Barclays Africa (Absa) has acquired a 49% stake in peer-to-peer lender, RainFin.
Peer-to-peer (P2P) lending, also known as person-to-person lending or social lending, is a type of financial transaction which occurs directly between individuals or “peers” without the intermediation of a traditional financial institution.
The deal between RainFin and Barclays Africa marks a unique position in the P2P lending space, structured as a direct equity investment by a global bank into such a player, RainFin said.
According to RainFin CEO, Sean Emery, the investment will enable RainFin to start developing its corporate product range.
This will soon include Supply Chain Finance, Enterprise Development Funding, Fixed Asset Purchases and Mid-sized Corporate Debt products, Emery said.
Under the RainFin business model, any South African resident over 18 can borrow and lend through the company.
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.
“Banks, Hedge Funds, and Institutional Investors are all exploring ways to collaborate with peer-to-peer lenders,” Emery said.
“City Group, Capital One, Bank of Montreal and Deutsche Bank have all recently started buying up loans originated through these platforms with Morgan Stanley’s wealth management division in the US also investing about $100m into peer-to-peer loans to date.”
“With the various hedge and pension funds starting to utilise this channel, the concept of peer-to-peer lending is starting to claim its place in the financial sector globally,” the CEO said.
According to Absa, the deal is a move to stay on top of the peer-to-peer lending market – a market which the bank believes will be “here to stay”.
“Through this partnership with RainFin, we now have a front seat view on its development in South Africa and beyond,” Absa said, adding that the platform will compliment its present lending channels.