Attractive yields on offer at Harmoney

New Zealand’s first peer-to-peer (P2P) lender has had a cracker of a first year, but it is investors in the Harmoney marketplace that are seeing the profits.

Thursday, September 10th 2015, 1:57PM

by Miriam Bell

Harmoney’s investors are seeing an average realised yield of 13% on their loans – and they earned a total interest income of $6 million over the last year.

In its first year of operation, Harmoney has attracted 3,000 active individual investors, which was more than the company expected.

At a media briefing to mark the company’s first birthday, Harmoney CEO Neil Roberts said that individual investors have funded 20% of the $100 million worth of loans transacted to date.

“However, last month investors funded 50% of the loans transacted, which was a record.”

To date, the average investment is $6,000 and investors are charged a 1.25% service fee on the principal and interest payments collected.

Roberts said Harmoney wants to deliver returns back to investors – particularly as there is a limited number of high yielding investment options in New Zealand and a growing demand for them.

Harmoney’s online marketplace offers investors a new, higher yield asset class.

With a target return of 12%, it is possible for investors to achieve higher rates of return to fast track retirement savings or home deposits.

When using the marketplace, investors fractionalise their investments, which breaks a loan into $25 units called “notes”.

Investors can then select how many "notes" they wish to fund in a particular loan, which spreads the risk. Typically, 24 different investors fund each loan.

Roberts said there is a growing awareness of the benefits of P2P lending, and what it could do for both investors and borrowers.

“We’re proud to be the platform that facilitates people investing in people.”

In order to make investing easier for people, Harmoney is exploring a range of technology options – including an app.

Roberts said they want their investors to use their marketplace more than they used their toothbrushes.

“We want to be able to provide investors with a chance to invest, perhaps from a list of pre-selected options, while they are in the lift or waiting for the bus.”

Data released at the media briefing shows that Harmoney has received over $1 billion of loan enquiries since its launch in September 2014.*

Over that time it has facilitated about $106 million worth of loans, which exceeds the company’s own target of $100 million worth of loans in its first year.

Further, Roberts said the company celebrated its first $1 million lending day on Tuesday this week.

Harmoney’s strong growth means the company is preparing to launch in Australia in November this year – although it has not yet achieved the scale to be profitable.

The company recently reported a loss of $6.3 million on revenue of $1.9 million in the 11 months ended March 31, 2015, according to the first financial statements it lodged with the Companies Office.

However, Harmoney chairman Rob Campbell told the media briefing that profitability “was not a million miles away”.

While Harmoney was and – for the time being – is the only P2P lender on the New Zealand, that is set to change as P2P licenses have now been issued to Squirrel Mortgages and LendMe.

Asked about Harmoney’s soon-to-be competitors, Roberts said he welcomed them as the marketplace was dynamic and offered a lot of opportunities.

“Ultimately, we are going to see a greater diversity of funders, and probably some very niche funders. We would like to fill some niche funding areas but, while the potential is there, we don’t want to run ahead of our capability.”

The fact that Harmoney was the first P2P lender in the market and has been able to build a strong brand would stand the company in good stead in the face of competition, Roberts added.

*80% of loans requests are declined as they don’t meet Harmoney’s lending criteria.

Tags: Harmoney investment Peer to Peer Lending