Lender DirectMoney, released its 2016/17 financial report last week, with mixed messages for investors interested in opportunities in the marketplace lending market.
Marketplace lenders have a number of different business models. In DirectMoney’s case, small investors who want to fund loans must invest in a pooled fund, the DirectMoney Personal Loan Fund.
The good news is that the fund produced a net return of 7.3 per cent over the 12 months to June. Since it was launched in 2015 it has produced an average annual return of 7.5 per cent a year.
According to the fund’s product disclosure statement, it seeks to deliver a consistent return of approximately 5 to 5.5 per cent over the RBA cash rate.
The not-so-good news is that DirectMoney is a loss-making business whose rate of lending growth slowed during the year. The long-term viability of marketplace (or peer-to-peer) lending in the Australian market has yet to be demonstrated.
DirectMoney reported a loss of $5.4 million for the year to June, down from a loss of $8.7 million in 2015/16.
Revenue was $1.16 million – down from $1.24 million the previous year. Cash outflow from operating activities was $2.7 million.
Its bad debt expense rose from $146,898 to $278,871. Total expense related to bad debts, doubtful debts and losses on the sale of impaired loans was $389,865, compared with $414,310 the previous year.
At June 30, the company was managing $11.3 million of personal loan assets, with $6.4 million of those assets on its balance sheet. The company said growth in its loan book slowed but did not say by how much.
The company remains confident of its future and it has the support of investors and financiers. It completed a $5.7 million rights issue during the year and signed a $50 million funding agreement with 255 Finance.