Israel is famous for its startup ecosystem. With the rise of fintech giants in the United States, Israeli entrepreneurs developing their own p2p lending companies was a given.
The p2p lending ecosystem has seen many American clones. Tarya is different because it offers both a true P2P general market but also a white-labeled community-focused sub-P2P markets.
Tarya is interested in offering loans by leveraging communities. For example, an organization that is interested in offering loans to its employees through Tarya, need to go online and sign up as an organization, confirm personal details of the employee, along with the underwriting process, and permit taking out monthly loan repayments from the employee’s salary. The organization’s involvement is merely technical – it is not obligated to finance the loans and does not have any liability to either the employee or Tarya. The borrower can apply directly via the website of the community or the community manager can fill in the details. It usually takes 1 hour to set up. Currently, Tarya deals with 4 types of communities.
- Smart Underwriting
- Community of Lender or Borrowers
- Labelled Community
- Full White Label
The platform’s architecture is built to enable community structures for lending and borrowing. The community, in this example, is structured around an organization and its employees. So you often have both lender and borrower origination from the same community. Each organization-community set their loan parameters, depending upon the type of organization and sector, security level, other parameters such as seniority, salary level etc. The platform also provides a sophisticated credit-scoring model relying on the usual banking-inspired large-data underwriting algorithms.
Lenders can be of any community, they see all the borrowers from all the communities under one big pool. Tarya does not manually choose who the lenders for each loan should be. Anyone who wants to be a lender can go to the website, set up the risk parameters like loan purposes, interest rate, risk level etc. So the lenders can either lend manually or can use the “smart agent” developed by the start-up which will invest in the loans on the basis of lending parameters decided by the lender. The parameters can be the duration of the loan, salary levels, interest rates etc. Smart agent automatically allocates the fund to the loans that match the parameters and thus enabling maximum diversification.
Another interesting innovation in Tarya is the company’s semi-secured fund. In order to limit the risk exposure, once a lender has chosen his investment criteria, Tarya puts a lender into at least 200 loans, if possible. This ensures that no single loan will affect more than 0.5% of the portfolio. Any risk above 0.5% is compensated through the secured fund. The lender can also choose a higher security level, for example, he wants to be diversified into at least 500 loans. This will reduce his risk to any particular loan to 0.2%. The investor will pay a premium for such a diversification, creating another revenue stream for the company.
The company has about 1000 lenders and on average they have invested $50,000 USD per lender through the platform. The minimum investment is 5,000ILS or $1,000 USD, another option is to start a monthly saving whereby anyone can start with as low as 500 ILS. Few of their premium lenders have invested over $6 million ILS. So far the start-up has originated loans worth 80million ILS, on average they are doing 14m ILS per month and are aiming to cross 200million ILS by the end of 2016.
Smart underwriting is the general pool, and white label is a SaaS service for companies looking to launch a p2p lender without reinventing the p2p technology. Tarya extensively deals with community #2 and #3, because in the community of lenders or borrowers there is more accountability and connection, and one can choose his/her community and apply accordingly.
Underwriting and key numbers
Depending on the borrower’s credit score, the interest rate for borrowers ranges from 3.5%-8.0%. The origination fee is between 0.9-5.5 % of the loan amount. Lenders pay a fee of 1.0% on returns. Credit Cards charge an average of 11% and lenders investing in diversified and micro-financed portfolios average between 5%-6% returns after fees. Thus lending and borrowing through Tarya are beneficial for all the stakeholders. The typical length of the loan ranges from 3 to 60 months and so far, they have not witnessed any defaults.
Tarya is one of the largest Israeli P2P lending platforms and was launched in January 2014 but started doing business in May 2014. Its aim is to provide a community led profitable financial experience for both borrowers and lenders.
Tarya was founded by Eyal Elhayany, who has founded numerous internet ventures, and held various management roles in leading companies in Israel. The founding team has Assaf Shlush, VP R&D and Verde Losthoiz, head of regulatory and legal and the former legal head of Bank of Israel. They entered the Israeli crowd funding industry to help in the financial transformation of the existing banking credit system. They are tackling regulatory, business and cultural challenges and they believe Tarya has the potential to change Israel’s credit market structure. Israeli banking sector is concentrated and not competitive, especially when it comes to household and SME sectors. Hence they felt developing an option for these sectors is the need of the hour and also for the development of the nation. The founding team feels the effects of P2P and crowd funding will be significant and profound.
Tarya is regulated under nonbanking loans, but soon they will be applying for the regulation for the p2p platform. They are hoping in next couple of years p2p will be regulated in Israel by treasury office and central bank. Another USP of the company is a secured fund. In order to limit the risk exposure,
Tarya is aggressively building one of the largest p2p companies in Israel. But its secret sauce is not its size or speed of growth, but its business model of communities and loan diversification model which will be a huge barrier for any newcomer looking to grow in Israel.