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Let’s be serious for a minute folks. Getting a loan from a bank can be a right royal pain in the arse. Surely you could save a load of admin if you, the willing borrower, could sit down at your computer and find a willing lender?
That’s exactly the premise behind a RainFin, a social lending company that says it wants to completely change the way people borrow and loan money in South Africa.
The company provides a compelling alternative to banks for consumers who wish to invest and borrow money at more competitive interest rates.
RainFin’s online platform links people who need to borrow money with people who have money to lend. Borrowers can typically access funds at lower interest rates than they could through a bank, while lenders can expect good returns on money that they loan to others.
Sean Emery, co-founder and CEO of RainFin reckons that social lending is disrupting the financial services sector internationally by using the internet to eliminate the need for banks, the traditional middlemen between people who have money to invest and those who need to borrow.
“This new model for lending and borrowing provides a viable alternative to the high costs and complexity of the banking oligopoly to South African consumers for the first time. Consumers will benefit from more competitive rates, lower and more transparent fees and charges, and better terms and conditions than they could get from the banks,” say Emery.
Peer-to-Peer lending services have proven successful abroad. It is estimated that the two largest players in the US alone closed more than over US$50-million in loans last month.
According to Emery: “RainFin is bringing this model into South Africa because we believe it will find a receptive market here. The country has a well-established stokvel sector — essentially an offline Peer-to-Peer industry worth R44-billion.”
South African residents over 18 can borrow and lend through RainFin. After passing a strict credit vetting process, borrowers can apply in the marketplace for loans of between R1 000 and R75 000 with a maximum repayment period of one year.
Individual lenders can invest between R100 and R500 000 across a portfolio of RainFin loans. Borrowers can specify the loan amount, the maximum interest they are willing to pay and the loan duration up to a year.
Investors can make informed decisions about which group of borrowers or individual borrower to lend money to, through credit risk information based on their gender, age, location and credit score.
To lenders, RainFin provides anonymous information on each borrower from the credit bureaus so that lenders can make better risk decisions. RainFin earns a low percentage-based transactional fee on every loan, making the costs of its platform transparent to its users.
“We believe that consumers have an opportunity to take back some of the power they have given to banks, benefiting each other rather than large institutions in the process,” says Emery.
“RainFin’s uncollateralised loans are just the start,” he adds. “The company plans to add other products such as SMME financing and mortgages to its portfolio in the months to come.”
For the sake of clarity, it should probably be noted that what RainFin does is different to online lending conduits like Wonga. The former does social lending while the latter uses to tech to assess whether or not you’re worth financing and then loans you the money itself.