And that was a big, big shift, right? Because all alternative lending platforms were profitable, when rates were at zero, they started to go up, most of them are going past. The reason I think that we are noticed. And obviously we didn't do this, anticipating that this was going to happen. But rather, it was just our strategic focus at the time, we decided to cover the full spectrum of working capital of our clients, right?

So we started as, hey, we get cheap money, we lend it digitally to clients. But then as we interacted with those clients, and we recognise that they had a broad range of needs, we decided to cover the whole spectrum. So we moved from, hey, how can I give you money, to how can I simplify your operations through money, right? And how can I make your financial operation simpler, smoother and more effective and efficient through money

So what is driving the default of an SME on a loan? We focused on three potential drivers: the firm's resources, board level factors, and the loan attributes.

I don't want to bore people going through all the variables that we considered but we have three categories of variables and within the categories we have a bunch of other variables. So what we found basically is the following an increased amount of financial resources and increased size of the board and a longer board's tenure, all these three elements are decreasing the default rate of firms. This is quite reasonable, right?

The size of the board is maybe a bit less intuitive. We are talking about the board size, we're not talking about the firm's size, which plays an extremely important role. But our focus was on the board size wich speaks to corporate governance being important there is a debate about corporate governance, many people make it more complex, but that is helping sharing the responsibility. So you may come a sounder, maybe a more bulletproof decision.

More than 50% of the economic activity is informal in Latin America, and so, because of that, they don't have access to capital for growing their businesses.

And what we are trying to do is to help out to Yeah, to make it a little bit more fair for economic growth for everybody.

Obviously, you can do it with a pen and paper, but you know, I can say from experience, or at least the experience that we have, that doing it manually really doesn't work! And so really our scoring, what we are building, is to try to analyse the informal business.

The customer sees three numbers: that's the amount they will be getting, which is, let's say they are getting a million pounds; the fee they have to pay, let's call it 10%, so they have to be £100,000; and what percentage of daily sales the lender will be taking. And let's assume 15%. So from customer's perspective, they have to pay £1.1 million pounds to the lender at the rate of 15% of daily sales.

It can take three months, it can take six months, it can take 18 months. Yeah, so the repayment term is not fixed.

Why customers love it is because they just assume they have made 85% sale and the 15% will go to lender, they don't have to worry that I have to pay 100,000 a month, and I didn't make a sale this month. And what do I do now?

But actually, I'm going to defy the odds, I'm going to still find alternative ways to grow my business.

And they've come to us, we've got them the funding products they need. And then the same banks that said no to them when they first started, now that they're doing 2/ 3/ 4/ 5/ 10 million in revenue, have come back to us, Lendoe as a platform and said, 'how do we now work with these clients?'... and that's why we call them underestimated.

And we have a number of examples like that.

There are great founders out there. They're great at doing what they do, which is running their business, but what they need is someone who can actually break down all of the options that are available to them, but also someone that can give them that confidence to actually apply once they've broken down those options - because the fear of rejection, the fear of the unknown, the fear of not knowing what you're getting yourself into, is often what prevents people from going ahead and saying, 'actually, I believe I can do this'.

85% of folks have bank accounts, but only about 20% of them actually use the bank (for borrowing). They rely on other forums to meet their financing needs. These guys don't have access to credit.

As a startup, when we launched back in 2018, the lending market in Sri Lanka was $5 billion - and what we understood this from this 5 billion requirement, almost 40% relied on loan sharks and individuals who have very dubious practices of charging excessive interest rates, as well as very unpleasant collection methods.

And coming from a tech and a finance background, we realised there might be a potential for us to provide credit underwriting through a blockchain solution.

We always take a very commercial and common sense attitude to everything that we're lending on: if there's a solid business story as to why they want the money; if there's a clear route to how we think they're going to pay it back; and if there's an asset that we can secure against to make sure we've got something to go after if it all goes wrong,...then for me that's 95% of the underwriting there.

As oversimplified as that may sound that really is the truth.

Because I mean, ultimately, as a lender, what more do you want than a good business that's got the ability to pay you bac

It really started in analytics when I first joined. And I think for me, as you know, if you want to learn, strong analytics really helps you to make better credit decisions. So we really worked with Experian on scorecards, but we built out a very strong analytics capability in the business. I guess that goes from the data warehouse through to the frontend with dashboarding and all the analytical tools that you use, as well as, like the actual people capability that we bought in.

And it's helped us to understand our loan portfolio performance at a very granular detail and be able to tweak our scorecards very, very, very quickly to respond to to any credit risk portfolios to be seen. And it's helped us from a margin perspective has certainly helped us a lot to grow the business sustainably.

I mean, this is not just doing data science, but actually looking to bring together and harness really advanced analytics, modern methodologies to really bring forward business strategy on that side. And that is something specifically on the credit risk side, which I'm seeing more and more, where if you actually start at the board level thinking about why do certain things not quite work? Why why are we losing market share? Why are we not growing as fast as we can? I mean, once you actually get into the engine room, you open the door, very often you find data related topics, modelling related topics, infrastructure process topics are really at the heart of what's not working.

We're able to bring in this reliable view on the world, that growth is actually still there and very important, but I would strongly recommend not just to continue in an undifferentiated way, what you've been doing over the last 10 years, characterised by low interest, low inflation, and so on and so forth, the environment is definitely changing. We see our clients adopt to that very quickly.

But adopting to it does not mean slamming on the brakes, it actually means getting more sophisticated in the analytic space, getting more sophisticated in terms of how can I assess the affordability of a loan for a specific retail customer, for a specific SME customer on a case by case basis, in a scalable fashion. That is really where we see really a lot of interest, and a lot of movement over the last six months.

When people look at your website, they're going to see the line "we provide repayable finance to help social enterprises" and for most of us, the first time we read that line, it's going to stick a little bit and people might be thinking why "repayable"? Why are you lending money to these charities, isn't it nicer to give a donation that doesn't have any strings attached?

Yeah, so lending has a few advantages over grant-giving in certain situations. What we're trying to do is to help organisations become better at doing what they do, becoming more efficient, so that either they can do things they weren't able to do before, or they can do them more efficiently - because they've been able to build some infrastructure, or expand into a new area, or possibly set up some trading activity which generates income, if that's what they're looking to achieve.

We try and fill a gap. It's very difficult to raise grant funding for anything that isn't directly related to a charity programme. Anything that has the word 'admin' in it is the anathema to many philanthropists. And that's where we come in, because we believe that a well run organisation needs opex, it needs capex.

So to give you a bit of background, when manufacturers and distributors are bringing on customers, they ask them to fill out a credit application. That credit application is a very simple document. Typically it's a PDF or Word Document. But things completely spiralled out of control from that point. There's just a lot of back and forth, there's missing and inaccurate data, and companies get credit that shouldn't get credit, and companies get denied credit that deserve credit.

These other companies that we had before we realised it was a problem, but at Nectarine Credit, we've automated this entire vendor credit application process.

Yeah, you know, we're definitely helping these companies scale quite a bit. Not only are we decreasing their cash conversion cycle so they could just build cash on their side, which is important to them. If we can actually get these customers to a negative cash conversion cycle, then cash will just build. But I think more importantly, we're able to double to triple the company's revenues. And then, you know, company could either take that money to reinvest, or you could parlay that into raising a larger venture round, which then they could hire more people, potentially introduce new products, and continue building the brand out there. I think that's definitely the best feedback we've gotten.

And in some cases, customers have staved off venture capital completely, because like, hey, now I don't need to raise money for inventory or for marketing. So I could use this debt solution/ working capital solution to meet that, and I'll never have to raise another venture round again. And thus, I could keep more ownership of the company. So it just really depends on the route they want to take to grow their company.

I can answer your question as a consumer. And in general, I can also share my viewpoint on the whole market. No doubt Hong Kong is a very competitive market, the credit card issuers are facing strong competition. For myself, I think I have more than five cards but in general, I will focus on one or two cards that're my major transaction medium. Why I want to just focus on using one or two cards is because of the benefits, because of the discounts, because of the cashback. You can go to different shops or restaurants, you have discounts, you have rebates and then on different purchases, you have also other privileges. That's the major motivation. I think, in general that's true for other consumers in Hong Kong.

And on the other hand, as you're said because they're always new cards coming out with new features, especially the welcome gift, you spend a few $1,000 and then you can get some cash coupon or you can get some premium or whatever - then that will motivate you to to apply for new card, but after that it will just sit there. I think that's a very normal way of life.