Sean Emery. Picture: ROBERT TSHABALALA
Sean Emery. Picture: ROBERT TSHABALALA

RAINFIN, a company that facilitates unsecured lending online, says it will pursue an ambitious target to help advance R1bn in loans on its platforms next year since it has diversified its lending infrastructure to cater for small and medium-sized enterprises (SMEs) looking for credit.

Its decision to diversify to SMEs, especially those rejected by banks, could help in facilitating growth in the small business sector, seen as vital to job creation and economic growth in SA.

RainFin, which in March became 49% owned by Barclays Africa Group, is a platform that allows people looking for better returns on their cash to lend the money to other people, including small businesses, through the online platform. This process is known as peer-to-peer lending.

"We want to do over R1bn in 2015. The reason we want to do that is we have launched SME loans. We started in October and we are careful with that," RainFin CEO Sean Emery said.

"We are lending to SMEs with invoices, people with contracts that are part of a supply chain. We think that segment will have the smallest bad debt."

RainFin started operating in SA in August 2012. Through an online auction process, it tries to facilitate loans at low interest rates to people with good credit scores. Borrowers can choose who to borrow from as interest rates charged are in the open.

RainFin allows individual investors to receive better interest rates than they would normally earn from a traditional savings account. As part of its service, RainFin does a credit score on the people who are borrowing and then recommends to the people advancing money how much interest they can charge.

RainFin takes responsibility for collecting the loans on behalf of the individuals making the loans. In exchange, the company charges fees to the lender and the borrower.

Mr Emery said when RainFin began, it made three or four loans a day, each averaging R15,000. But by the first quarter of this year this had grown to about R350,000 in loan applications a day, at an average of R35,000.

RainFin is now looking to attract larger, institutional investors such as asset managers, to invest capital for lending.

When Barclays Africa Group bought a 49% stake in RainFin this year, the firm had to slow the levels of lending as it adjusted its systems to meet Barclays Africa Group’s requirements.

One of RainFin’s peer-to-peer lending rivals in SA is Africa Internet Holdings’ Lendico.

Commenting on whether it made sense for Barclays Africa to invest in RainFin, an analyst who did not want to be named in line with his company’s policy, said if it worked it would give Barclays Africa access to noninterest revenue (income from the commissions generated by RainFin).