Talad Invoice, a lending platform initiated by a fintech startup, is expected to grow at an exponential rate this year, following two years of peer-to-peer lending using invoices as loans collateral, said Watewiboon Pumipue, chief executive officer of D90 Capital Co, which operates the financial platform.
Loans have reached Bt30 million since the Talad Invoice platform was launched in late 2016, he said in an exclusive interview to The Nation.
“We expect lending to reach Bt1 billion this year and we already have Bt100 million in the pipeline,” said Watewiboon. The company will also next month expand its business to Hanoi Vietnam.
Talad is designed to solve the issue of cash shortages experienced by small and medium-sized enterprises (SMEs), which are usually viewed by commercial banks as high risk clients. Low credit ratings lead to limitations for SMEs seeking loans from banks and other financial institutions.
Watewiboon has experienced the dilemma from the other side of the desk: he used to run a small logistics business and had faced a crunch of liquidity for working capital.
He saw the opportunity to help SMEs by using invoicฌes as loan collateral and looking at the credit of those who buy products or services from SMEs.
Invoice-based lending relies on the credit of SME customers.
“For example we know for sure that hospitals, which buy products from small farmers, would not default on payment,” he said.
It works like this: his company will make loans to a farmer in exchange for getting a good invoice and the right to collect payment from the farmer’s debtors.
D90 Capital will give cash in advance to the farmer, say 80 per cent of the total value of the product related to the invoice, with the remaining 20 per cent given later when he could collect all payment from buyers, said Watewiboon.
Investors will get an interest-rate return for their investment, while D90 Capital will take a commission fee from the financial transaction. The interest rate is paid by SMEs. Put another way, customers sell invoices at a lower price than their face value to the Watewiboon platform.
He currently has about 400500 SMEs engaging with his platform. These small businesses are in many sectors, including agribusiness, auto parts, electronics and ecommerce.
So far the bad loan rate is at zero per cent, Watewiboon claims.
He has few high net-worth individual investors, along with a few financial institutions, providing the funds required for this lending business.
Though the intention of the Talad Invoice model is to reach retail investors, the business model is limited by Securities and Exchange Commission regulations that allow only a limited number of investors in the platฌform, said Watewiboon.
He has been consulting with the SEC and plans to put the Talad Invoice platform into the SEC’s “experimental sandbox” for testing that would allow a limited number of retail investors to participate. If he could pass the sandbox test, Watewiboon could reach out to further retail investors who want to invest in his platform.
Meanwhile, regulators including the Finance Ministry, Bank of Thailand, Anti-Money Laundering Office and SEC are racing against time to come up with regulations for the fintech sector. The regulation would aim at nurturing the fintech industry and at the same time protect the interest of investors and consumers, according to authorities. The regulations will also cover how these companies could raise funds or how could they issue initial coin offerings (ICOs) and use cryptocurrency tokens.
Watewiboon said that Thai regulators are moving slowly in comparison to peers in Singapore and Indonesia where fintech legislation is already in place.
Speaking of his business plan for Vietnam, Watewiboon said that he has a joint venture project with a local financial institution which has about 20,000 to 30,000 clients in its portfolio. If the business succeeds, he might expand to other Asean countries and he would raise funds by launching an ICO next year.
Watewiboon is also planning to expand his business to cover other financial papers, including using letters of credit and purchasing orders as loans collateral.