While we are still in the throes of COVID-19, I feel there are still risks in the world of lending which may see more headwinds in the future. Continuing with the reviews of the different platforms and how they are holding up, I have broken down and the available Moneyspot data. I chose this platform for my next deep dive given the nature of the fund. From an investor side, it is a pooled investment, with no hands-on involvement in the P2P lending. However, the borrower side focuses in on small value loans ($200 to $5,000) which are typically repaid over weeks or months.
To analyse the data, I’ve documented from every monthly fund performance report the following key pieces of information:
- Annualised Return
- Average Bad Debt
- Average Loan Size
- Funds Lent to Date
To get a picture of how the lending is going, I first compared the I first graphed the average loan size and funds lent to date in the graph below.
The growth in the funds lent has shown very little signs of slowing down, something I was not expecting. In the current climate I was expecting a slowdown in lending as I had observed on other platforms and read in news articles. However, on further reflection, this does make sense when you think about the people taking loans. The need for short term loans may increase during the current COVID-19 environment and economic fallout.
Next, I pulled together to annualised returns of the fund and the average bad debt. I figured we would see a drop in returns and an increase in bad debts (loan defaults). To date, however, returns and defaults have been steady.
Interestingly, there was an increase in defaults in March 2019 and again in March 2020. However, this has started to drift lower. I do feel this may change in the future as some of the government stimulus wears off, so it will be a metric I will be monitoring closely.
The overall performance covering the last six months on Moneyspot has been consistent and while bad debts are something that that need to be monitored, have not yet impacted investor returns. I believe the next six months will give a much clearer picture of how this platform will continue to perform in current conditions as we see how COVID-19 continues to play out in Australia and impacts it has on our economy.
Hope everyone continues to stay safe in these crazy times.