Peerberry E-mail: Aventus Group: risk management is a key for sustainable business

Interview with Gennady Machulin,Chief Risk Officer at Aventus Group.

March 22, 2020

Today I received another e-mail about Covid-19 this one from Peerberry about Aventus Group risk management

E-mail from Peerberry

At a time when international markets are facing the challenges of the COVID-19 and the resulting economic consequences, we receive questions from our investors about how our partners will manage risk issuing loans in the near future and how the protection of their investments will be ensured.

We have asked Aventus group, PeerBerry’s largest business partner, to provide detailed answers to our investors’ questions. Today in our Blog we speak with Gennady Machulin, Chief Risk Officer at Aventus Group.

What steps and measures does Aventus Group take to ensure the safety of investors’ money?

The question of wise and secure investment possibility is the key in the context of global prolonged crisis. Investing in P2P is most preferable, as other assets begin to lose in price and their demand falls. When international markets are exposed to various fluctuations, profits from investing in P2P loans remain very stable in comparison with other investment means like stocks, bonds etc.

The main purpose of receiving loans is the purchase of essential products, and the demand for these products will remain constant even under strict quarantine. Thus, the investment in basic needs will remain a very good tool to save investors’ money.

All the loans, issued by Aventus Group companies and listed on PeerBerry for investors choice to invest are fully secured with buyback guarantee. In addition, the management of Aventus Group (together with another PeerBerry business partner Gofingo Group) have made very responsible decision to apply an additional Group Guarantee to ensure maximum protection for all investments. Additional Group guarantee will ensure additional protection for investors’ money, in case some loan originator will face financial troubles and will not be able to implement buyback guarantee. This means that in case of insolvency of some company, other Aventus Group and Gofingo Group companies will cover all the liabilities of this company on purpose to protect investors investments, maintain transparency and good reputation of all the Group.

The whole world is currently facing the threat of coronavirus that poses major challenges for the global economy. Will Aventus Group change its risk management strategy? If so, what exactly will be changed?

We have already “hedged” our risks in some countries by tightening credit policy and changing the product parameters. Countries, where Aventus Group companies issue loans are less affected by a pandemic virus. In addition, our loans are issued online, which also helps to keep our business quite efficient during quarantine. Our portfolio is highly diversified and it allows us to direct efforts and increase volumes of loan issuance in more stable markets. In most countries, where Aventus Group operates, the crisis is not that obvious like in continental Europe. Lending in many markets is closely related to the public sector and the refusal to supplement the budget with loans is the last thing the governments would do.

According to your forecast, how many customers who are granted with loans issued by Aventus Group companies will face solvency problems? What is the percentage of increased number of overdue loans?

As regards the risk growth levels, it directly depends on a number of factors, for instance, some customers from banking retail area who were accustomed to go to bank branches before quarantine will move to the online microfinance organizations segment, like Aventus Group companies.

Personally, I do not expect that the risks will increase by more than 4-5%. It is not much different from a seasonal surge of risks on New Year and Christmas.

Will you tighten the risk assessment of customers who apply for the loan?

According to our risk management procedure, the default rate is manageable by 95%. In each market, we use about 15-20 sources for obtaining information about borrowers, starting with classic demographic parameters and a credit bureau history, and ending with an assessment of customer behaviour when completing the questionnaire (for instance, how many times did he/she move the cursor when choosing the loan amount or how often did he/she press hot keys). All this data set is processed in a single decision-making centre and managed on-line depending on changes in risk parameters in a particular market.

What are the key factors that are currently considered when assessing a person’s access to credit? Is the customer’s risk verified in official databases?

The data structure and significant factors vary greatly from country to country. It is important how many loans the client had previously had in the history credit bureau; meanwhile in Vietnam, the client’s medical insurance is crucial.

During the customer risk assessment, we use 300 to 500 parameters and collect all legally available information in the market, including public services, as access to them is often free of charge.

What in your opinion will increase the need to borrow at a time of economic crisis? What could be the reasons for the increased need for lending?

Demand for micro-loans usually tends to increase in times of economic downturn. This is quite a good time for this business and many players in the online microfinance organizations segment if they remain in the market and gain access to a significantly large segment of, for instance, banking clients. The online segment is currently growing quite rapidly. It applies not only to borrowers, but also to entertainment portals and home theatres.

Is there any assessment as to which loans – short-term or long-term – are more risky?

The short-term loans segment is liquid and the risks are immediately visible in many cases. Moreover, there are opportunities to extend the loan in many countries and it allows replacing a short-term loan to long-term loan at higher lending rates. Currently the short-term loans are the main product in portfolio of our company. The total Aventus Group loan portfolio is diversified between short-term, long-term and leasing loans, which are secured with collateral.

Gennady Machulin

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