P2P financing in Eastern Europe

Being from Eastern Europe I have found recently, that when searching for investment opportunities, I don't really need to look far (for ex, to international stock markets).

There are numerous peer-to-peer investing opportunities right here. Of course these investments are risky, like any others. However the good thing about them is the opportunity to invest with small amounts of money. Usually they offer possibilities to invest in loans starting from 10 €.

After doing some research, I have found the most interesting to be Mintos, Twino and Viventor, all being from Lativa. The first two I have already used and they seem to work well. What separates those peer-to-peer lenders is the BuyBack Guarantee. Essentially the investor is taking the risk that the loan provider may default. This is a much better position to be in, than say giving consumer loans to anonymous strangers. 

I find the best setup to be in Mintos. They have a secondary market, where it is possible to buy even smaller pieces of a loans. That means reinvesting is possible with only few euros, so even small sums of repaid money from the loans can be reinvested immediately.

In case a loan default occurs with the BuyBack Guarantee in place, the originator buys the loan up after some time (generally 30-60 days, different websites have different terms). The only inconvenience for the investor is then the additional waiting time. This is much better then having a defaulted loan and having to deal with the time and cost associated with the recovery of the loan. 

So until the loan providers do not default, the investment will work and risks are minimal, when compared to unsecured P2P lending. So hopefully the bust of these P2P lending sites is not happening in the near future. The small lenders behind the guarantees are usually getting a lot of cash from these loans (about 40-60% interest) from the customer and giving back about 10-12% interest to the investor. This means they should have ample cash flow to provide the guarantees. As long as they all don't default at the same time (possible, but should not happen often).

Risks of course are quite big, in case the website owner defaults, it will be really difficult to get some or any money back. However, as these websites are quite new and still growing, I am not concerned about the big systemic problems. These will come at a much later stage.

So this was a small overview of potential alternative P2P investments in Eastern Europe. I plan on covering this topic also in the future, so stay tuned.