Lendahand Review – Crowdfunding Impact Investing Platform
In this Lendahand review, we look into their main statistics, investment types and social and environmental impact. If you are looking for a reliable impact investing platform, Lendahand can be a good option to start with.
Intro to Lendahand
Lendahand is a Dutch crwofunding impact investing platform where small investors can support local entrepreneurs and sustainable initiatives in emerging countries. Starting at 50 EUR, investors invest for impact with Lendahand by lending money via a local partner, making direct investments in local projects, or co-financing projects together with renowned third parties.
The company is based in the Netherlands and is certified as a B-Corporation, which means it has been verified by the non-profit B Lab as a company that creates a positive impact on people and the planet. It was founded in February 2014 by Koen The, Peter Heijen, and Peter Stolze. According to Crunchbase, the company has been through several funding rounds, receiving a total of EUR 1.9 million. The largest and latest investment of EUR 1 million was made by Velocity Capital Private Equity in May 2019.
UPDATE – Aug/2020
On 6th May 2020, Lendahand launched a crowdfunding campaign on Seedrs to support the company growth and market expansion. A total of EUR 1,211,733 were raised from 676 investors, equivalent to an equity share of 6.48%. According to Seedrs, Lendahand’s indicative valuation is now EUR 18.7 million.
The additional equity from the crowdfunding campaign will be used to increase the number of projects on the platform and grow the investors base from 7,000 to 25,000 by 2025.
Lendahand expects to achieve this goal by increasing the investment team, introducing AI-based lending, expanding their “co-financing” operations and introducing local currency and USD investments into the portfolio.
Moreover, they will increase their web development team and expand operation into the Nordics & Germany.
Foundation – Complementary to the investment platform, in 2014 the non-profit Lendahand Foundation was created to provide SMEs with business knowledge and skills. Soon after, in 2016 the Lendahand Academy was established, providing a more comprehensive four-day course focusing on Business Model Canvas, Marketing, Financial Management, and Business Pitch. Since its creation the Foundation has trained more than 800 SME entrepreneurs at 57 training sessions in 4 countries – Philippines, Ghana, Mongolia, and Zambia.
Lendahand in Numbers
As of August 2020, the company had EUR 81.5 million invested, which supported the installation of 5,178 biogas digesters and 70,441 solar systems, resulting in the creation of 7,842 jobs and a total CO2 avoidance of 299,148 tons.
- Minimum investment: 50 EUR
- Annual interest rate: 2% – 7% p.a.
- Default rate: 1.6%
- % of outstanding delayed: 5.8%
- Total amount invested: 81.5 million EUR
- Repaid to investors: 47,8 million EUR
- Market presence: 25 countries
- Number of projects financed: 2,811
- Top 3 markets by outstanding investments: Kenya (4.1 million EUR), South Africa (3.3 million EUR), India (3.0 million EUR)
How Does Lendahand Work
Lendahand offers three types of impact investments – indirect investment, direct investment and co-investing. The type of investment is related to the agreements between investor and entrepreneurs, and consequently subject to different risk levels.
Investing via local partner (or indirect investment)
Investors will be providing working capital needed for operations of small and local lending companies (the local partner), which will be responsible for screening and selecting the entrepreneur that will be receiving the loan. This type of investment brings lower returns, between 2.5% and 4.5% per year. However, risks are also lower since the local partner works as a middleman and can absorb some defaults and currency risks.
By investing directly with local entrepreneurs, the investor is assuming higher risks, since there is no other party involved. Direct investments are usually solar and clean energy projects. This type of investment provides higher interest rates, between 5% and 7% per year.
Lendahand runs its own due diligence on those projects and hires an independent party to analyze the risks involved, which are always displayed at each loan’s page. The descriptions are quite extensive and include the profiles of the management team.
At this investment type, the investor will join forces with trusted and well-known third parties. The projects are focused on more basic needs of the local communities and include investments in agriculture, housing, and access to drinking water.
New partnership – In February 2020, Lendahand announced a partnership with Symbiotics, a global impact investment company that has structured or originated more than USD 5 billion in deals.
“Symbiotics is the leading market access platform for impact investing, dedicated to financing micro- small and medium enterprises and low- and middle-income households in emerging and frontier markets.“Symbiotics
The new partnership is expected to bring more projects into Lendahand’s platform and more diversification options for its investors.
In this video, Thomas Plaastman from Lendahand explains the benefits of co-financing or co-investing projects:
Co-investing seems to be a relatively new investment option at the platform. Currently the most common project types available are still the traditional direct and indirect investments (via local partners).
Lendahand performs a very thorough due diligence when selecting its local partners and local entrepreneurs. As part of the due diligence Lendahand will assess:
- Local partner track record
- Portfolio credit level and capacity of absorbing downturns
- Organizational structure
- Robustness of internal processes
For direct loans, Lendahand provides an independent assessment that can be downloaded at each project’s page.
What are the Risks and Guarantees when Investing with Lendahand
Similar to any peer-to-peer investment, the projects are subject to several risks, including the conditions of local infrastructure, partner income stream, currency risk, and the financial stability of customers to cover fixed costs. As a disclaimer on the Lendahand website, the Autoriteit Financiële Markten (AFM) advises investors:
“Investors should only commit 10 percent of their investable assets via crowdfunding. It is also highly recommended to spread loans across different local partners.”Autoriteit Financiële Markten (AFM)
Overall, Lendahand has an average default rate of 1.7% which can be considered good when compared with microfinance loans in South Africa and very attractive when compared to commercial and industrial loans in the US. However, it is recommended to look at specific financial indicators of local partners and entrepreneurs to assess the risk:
- Local partner: verify their specific PAR90 (portfolio at risk) which is the part of the total investment portfolio where at least one payment is 90 days overdue. For example, some partners such as Spartan Impact Finance, ABii National, NPFC, and FinancialAccess have a PAR90 above 10%.
- Direct investees: at Lendahand’s summary page information on specific entrepreneur revenue, liquidity, and Equity/Total Assets is provided. Additionally, a dedicated page is available for each investee, where financial reports audited by third parties can be found.
Aware that peer-to-peer investment businesses might attract investors of all educational levels, Lendahand has implemented a mandatory Investor Test. The test requires the new registered investors to answer 10 questions and to reach 22 points out of 30 possible points. The test topics involve:
- Knowledge and experience in investing
- Available wealth
- Invested capital availability
- Local partners
- Risk and Return
Lendahand has a partnership with SIDA, the Swedish International Development Agency. However, only a few loans in Africa are subject to a guarantee of a maximum of 50% of the outstanding capital. Those special guarantees will be explicitly indicated on the project page.
We recommend that you look at each project page and carefully read the terms and conditions of the guarantee to make sure that a specific project has a financial guarantee.
Social and Environmental Impacts
Lendahand has a dedicated page on their website to indicate how much impact the projects have created in the communities. Impact metrics are also disclosed at each project page. The metrics presented are the number of biogas digesters, number of solar systems, jobs created, people reached, toilets built, and tonnes of CO2 reduced.
Lendahand does not disclose how the reduction of CO2 emissions is estimated from each impact investment. However, after reaching out to their customer service they have clarified that:
“most PAYGO companies follow GOGLA guidelines. Those impact stats are based on certain assumptions (e.g. based on the number of systems installed) that we made after carefully studying the numbers (people/households/CO2 per household).”Lendahand’s customer service
The number of jobs created is calculated based on the investment amount. It is assumed that each 2,500 EUR invested leads to the creation of one local job.
Considering that Lendahand is a B-Corp whose purpose is to positively impact people and the planet, we would expect more consideration on how the environmental impact metrics are assessed and presented. We hope that Lendahand will improve the transparency of the environmental impact metrics on their website.
Conclusion of Lendahand Review
Summing up this Lendahand review, the company offers a user-friendly platform, provides transparent information about each project and financial guarantees (whenever applicable) supported by reliable financial partners.
Financial return is lower than on equivalent impact platforms in the market. Direct investment is the only investment type that offers returns above 5%, however, it is also the riskiest, since the investment is made directly with the loan issuer.
Lendahand also clearly indicates the social impact in each project which is fully aligned with its purpose. However, for solar projects, the company could be more transparent on how the avoidance of CO2 emissions is estimated.
If you are interested in supporting communities in developing countries by providing working capital for small businesses and are comfortable with returns between 2% and 7%, then you can choose to invest for impact with Lendahand.
By using the referral code RWHG-GT32-FDU4 when checking out of your first investment with Lendahand, you will receive a 25 EUR discount
COVID-19 update: Lendahand has been proactive by quickly adapting to the potential impacts of the COVID-19 on its business. Five temporary measures have been implemented:
- Fundraising limits: Partners can only raise funds to the amount of their exposure on 31 March 2020
- Revised terms: interest rates and grace periods have been increased to reflect the current risk level in global markets and allow more flexibility for the partner payments. Interest rates have been increased either by 0.5% or 1%. The grace period for the first payment has been extended to 12 months, instead of 6 months.
- New information on project pages: information has been updated on each project page to reflect the new loan conditions
- New project assessment and agreements: now partners are requested to inform their COVID-19 contingency plan as part of the project due diligence
- Partners: potential new partners can still be evaluated, however, most of the company efforts are going towards their existing partners.
Not investment advice: The information provided on this website is intended for general information purposes only and does not constitute investment advice, financial advice, trading advice, or any other sort of advice. You should conduct your due diligence and, if necessary, consult a qualified independent financial advisor before making any investment decision.
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Britt Bouter · March 2021 at 17:20
Dear Team Fernando,
I’m a Master student Business Administration at the University of Amsterdam following the entrepreneurship and innovation track. I’m currently writing my Master’s thesis about sustainability-oriented ventures and investment crowdfunding. For this thesis I’m going to interview investors (both professional and private) who invest in sustainability-oriented ventures through investment crowdfunding (loan and equity). The thesis will investigate what the underlying attributes are of sustainability-oriented ventures and their campaign that motivate investors to invest in that venture. Because you wrote about lendahand i assume you also invested in one or more sustainable projects and therefore have experience with investing in these projects or ventures. Therefore i would like to interview you about these investment choices. This interview could be given in Dutch or English depending on the investor’s preference and will only take about half an hour. Below is a brief summary of the thesis and I hope for your cooperation.
Thank you very much for your input and your response.
Short summary of the thesis
Crowdfunding is a viable financing tool for sustainability-oriented entrepreneurial ventures in particular, therefore holding high potential for sustainable development. Due to the higher associated risk of sustainability ventures, such entrepreneurs often face difficulty in financing their ventures. Crowdfunding is often considered as a complement to the traditional forms of entrepreneurial financing, by closing the funding gap of sustainability-oriented entrepreneurial ventures. The primary aim of this thesis is to advance deeper understanding of the investment decision-making process of sustainability-oriented investors on investment based crowdfunding platforms and to shed light on what the underlying attributes are of sustainability-oriented entrepreneurial ventures and their investment crowdfunding campaign that motivates these investors to invest. The thesis will contribute to society as there is still a need to deeper understand what investment crowdfunding entails and how investors qualify and determine whether or not to invest in particular projects, in particular of sustainability-oriented entrepreneurial ventures and their investment crowdfunding campaigns.
Fernando · March 2021 at 17:35
Thanks for your interest on Your Green Wealth and for focusing your research on such a relevant topic as sustainability-oriented crowdfunding and ventures.
Sure, I will be happy to help you and will be glad to be interveiwed.
You can write to me at fernando @ yourgreenwealth.com to arrange the next steps.