Personal loans by banks rise 8.8 per cent in Oman

Category: Personal Loans
Published: Thursday, 18 December 2014
Written by Admin
Muscat: Credit facilities provided by commercial banks for economic activities in the Sultanate amounted to OMR15,177.4 million.

These included OMR6,080.9 million for personal loans, OMR1,480.1 million for the construction sector, OMR1,378.4 million for the commercial sector and OMR1,288.8 million for the service sector.

They also provided OMR1,266.9 million for the transport and communications sector, OMR1,772.7 million for the electricity and gas sector and OMR672.5 million for financial institutions, in addition to OMR584.5 million for the mines and quarries sector, OMR453.7 million for non-identified credits, OMR64.1 million for export activities, OMR45.6 million for the agriculture sector and finally OMR18.4 million for the government sector. A sum of OMR684.4 million was also provided for other sector.

Personal loans provided by commercial banks increased by 8.8 per cent in 2014 to constitute 67 per cent of the total credit or OMR16.5 billion as of the end of September 2014. The credit availed by the private sector grew by 8.9 per cent during the same period to hit OMR14.4 billion as of the end of September 2014. It is noted that personal loans constituted 45 per cent of the total credit.

With the government endeavouring to limit personal and consumer loans, the board of governors of the Central Bank of Oman (CBO) made a number of decisions that serve the interests of the citizens and the state monetary policies. These decisions take into consideration the needs of socio-economic development and the international variables.

The CBO also took measures to control personal loans and ensured that they do not have a negative effect on the lives of individuals.

As per the decision issued on March 24, 2013, the CBO board of governors capped personal loans at 35 per cent of the credit portfolio compared to 40 per cent more or less over the past period.

The CBOs regulation ban banks from deducting more than 50 per cent of the salary of the borrower. The interest rates on personal loans were also capped at 6 per cent per annum and the personal loan repayment period was extended to 10 years at maximum with two-month grace period as an option for the customer.

The decision allows borrowers to apply for renewing their personal loans after 24 months of starting repayment provided that there is evidence that the borrower has credit efficiency or has paid 50 per cent of the loan. The borrower age and credit card instalments should be taken into consideration while disbursing personal loans. The CBOs decision on decreasing the interest rate on new personal loans came into force on October 2, 2013.

It should be noted that master personal loans are consumer loans that have high risk of default in repayment of both the principal loans and interest rates. Many borrowers, most of them from among the limited income categories, have incurred great loss in the guarantees provided to lending institutions.



Lendable Raises £2.5M As P2P Lending Market Shows No Signs Of Cooling

Category: Personal Loans
Published: Wednesday, 17 December 2014
Written by Admin

Perhaps riding the wave of US-based Lending Club's recent $5.4 billion IPO, the UK's Lendable, which also offers a peer-to-peer lending platform for personal loans, has raised a £2.5 million seed round from a decent group of European angel investors with plenty of fintech experience.

The young startup's backers now include all three partners at London VC Passion Capital -- Eileen Burbidge, Robert Dighero, and Stefan Glaenzer -- each of whom invested on an individual basis. That's because Passion Capital's 'Enterprise Capital Fund' (ECF) structure, which means it counts the UK Government as an LP, prohibits it from investing in lending.

However, I'm told that the three partners were still convinced enough by Lendable's potential to become big that they chose to put their own money into the company anyway.

Noteworthy also is that, amongst many other investments, Glaenzer is an early backer of German fintech company Kreditech, which helps to automate credit scores based on Big Data.

In addition, Will Kirby, non-executive director of Market Invoice (which itself just picked up £5 million in new funding), also participated, as did Adam Knight, the former managing director Glencore-Credit Suisse and current executive chairman of the London-based Bitcoin exchange Coinfloor.

Now of course, P2P lending startups for personal loans isn't a new phenomenon, not least in the UK where Zopa was a very early mover in the space and more recently counts RateSetter and Lending Works as competitors.

At the start of this year, Zopa added $25 million in new funding to its balance sheet, and now totals a hefty $56.6 million in VC to date. The same month, Lending Works disclosed £3.5 million in funding pre-launch. More evidence P2P lending and London fintech remains hot.



On Deck IPO Sees Big Demand But It's Riskier Than Lending Club

Category: Personal Loans
Published: Wednesday, 17 December 2014
Written by Admin

NEW YORK ( TheStreet) -- On Deck Capital (ONDK) is set to begin trading Wednesday after pricing its initial public offering on Tuesday night, but it looks like a riskier bet than Lending Club (LC) , another online lender, which had its IPO last week.

On Deck shares were priced at $20, above the suggested range of $16-18. Lending Club also priced above its range, and opened 67% higher last week.

Read More: IPO May Be Around the Corner for On Deck Capital

The trading performance of Lending Club is clearly to the benefit of On Deck. They are, however, two different companies, said Kathleen Smith, principal of IPO ETF manager Renaissance Capital.

Both are start-up online lending platforms, but an important difference is that On Deck takes some of the risk on its balance sheet, while Lending Club merely charges a fee for bringing borrowers and lenders together.

On Deck focuses mainly on lending to small businesses -- an area big banks like Bank of America (BAC) , Wells Fargo (WFC) and JPMorgan Chase (JPM) have largely abandoned as unprofitable. While Lending Club also has entered the small business lending space, its chief focus has been personal loans to people consolidating credit card debt. And while anyone can lend through Lending Club, in amounts as small as $25, On Decks lenders are mainly institutions.

Start-up online lenders are seeing huge success because they are more nimble than big banks, which have massive overhead and are unpopular with the public, argued Charles Moldow, general partner at VC firm Foundation Capital, which is an investor in both companies.

He said banks charge interest rates that are on average 4% to 5% higher than online start-up lenders.

Still, rates for online start-up business lenders such as On Deck, Kabbage and CAN Capital are very high. On Decks rates can get as high as 50% annually.

Moldow said the high rates reflect the big risks the start-ups take by approving loans quickly. He said businesses use them on a short-term basisi to get quick cash and avoid missing out on revenue opportunities that are right in front of them.

Investors buying into the IPO will have to cast aside traditional multiples such as price to earnings and bet that On Deck can keep growing in an increasingly competitive field.

Read More: Lending Club Soars at Open as Investors Scramble for Bank Disruptor

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Irish personal loans market: Why Basel III is bad news for Credit Unions

Category: Personal Loans
Published: Monday, 13 October 2014
Written by Admin

The introduction of Basel III framework sought to improve regulation and enhance minimum capital levels for banks, hedge funds, financial intermediaries and bank holding companies.

Basel III is a formidable reading assignment. But despite the layers of complexity of the rules - including the many new liquidity metrics, coverage ratios and risk models - the broad aims of the policy should be easy to understand.

A key principle of the new regulatory regime is that higher capital levels to ought to compel banks to reconsider how much capital to allocate to clients and, by implication, to investigate with a greater degree of diligence the clients to whom they lend.

So what is not to like? After all, such strict capital requirements for large institutions should be applauded, since such measures will lessen systemic risk and therefore reduce the chance of a repeat of the 2008 financial meltdown.

The introduction of the Third Basel Accord, inevitably, has had an effect on the costs of lending. The combination of increased capital requirements, particularly in the common equity element of Tier 1 capital and capital buffers and minimum liquidity requirements, will reduce the return on equity for banks.

The difficulty with the accords is that beyond the well-known capital increase, the rules contain new and, crucially, unproven macroprudential capital buffers that impose costs on large banks with uncertain stability benefits. One area where this has had an adverse effect is credit unions.

According to the Irish League of Credit Unions, Irish commercial banks are citing the cost of capital the Basel III rules impose on wholesale deposits as the main reason they have adjusted the interest that they will pay on credit unions term deposits. In this instance, the interest rate has been reduced from as high as 3% annual interest to as low as 0.6%, with an average spread between the yields on retail/small business and wholesale of 150 basis points. By way of comparison, in the United Kingdom, several large banks have stopped doing business with credit unions altogether.

The Republic of Ireland has nearly 400 credit unions, of which twenty have over EUR 100 million in assets and four have assets between EUR 200 million and EUR 350 million. At the end of 2013, the total system asset amounted to EUR 12 billion, with the average credit union balance sheet fo EUR 30 million.

The average lending ratio is 40%, so the average credit union has EUR18 million on deposit with a number of banks. Most credit unions spread their deposits across 5 or 6 counterparties, meaning that the average amount on deposit with each counterparty would be between EUR 3 million and EUR 3.5 million if spread across banks equally.

Irish credit unions bank deposits remained stable during the financial crisis. The credit unions did not move their money away from the Irish banks during the financial crisis as many other non-retail type depositors did at that time.

Further, it is up for debate whether the withdrawal of individual deposits of this size is going to create funding problems for these banks even in a crisis.

On the other hand, Basel III implementation will negatively impact underserved communities in Europe, especially in rural areas where credit unions are often the only financial institution serving the community.

This is particularly true in Ireland, where credit unions are the only remaining financial institutions with local branch offices in many rural areas.

For more information on the Irish personal loans market, see the latest research: Ireland Personal Loans Market

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