At the same time, the conditions for the industry are better in Sweden than in any other country. In Sweden, we have social security numbers, mobile Banko, UC and other information companies, the Swedish Criminal Investigation Agency and a culture of repaying our credits. The fact that we have extremely good conditions in Sweden becomes evident when we listen to foreign players in the same industry. We have just returned from a large USDopean conference on Marketplace lending and we realize how good our conditions are in Sweden and the Nordic countries.
Marketplace lending is significantly greater in the US and the UK than the industry in Sweden.
In the US and the UK, marketplace borrowers in 2015 funded loans for USD 30 billion. In Sweden, the total market for consumer loans amounts to USD 200 billion. It says some of the potential that exists for Dan Malo.
A major theme at the Lendit conference this year was how the industry is affected by a recession.
As many companies in the industry are new, our business models have not been tested in a recession. Apa is one of the leading players in the UK in the Marketplace lending for consumer loans and started before the financial crisis in 2008. What we can see is that their lenders did not lose any of their invested capital during one of the worst financial crises we have experienced in modern history. Apa’s loan losses increased to 4.5 percent in 2008, but already in 2009, credit losses were down 1.5 percent. Thus, during this period, their lenders had a positive return on their capital while many other asset classes crashed.
Dan Malo offers only the most creditworthy borrowers to borrow and our expected loan losses are at 1 percent on an annual basis.
The Swedish market offers significantly better conditions for lending than most other countries and a comparison with Swedish players in consumer credit is the most relevant for Dan Malo. To see how a recession would affect our credit losses, we have looked at the Swedish niche banks, which in 2008 had a portfolio of consumer loans. What we can see is that, on average, credit losses increased to 2 percent in 2008 and 2009. As our lenders have an average return of 6 percent, credit losses must increase by more than 6 times (credit losses must be above 6 percent) for credit losses to affect invested capital. For your lenders who have our Autoinvest accounts, there is also the credit loss fund which covers up invested capital in the event of any loan losses.
The diagram above shows a weighted average of Swedish niche banks’ credit losses during the period 2006 to 2015. The diagram also shows Apa’s credit losses during the same period.