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Barclays’ RainFin chasing peer-to-peer growth in SA

Expands from personal to small business loans.

RainFin, a South African peer-to-peer lender part-owned by Barclays Plc, is expanding from personal loans into small-business loans, hoping to mimic the growth of U.S.-based LendingClub Corp.

With a maximum term of 24 months, small and medium-sized businesses can use the website to solicit lenders for as much as R250 000, Sean Emery (pictured), chief executive officer of RainFin, said in an interview in Johannesburg on August 27.

“We have two years of history now, but volume ramps up as you have performance data,” he said. “We’re in the equity phase. When you get a rating, that’s the trigger point for massive acceleration.”

LendingClub, the largest U.S. peer-to-peer lender, started in 2007 and its revenue almost tripled last year to $98 million, according to its annual report. The San Francisco-based company and RainFin connect individuals and institutions to borrowers through the web. At RainFin, the annual interest rate for a loan is 10% to 32%, Emery said.

With the August 10 failure of African Bank Investments Ltd., another South African unsecured lender that charged as much as 60% a year, peer-to-peer lending can offer borrowers a cheaper alternative, Emery said.

“The collapse creates a massive problem because unsecured lending has huge negatives about it, but if I can tie investors in to borrowers they can trust, then it’s an opportunity,” he said.

Default rate

Over two years, 5% of loans on RainFin have defaulted on average, according to Emery, while loans in the least-risky category show a default rate of less than 1%. About 350 customers register on its site every day with 10% of them passing the screening test. Eighteen new loans with a total value of about R400 000 are listed on RainFin each day, he said.

Emery said he worked for Accenture Plc and Johannesburg- based Standard Bank Group Ltd. before starting a technology company called Trade World, which he later sold to SAP SE. He worked in venture capital in Dubai, and returned to South Africa in 2010. RainFin is based in Somerset West, near Cape Town, and is registered with the National Credit Regulator.

Barclays’s South African unit bought a 49% stake in RainFin in March and is about to market its services through its consumer bank and to borrowers and lenders across the country, Stephen van Coller, CEO of the investment bank, said in a phone interview on Thursday.

“We’d love to own the platform,” he said.

Barclays Africa Group Ltd. can do both lending and borrowing with known or unknown counterparties through RainFin’s website, according to Van Coller. “This can change the industry massively,” he said.

©2014 Bloomberg News


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