Liwwa: Looking to Lend More

After securing a crucial round of funding from investors, CEO of peer-to-peer lender liwwa says he’s ready to further expand the platform’s reach across the region.

By Jane Hosking

The region’s SMEs have long had a hard time securing finance, which has undermined their ability to contribute to economic growth and job creation. But through establishing a platform for peer-to-peer lending, liwwa is doing its best to give SMEs a leg up.

Since 2012, Amman-based liwwa has helped finance a diverse array of projects in Jordan, including a prosthetics company that’s assisting victims of the Syrian conflict. Now, after he helped convince investors to pump more money into his platform earlier in the year, liwwa Cofounder and CEO Ahmed Moor has his sights set on expansion across the region.

How does liwwa work and how does it differ from other sources of finance?

Samer Atiani, liwwa’s cofounder and chief technology officer, built an online exchange for debt where SMEs can secure lender capital. Those SMEs can submit a loan application through our website, a process that takes about 10 minutes or less. We have our own credit model where we make a decision on the creditability of an SME, and we post as much of that information on the website as we can. So any interested lender can go and register on the website to see the full range of investment opportunities and descriptions of the businesses that we’ve funded.

The biggest difference between liwwa and a bank is that we’re actually focused on the SME sector. The opportunity cost of capital for banks means that they most often invest in either corporate loans or government debt. Another big differentiator is the source of capital. This is called peer-to-peer lending because the capital comes not from deposits at banks, but from other individuals who have saved money.

How is liwwa a better way for SMEs to gain access to finance and a better way for investors to invest?

It’s a better way and in many cases the only way for SMEs to get access to capital because of pricing and efficiency. We commit to making a decision mostly within 24 hours, and in some cases 48 hours, and we disperse capital to our borrowers generally within two weeks. For lenders, returns that are paid on a fixed schedule make things a lot more predictable for them. We’re helping deliver investments that mimic fixed income opportunities in a part of the world where the debt capital markets just don’t exist in a very robust way. Our lenders can lend to SMEs in their community for the social good, but at the same time they also receive 9.45 percent net of fees through our network.

The SME lending gap in MENA, which is the second worst served by banks for SMEs globally, amounts to $240 billion. The role of SMEs as engines of job growth and GDP growth is difficult to overstate. So that’s what we’re trying to work on. We want to leverage private capital and redirect it so that it can act as an engine of economic growth. We’re looking at extending the reach of capital to SMEs that otherwise wouldn’t be able to access it through the current financial system.

How many companies have you serviced through liwwa and how difficult is it for them to get through the screening process?

About 50 companies are currently on the platform. Our focus right now is on delivering capital to the highest quality SMEs that we interact with. We have only worked with less than one percent of total loan applications. We don’t want to deal with defaults at this point and our default rate is about one half of one percent. We’re not by any means talking about easy access to capital. It’s easy access to capital for qualified businesses. And we don’t work with startups; we work with existing SMEs.

What is your business model and how do you make money?

We collect 2 percent of every repayment an SME makes. So if an SME borrows a thousand dollars and has to repay that amount over 12 months, and say if the profit rate is at 10 percent we collect about $2 from every monthly repayment of $92.

Earlier this year liwwa closed a successful financing round. How important was this finance to grow the company?

I would say that we would not be here today without the support of Ali al-Husry, Fadi Ghandour, and the leadership of Bank al Etihad. They were great partners for us and we really enjoy working with them. We think that they generally act as catalysts for, not just our growth, but also the growth in the region. More people should probably participate in the way that they have. Most of the real work we have done has been since we closed the round. It enabled us to hire the team and begin to build in a serious way, and you can see that in the numbers. Before we closed the financing round in March we had underwritten $40,000 in debt. Today that number is $630,000 and that’s occurred in about six months.

Do you have plans to grow beyond Jordan?

Right now on the borrowing side, it’s just Jordan. Hopefully we’ll be expanding soon to Lebanon and the UAE. But our goal for this company is to grow much bigger than that. We’re going to underwrite a lot of debt. That’s how we’ll grow. It’s straightforward: the more debt we get on the website, the more attractive it is for lenders and it’s a virtuous cycle in that sense. We want this to be a global business and we want to be vibrant in every market that we serve.