue and unpaid principal and interest payments immediately from the calculation. No assumptions for future interest payments or loss provisions are made as this is expected to be covered within our approach to arriving at the present value of the portfolio.

In other words, if you would borrow money at a rate equal to the net return shown on Bondora in order to finance your investments you would end up break-even. If you are borrowing money at a lower rate or your alternative investment opportunities (e.g. mutual fund) have a lower rate of return than you are making a profit compared to other options and it makes sense to continue or increase investment.

Can net returns of an outstanding portfolio change over time?

es, your net return over time can fluctuate based on the actual interest and principal repayments received. Overdue loans might start performing again and current ones become delayed. Recovery processes can take years to collect every penny owed, so even performance of very old portfolios might increase substantially over the years. Over time our servicing, collection and recovery practices are continuously improved and even higher risk portfolios can start behaving like lower risk ones.

Most of the fluctuations (calculated as the current net return vs. the net return calculated in the end of the specific calendar year) we have witnessed have been positive due to recovery efforts. Using data since 2012 there have been variances between -8.1% to +4.4%.

Can the net return calculation be improved?

Theoretically it would be possible to substitute the current present value sum of scheduled future principal repayments with the sum of actual discounted future cash-flows. However in order to accomplish this you would need to make a significant amount of assumptions about the timing and amount of the future cash flows from your outstanding portfolio. You would need to estimate when and how much would current loans repay and you would have to make the same assumption also for delinquent loans. Furthermore, you would need to discount these cash flows with a rate equal to actual XIRR of the fully matured investment or use future dates and payment amounts granularly in the model. In the end, one would simply arrive at a number based on a lot of assumptions that still needs to be tested in reality.

We have seen some investors build their own risk-adjusted models that simply take the outstanding principal balance and reduce this by a fraction of the overdue loans. Although this might at face-value seem like a reasonable step, it ignores the fact that outstanding loans will make both interest and principal repayments, as will recovered loans. This logic could be applied to investments with very low rates of return (where future interest payments are discounted to zero or to negative numbers) however not to consumer loans carrying reasonable risk-adjusted interest rates. In other words in case one would discount overdue loans at the same time performing loans would be taken into the present value with a premium.

In case you are interested in trying to establish a better model for calculating the present value then we recommend using the Historic payments and Future cash flows data exports under public or your personal data. Simply using outstanding amounts is not sufficient for building a model.

The enclosed file gives you a template example of discounting future cash flows and calculating XIRR at different points in time over the cycle of a portfolio. It also includes all the data used in the actual return calculations presented in the analyses above. Sheet ‘Xirr Calculator Example’ displays a basic model that includes some elements to include in your own analyses. Cells in yellow can be edited and white cells are fixed (please note that this example is for a 52 month term portfolio). Calculations related to ‘Bondora XIRR’ are based on the logic currently used on Bondora whilst ‘Perfect XIRR’ calculations are based on a situation where one would have perfect information available at any time during the cycle.

 

Can net returns be positive even in case default rate is above the interest rate?

Net returns on a portfolio can be substantial even if cumulative default rate is equal or even above the nominal interest rate. This is because the performing portfolio continues to generate interest and repayments over the full cycle of the loan not only in a single year.

Over an average 52 month cycle the performing loans and parts of the non-performing loans generate and pay interest for 52 months. Therefore in case one would want to compare this number with the cumulative default rate then the nominal rate should either be cumulated as well or the default rate annualized over the 52 month period. In the calculation model shared above we have built cash flows for an imaginative portfolio with 10% nominal interest rate and a 12% cumulative default rate to illustrate this.

We have seen some investors build analyses where portfolio returns have been calculated as interest rate less cumulative default rate (or cumulative expected loss). Furthermore some of these analysis have been done by calculating tax income on the nominal interest rate although non-performing loans do not pay interest and hence are not taxed. Such models unfortunately are misleading at best due to the reasons explained above.

Please make sure you use the full cash flows when building your own portfolio evaluation models and apply taxation only to actual paid interest not nominal values.

How are recovery rates measured?

Bondora calculate the recovery rate by comparing actual principal cash flow (net of write-offs) that occurred after the default with principal cash flow that we would have expected from the loan in case it had paid according to the agreed schedule. This measure allows us to determine the expected capital loss on loans that default.

Data is aggregated to larger cohorts and recent data are excluded as otherwise outliers will skew the results too much (e.g. 1 customer repaying the full amount after default at once). On the Bondora level this means excluding the last three months of defaults and using country based quarterly cohorts. Data on individual portfolios should likely be viewed on a higher level either using yearly country based cohorts or simply quarterly cohorts across all countries.

How to find recovery rates using Bondora statistics?

You can easily find information on recovery rates on the entire Bondora portfolio through the Recovery Rate chart on Public Statistics. The same chart is also available for the portfolio of each individual investor in your Personal Statistics page. Simply adjust the period, country, planned, actual and group by filters to pull out the data you want.

Some tips to help you master the Recovery rate chart:

  • The period filter looks for loans that defaulted in the specific time range.
  • The country filter allows to look at defaults from a specific country.
  • The status filter segments the data based on the loans current status (Defaulted = loan is still in default; Full recovered = the loan has been repaid in full; Restructured = a new payment schedule has been agreed; Sold = loans you have sold – this is only applicable to your private portfolio).
  • The recovery status filter allows you to analyze the performance based on the latest high-level collection and recovery stage assigned to the loan.
  • Planned and actual filters make it possible to determine how the recovery rate is calculated. You can for example compare planned interest vs. actual interest received or planned principal vs. actual principal received.

How are investments taxed?

The profits earned through Bondora are in general taxed based on the gross interest received and the residency of the investor. Please declare interest income to your local authority in accordance with the law. Keep in mind that with peer-to-peer lending individuals generally cannot offset losses against income.

Please check with your local tax authority if, how and when you need to report your income.

To make the reporting easier for investors, we have prepared a Tax Report with the necessary information included. The report can be found on the Reports page on your Bondora account.

Consumer lending market in Europe

The European consumer credit market is the most relevant market for Bondora and its trends and developments will play a significant role in the success of Bondara’s business. The development of new technological solutions, changes in economic conditions, and the growth and acceptance of online lending are among the key driving factors that have reshaped the European consumer lending market. Bondora’s business model is designed to capitalize on these trends and developments.

The total market size of the European consumer credit was EUR 1.07 trillion in 2014; after reaching EUR 1.16 trillion in 2008, it contracted for five consecutive years. That said, the market appears to have stabilized; it experienced only a 0.3% year-on-year decline in 2014.[1] For 2015-16, expectations are for moderate growth overall, though with significant differences among individual countries in the region.

The European consumer credit market can generally be divided into three groups: Northern Europe, Continental and Southern Europe, and Eastern Europe.

Countries in Northern Europe, such as the UK, Ireland, Denmark, Finland, Norway, Sweden and Germany, have relatively high consumer credit penetration rates, with per capita volumes above EUR 2,500. Finland is positioned at the lower end of the spectrum; at EUR 2,563, per capita consumer credit is fairly modest when viewed from the perspective of its overall economy.

Per capita volumes are less than EUR 2,500 in the Continental and Southern European countries, which include France, Austria, Netherlands, Spain, Italy and Portugal, while the consumer credit market is least developed in Eastern Europe, where per capita volumes are less than EUR 1,000. The European Union average is EUR 2,100.

Recent market dynamics have contributed to variations among and within the three groups, with relatively faster growth being seen in several Eastern European countries, the UK, Finland and Sweden. In contrast, certain countries in Southern and Eastern Europe are experiencing declines.

Following the 2008 global financial crisis, the banking sector witnessed a shift in market dynamics, driven by increasing regulation (e.g., Basel III and CRD IV). The changes have forced banks to improve their balance sheets and focus on core products in domestic markets, and have led to an overall decline in the appetite for credit risk. Consequently, it has become harder for individuals to obtain credit from commercial banks. Because demand for consumer credit remains strong, many prospective borrowers have turned to non-traditional lenders.

The banks’ retreat from consumer lending and technological evolution have been driving forces behind the emergence of alternative lending models and new players. Digital channels offer opportunities to reduce costs and improve customer targeting, as well as the ability to capitalize on advanced scoring and underwriting methods.

As a result, digital lending has been a credit market game changer. Among the features that distinguish digital lending, which has an estimated addressable market of EUR 760 bn,[2] are new players offering a pure online experience, the ability to tap additional data sources when evaluating potential borrowers, and the ability to consolidate different aspects of lending.

Perceptions about non-traditional lenders have also been improving as they have sought to burnish their image and that of the sector. As they make inroads in presenting themselves as credible alternatives to traditional unsecured consumer lenders, and as banks continue to shift their focus from expansion to extracting value from existing customers, non-bank lending is expected to become an increasingly important aspect of the consumer lending business. The fact that banks in several markets have begun cooperating with new entrants by capitalizing on their technological advantages and financing loans underwritten by non-traditional lenders will likely bolster this trend.

Aided largely by expansive monetary policy in Europe, and in the eurozone in particular, economic growth and consumer confidence have been spending more time in positive territory in recent years, which should continue to spur moderate growth in the consumer lending market. The pace of expansion is expected to mirror that of the overall economy, and with the odds of an expansive credit boom appearing to be low, market dynamics should remain relatively healthy.

Europe’s evolving consumer lending landscape has led to additional regulatory scrutiny and altered perspectives on regulation in many countries. This stems from a desire to increase financial system stability at the time when non-traditional lenders are accounting for a large and growing share of credit activity and to ensure consumers are adequately protected. In light of this, the regulatory risks and other aspects of operating in this market are becoming much more important.

To succeed in such an environment, lenders must be able to adapt quickly to new regulations and changes in product offerings and requirements, and direct ever greater attention to the risk management and data-related issues that Bondora has been strongly focused on.

[1] Source: Overview of the European Consumer Credit Market, Credit Agricole, July 15, 2015

[2] Source: Digital Lending: The 100 Billion Dollar Question, Autonomous Research, January 2016.

General statistics on Bondora

  • Average loan amount: 2500 EUR
  • Average loan duration: 47 months
  • Average interest rate: 31.9%
  • Loans issued: 91.6 M EUR
  • Net return: 14.6%

 

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Hot to sell loans from one investor to another with Bondora’s Direct Sell feature

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Bondora has introduced a new facility that allows investors to sell loans directly to other investors. The feature opens up a wider offering of investments for the users. With this feature you can also bundle several loans together and sell an entire portfolio. Here are two instances where the investors may want to use the direct sell feature:

  • An investor may reach an agreement with another investor to sell their loans. In this case the investors have already agreed on the terms of the sale before arranging the transacti
  • Some investors may use direct selling to consolidate their holdings. Some users who began as private investors may find the feature useful when grouping their investments into a company account. This essentially works as portfolio transfer.

Selling directly to another investor

The direct sell option is very easy to use for investors. Here’s how:

On the Investments page, select which loans you want to sell by clicking the sales cart icon, then press the “Sell” button above. A popup box will appear asking if you want to sell the loans individually or as a single portfolio. Now you will need to designate specific investor username to whom you want to sell the selected loan(s) or portfolio.

Bondora sales list

Investments-sell-to-specific-user-confirm

In this same popup box you’ll see the total calculated expected income from the sale. The fee totals 1% of the sum of outstanding principal of the loan(s) less the sum of the overdue principal amount. The final step is to sign the loan sales.

Confirm investments sell to specific user

Finding direct sales offers on Secondary Market

At this point the buying investor is able to find the loan/portfolio. The listing is available in the Secondary market page. Open the filter options and locate the filter “Show offers meant for me”, then select “Yes” from the dropdown box.  Buying the offer is no different from the usual process – select the offer by adding it to buy cart and click “Buy”.

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How to sell multiple loans as portfolios on Secondary Market at Bondora

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In may 2017 Bondora released a new feature enabling investors to sell multiple loans as one portfolio in Secondary Market. This feature adds a new tool for the investors to increase liquidity and manage their portfolio risk more effectively.

Before, investors could sell investments from their portfolio one by one by adding the loans to sales cart and signing the sales orders in the Investments page. The new feature adds the possibility to combine the loans you want to sell into one portfolio and put this portfolio to sale on Secondary Market.

To sell multiple investments as one portfolio, just mark the “Sell as a portfolio” checkbox in the Sales list popup. The summary of the investments is displayed in the same view. In addition, you are able to set the price for the portfolio manually by marking the checkbox for “Set a portfolio price”. If you do not set the price manually, the system sets the sum value of outstanding principals as the portfolio price. Next, you just have to continue and sign the sales.

Bondora - Sale multiple loans

Find portfolios for sale on Secondary Market

To see all the portfolios for sale by other investors, go to the Secondary Market page and enable the “Show portfolios” option on the top right. This quick filter only displays portfolios for sale. You can look into each portfolio and see which loans are included and what is their history and status.

Bondora - find porfolios

This feature offers a new level of liquidity for Bondora users. If an investor wishes to divest themselves of a loan they can do so before it reaches maturity. Additionally, investors can increase the liquidity of lower rated loans by including them with higher rated loans in a single portfolio, thus increasing the chances of liquidation.

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New feature at Bondora – Recurring payment

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Bondora announced today (28 april 2017) the launch of a new automation feature: recurring payments.

How to set up your recurring payment

They added a simple new feature which allows you to set up recurring payments from your bank to your Bondora investment account. When you login to your Bondora account, go to the “Add Funds” tab on your Dashboard. Below you’ll notice a checkbox for “Make payment recurring.”

With this checkbox selected, setting up a recurring payment is as easy as making a regular credit or debit card payment.

  1. Choose the deposit amount.
  2. Choose a period for the recurring payment.
  3. Choose a payment day.
  4. Click on “Make a deposit with credit card”.

Bondora setting up recurring payments

After that you are asked to provide your card details and authenticate the payment.

Bondora setting up recurring payments

Automation makes it easy to contribute even small amounts. Over time the account grows from your regular contributions and your compounded returns. Even small weekly amounts can make a big difference.

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New bid allocation model at Bondora

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Bondora’s new bid allocation model levels the playing field for investors

Marketplace lending is becoming a mainstream investment choice. However, as the investor base grows, so does the competition for loans.

Originally, if a loan received too many bids (overbid), Bondora would rank the bids based on size. Unfortunately, this method made it difficult for investors with smaller bids to get the loan. Some investors got their entire bid accepted while others were left out. Now, they are changing the bid allocation model to be more inclusive to all bidders.

They will no longer rank the bids based on size. Instead, they will proportionally distribute loans among all investors trying to buy them. In short: All bidders will get a piece of the loan. This way everyone – big and small investors – will get access to the same loans.

Here’s an example of how the new system will work: A borrower requests a €1,000 loan. Several investors bid a total of €2,000. As a result, each investor who made a bid would have 50% of their bid accepted. This way each investor would be able to get access to all loans they want, albeit sometimes for much smaller amount they wanted.

This bid allocation model implementation will be automatic and requires no action from investors. Bondora will be removing investor ranking on 20th of April . However, please note that minimum investment size setting in the API and Portfolio Manager will become obsolete with this change.

Initially, there will be an absolute minimum investment size of €1 in order to facilitate investment level calculations using the current technology. Over the coming months Bondora will however be rolling out a new infrastructure that allows fractionalizing loans to much smaller units making the proportional distribution even more precise.

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