Peer-to-Peer (P2P) lender, Monexo Fintech has partnered with Cube Wealth to provide clients with an alternative avenue for investments. The app-based wealth management firm's user-base of 350,000 customers will have an option of placing a portion of their investments onto Monexo's platform.
The P2P market space is only three years old and until last October operated without any regulatory oversight. While there are 3,000 P2P lenders in China with a total lending book of $500 million, the Reserve Bank of India (RBI) is said to have approved P2P licenses to around eight firms.
Industry sources say that the P2P lending market is still in a nascent stage with a total of Rs 1 to Rs 1.5 billion transactions done until now. On average, NPA levels are at 5 to 6 per cent.
“We partnered with Cube because they want to provide their new-generation of wealthy clients with new asset classes for investments, apart from the standard equity or debt portfolio. The partnership will help with seamless on boarding of their customers onto out platform,” Mukesh Bubna, Chief Executive Officer at Monexo Fintech.
The RBI guidelines state that a lender (investor) cannot contribute/invest more than Rs 1 million and borrowers cannot avail loans of more than Rs 50,000 from a single lender while taking a maximum of Rs 1 million spread across 20 lenders (investors).
There are two-sides to a P2P transaction, one where a borrower can get loans quickly through these platforms with interest rates ranging from 12 per cent to 30 per cent, depending on their credit quality. And on the other, investors place money onto the platform and earn returns from the repayments of borrowers.
On average returns for lenders or investors on P2P platforms range from 14 to 30 per cent, which makes it an attractive asset class. However, experts say the RBIs regulation on investment limit is restrictive.
The company has around 10,000 customers mainly from the main metros as well as from states like Goa and Manipur.
Monexo has so far raised $ 1million in pre-series funding and is in talks to raise an additional $5 million. As of April the, P2P lender had assets under management worth Rs 20 million.
Every investor on the platform can either opt for an automatic allocation of their investment across multiple borrowers or they can select the borrowers they wish to fund.
“Transparency is key,” says Bubna an ex-banker with the CitiGroup, “our online investment dashboard allows lenders to see borrowers’ details, and they have access to all legal notices, repayment intimation and collection calls that we place.”
Bubna said the plan is to eventually scale-up P2P lending to the self-employed class and small-medium enterprises by 2020, provided the regulatory environment allows for it.