Interview with Henrijs Jansons from Debitum

Thank you so much for doing this interview. Can you start by introducing yourself and also your platform Debitum?

Firstly, I'd like to express my gratitude to you, Marco, for having me. Despite it being summer, a time when most people are taking a break, I appreciate the opportunity to do some work. I'm spending most of the summer in Latvia, where the weather is currently delightful.

Now, about me and Debitum. I've been in the IT and finance industry for over a decade. I started in the IT industry, working with data warehouses and business intelligence. One of my clients was Mogul, a car leasing company. After my stint at Mogul, I moved to a payday loan company that had operations in Indonesia, Georgia, and other places. We were successful initially, but the owners decided to take the company in a different direction, leading to the management team, including myself, leaving.

After that experience, I took a break from Fintech and started a company that dealt with international debt collection and creditworthiness. This company was based in the Czech Republic and dealt with cases where products were produced in Germany but the payments were not made. We started sharing data about non-paying customers and grew into an international debt collection company.

How did you end up at Debitum?

When Martin, the owner of Debitum, and the previous CEO approached me about an opening, I was initially hesitant. However, I realized that my knowledge of IT, business loans, and my experience with large corporations and international debt collection could be beneficial to Debitum. So, I decided to take the plunge and join Debitum.

Today is a significant day for us as we have finally received approval from the regulator to change the ownership of the company. This has been a long process, but we have now submitted the first new shareholders to the commercial register. There is still some money to be finalized, but the majority of the shares have already been submitted. I anticipate that in one or two months, the entire process will be completed.

This is a big step for us, and it means we can now focus more on development. During the process of buying and selling, it's challenging to invest money before the deal is finalized. But now, we can move forward.

What makes Debitum different from other platforms?

Debitum stands out from other platforms in three key ways. Firstly, we have a solid track record of zero percent default over the past five years, which is a testament to our robust culture and approach. Not all platforms can boast of this achievement.

Secondly, we are a regulated and licensed platform. This means we have to comply with stringent regulations, which not all platforms do. This extra layer of compliance might seem daunting, but we believe it's worth it for the added security it provides to our users.

Lastly, our focus is on business loans, specifically factoring. We do not currently offer consumer loans. We believe this focus on the business side of lending is beneficial for our platform and our users. It's also a reflection of my personal experience and expertise in evaluating businesses and their creditworthiness.

What was the impact of Debitum getting licensed at the end of 2021?

Getting licensed had a significant impact on our platform and our relationship with investors. We were one of the first platforms to switch to a licensed product, which we did at a challenging time - the start of the war in Ukraine. This meant we couldn't promote or explain the benefits of our new license as much as we would have liked.

However, we noticed that other platforms, like Mintus, Stino, and VMS Lounge, also experienced a temporary decline in users when they launched their licensed products, but they bounced back. We experienced a similar pattern, albeit with the added challenge of the war.

Initially, there were some tax-related issues due to the new regulations. For instance, licensed platforms had to charge a 20% tax, which wasn't appealing to investors. Thankfully, the Latvian government acted quickly to reduce this to 5%, and with the submission of certain tax documents, some investors can even get it down to 0%.

What are the advantages and possible drawbacks of investing in business loans rather than consumer loans?

Investing in business loans has several advantages. For one, there are no GDPR restrictions, so we can access all the information we need to evaluate our partners. This transparency is crucial for maintaining our zero percent default rate. Additionally, business loans are typically larger than consumer loans, which means we can do fewer checks per loan but for larger amounts.

Another advantage is that businesses can provide collateral, which isn't usually the case with consumer loans. This collateral can be machinery, property, or other assets, which provides an extra layer of security for investors.

However, one potential drawback of focusing on business loans is that the volume in numbers might be lower compared to consumer loans. This might give the impression that there are fewer investment opportunities, but the actual amount of money involved is often higher.

How does investing in Debitum compare to other investment options?

Investing in Debitum is just one of many ways to invest your money. You could also invest in real estate, the stock market, or put your money in a savings account. However, we believe that our platform offers a unique combination of benefits, including a solid track record, regulatory compliance, and a focus on business loans.

Why do you think P2P lending is a better or different way to invest than other asset classes out there?

Well, I wouldn't necessarily say it's better, but it's certainly different. I have a diverse portfolio that includes real estate, stocks, and investments in Debitum, among others. The best investment, in my opinion, is a diversified one. P2P lending is just one of the sectors I invest in.

It's important to note that my investment strategy might be different from yours. As the CEO of Debitum, I have a unique perspective on the industry and where the money is going. For others, P2P lending could just be a part of their portfolio.

What makes P2P lending a good investment?

P2P lending as an industry is good because it offers steady returns. Last year, for example, P2P lending offered a steady percentage return. You won't double your money, but you can expect a consistent return each month. This is different from real estate or stocks, where the returns can fluctuate.

Another advantage of P2P lending is that it's a passive investment. If you set everything up properly, you can sit back and watch your investment grow each month. This is different from real estate, where you have to deal with tenants and property maintenance.

What do you think the future holds for P2P lending?

I believe the future of P2P lending is bright. The industry is still relatively new, having started around 2012, but I believe it will continue to grow. However, it will remain a passive product in an investor's portfolio.

As for the interest rates in P2P lending, I believe they will remain more or less the same. They might decrease slightly due to regulation, but they will still be higher than stocks or real estate. However, they won't reach 20% because that's not sustainable for a business.

Can you tell us more about Debitum's new loan product, Sandbox Funding?

Sandbox Funding is a new loan product we've launched at Debitum. It's designed to help us establish new partnerships and fund promising projects. The idea is that we give out our own money first, and then we offer the loan to our investors. This way, we can ensure that the project is viable before we offer it to our investors.

We've already had a couple of clients for Sandbox Funding, and one of them is very close to being funded. We hope to have more projects for Sandbox Funding in the future.

What are Debitum's plans for the future?

At Debitum, we have a lot of plans for the future. We want to introduce new features, such as an autonomous secondary market, and we're also looking at other interesting products. We're also planning to start issuing bonds and doing pre-IPO financing.

However, our main focus is on finding safe and sustainable businesses to finance. We're particularly interested in the energy sector, forestry, and eco-housing. We're also planning to hold an event in Germany in autumn, where we can meet with our investors and discuss our plans.

What advice would you give to someone who is just starting out in P2P lending?

The best advice I can give is to do your research. Google 'P2P investing' and read the content that comes up. Look at the track records of the companies you're considering investing in. Don't put all your money in one place - diversify your investments. And finally, be aware of new companies. They might not have a track record yet, so it's important to do your due diligence.

How can people find more information about Debitum?

The best way to find more information about Debitum is to Google 'Debitum P2P investing'. You'll find a lot of content written by bloggers and other opinion leaders. You can also reach out to us on Telegram or visit our offices in Riga. We're always happy to answer any questions you might have.