Last week, Massy Finance—a subsidiary of T&T’s second-largest conglomerate, Massy Group—launched its first fintech offering, an online loan platform called InstaLoan.
Massy’s model, according to executive vice-president and group chief financial officer of Massy Holdings Ltd Ian Chinapoo, is to be disruptive, especially to local banks.
While it’s Massy’s first foray into fintech, online loans have been on the market from three separate companies for the past three years.
InstaLoan can be accessed by anyone wanting a loan—be it for a vacation, home repair or for a Carnival costume.
It starts at $5,000 and goes up to $50,000, with repayment terms from one to up to five years.
Its interest rate starts at ten per cent, but they expect it to normalise at 15 per cent.
Massy’s selling point?
Unlike traditional banks, InstaLoans are unsecured.
Chinapoo explained that for Massy Finance, which is regulated by the Central Bank, InstaLoan is a service offering distinct from a product offering.
He said that Massy Finance intends to be fair and transparent with InstaLoan “as we are with any of our other products and will favour lending in the public interest in our business model”.
“In fact, we are positioning InstaLoan to solve money problems for professionals and small businesses alike while staying true to our core values and not compromising on good governance,” he said.
Managing director of Massy Finance Duane Hinkson said it’s ideal for small businesses looking for short-term capital to expand.
He said businesses that were born during the pandemic and have potential can apply for these short-term loans to explore their potential.
While the financing component is backed by Massy Finance, it has partnered with the Barbados-based fintech firm Carilend for its platform.
Its initial contract with Carilend is for five years.
Carilend has already rolled out an online loan platform in Barbados, and two years ago during the pandemic, in partnership with Jamaica’s VM Group, it launched in the Jamaica market.
Growth in online lending
Chinapoo noted that the pandemic has accelerated the information technology thrust, and the online lending space is forecasted to see huge growth locally and across the region.
“InstaLoan is proof that it is already happening. Competition aside, I want to encourage us to throw our support behind these local developments as customers want the ease and convenience of transacting business,” he said.
“Caribbean fintech start-ups are pushing the limits of technology, and they do not hide that they would love nothing more than to disrupt big banks. Additionally, larger, more-established banks want partners who can provide forward momentum in areas where they simply do not have the capacity.
“This symbiosis creates an ideal environment for fintech to succeed. If we get it right, it is the customer who ultimately wins as dynamic and efficient service creates a superior customer experience,” Chinapoo said.
In T&T, there are already loan options available online.
However, rather than be disruptive, it remains an option.
With traditional banks moving more services to online following the shift of services online brought on by the Covid-19 pandemic, the onus is on the companies offering online services to capitalise and grow their businesses.
Unicomer (Trinidad) Ltd, trading as Courts, is licensed under the Moneylenders Act to provide cash loans up to $50,000.
Its loan offering is called Ready Cash Loan, launched in 2020, with an interest rate as low as two per cent, and loans can be for a period of three to 36 months.
Like InstaLoan, there is no collateral and Courts boasts of a one-day approval.
The money goes straight into a bank account.
Island Finance also offers online loan packages starting from $3,000, up to $54,600.
And there’s Term Finance, a Trinidad-owned, web-based credit outfit which offers short-term loan solutions in T&T, Barbados, Guyana, Jamaica and St Lucia.
In March 2021, First Citizens announced its acquisition of a 19.9 per cent minority stake in Term Finance.
The company already has minority partners in Jamaica and St Lucia. Their target market is small businesses.
Mark Young, chief executive and co-founder of Carilend, noted that T&T was the third Caribbean market for the online loan platform to be operational.
“We’re really excited about Trinidad. We think it’s a huge potential. We think it’ll be bigger than Barbados and Jamaica put together,” he said.
He explained that Carilend is the conduit for Massy’s endeavour.
“The provision of financial services and providing loans to people is a regulated activity. Massy Finance is a regulated company that provides that regulated product already. All we’re doing is delivering it in a very much different way, in a much more convenient way,” he said.
In T&T, the range of interest rates for InstaLoans is between ten and 15 per cent.
“The rate that you get will be based on your own personal circumstances, your own personal credit score that we will give you. So if you’re a good borrower, with a good credit history, good employment, you’re a stable borrower and good history, you’ll get a lower rate. We don’t take super-risky people. Everybody we’re looking for has to have steady employment, good credit history, a good track record and can afford the loan,” he said.
He said that interest rates in Barbados are a little bit lower than Trinidad while interest rates in Jamaica are a little bit higher.
“In Jamaica, our rates range from 14 to 22 per cent. Because that’s the market rate for borrowing money in Jamaica. The cost of borrowing is higher,” he explained.
He said that over both countries, Carilend has done over 5,000 loans and over 90 million Barbados dollars over the last five years.
So, what’s the default rate?
“So, what we have is our own proprietary credit scorecard. And we’ve developed that five years ago and it’s been in production and testing for five years. In Barbados, our default rate for loans after five years is 2.47 per cent. That is lower than all the banks, lower than all the credit unions. So we have a good track record. In Jamaica, it’s even lower at the moment. We’ve only been there two years. But our default rate there is 1.47 per cent.
“We do all the usual checks. We do all the AML, KYC, all the security checks, we check your identity against all the usual databases. We do all the checks about your income, about your employment, about your identity, about your interest; we have to do all those things that you do as a regulated product, but we just do it electronically,” he said.
In the region
Carilend wants to be the fintech backbone for the Caribbean.
“We started with peer-to-peer lending there, which is when you bring the borrowers and the investors together, so people can invest money as well as borrow money. Now, we’ve done over 4,000 loans in Barbados. And then, two years ago, we started in Jamaica,” he said.
He said that starting in Jamaica during the pandemic was “quite scary” as he recruited the whole team of Jamaicans and hadn’t met any of them in person, only on Zoom.”
“But we got up and running. It’s been going really well. And it proved our business model,” he said.
He said that their entry into Jamaica was different from their operation in Barbados.
“They know who we are in Barbados, but they don’t know who we are in Jamaica. So we said let’s partner with somebody big that everybody knows and trusts. That’s the VM Group. And that’s the same thought process that we have with Trinidad. We said let’s go with a name that everybody knows, everybody trusts, so that they don’t have any fears about coming to a company they don’t know and then never worked with. They know the Massy brand,” he said.
Young said the company was open to possibilities in the region.
“Guyana is obviously a really interesting space at the moment. Its infrastructure is not as well developed from a banking point of view as Trinidad or Jamaica or Barbados. So it will be harder to work there,” he said.