Company Focus: Lendwise
Read the first in our Company Focus series, where we put a peer-to-peer lending platform under the microscope.
Lendwise is a peer-to-peer education lending platform. The firm was authorised by the Financial Conduct Authority (FCA) in 2018 and started trading in the final quarter of that year.
The platform focuses primarily on funding tuition fees for post graduate education, making it an appealing option for lenders looking to invest for a social benefit as well as to make a return, although co-founder Kypros Mouzouros says it has a broad range of investors, both retail and institutional.
To date, it has funded loans to the value of more than £35m to almost all universities in the UK as well as some of Europe’s top business schools. The size of the loan book today stands at £27.5m.
Lendwise has an auto-invest feature, called AutoLend, whereby lenders set investment criteria such as maximum investment per loan and per portfolio, interest rate, remaining terms to maturity, and university.
It also has a secondary market, enabling lenders to exit loans early if they can find a buyer.
Read more: Lendwise: Education niche protected platform despite headwinds
“Despite the latest turbulence in financial markets, liquidity both in the market and on the platform does not seem to have been negatively affected and loans are funded at the same fast pace they have always been,” Mouzouros says.
Lendwise has not shied away from institutional investment, although Mouzouros says the firm remains committed to its retail investors as well.
He says the retail side can be private individuals who want to invest a small proportion of their savings into an alternative investment, up to sophisticated or high-net-worth investors who wish to diversify more extensive portfolios or take advantage of the firm’s Innovative Finance ISA (IFISA).
Lendwise launched the first education-backed IFISA in January 2022. It is available from a minimum investment of £1,000 and targets returns of up to nine per cent.
Read more: IFISA returns on the rise
Institutional investors, such as investment funds, come to the platform because they see higher education funding as a good alternative to diversify risk away from traditional investments such as bonds, equities and cash earning high market yields at the same time.
“Education finance was the niche we as founders chose as it is our strong belief that by doing that we are contributing towards the wider good cause of higher education,” Mouzouros explains.
“Additionally, we felt that education finance is probably one of the few types of debt that enhances the borrowers’ repayment ability through upskilling and reskilling, something that is seen as an advantage by our lenders.”
Mouzouros believes postgraduate education funding offers a relatively low risk investment option because it enhances the repayment ability of the borrower. “At the same time, it satisfies sustainability and ESG principles sought after by many investors by being a social impact investment which our lenders are quite fond of,” he says.
Investor rates on the platform currently range from seven per cent to 11 per cent, depending on the loan maturity and risk profile. Mouzouros says new loans are being funded at higher rates thus driving higher levels of investor returns, due to the increasing Bank of England base rate.
“There is certainly pressure from the back-to-back rate increases by the Bank of England in the attempt to contain inflation,” he says. “Alternative investments are put to the test against traditional cash deposits, but they keep showing resilience and endurance and are still well placed as a strong part of a well-balanced investment portfolio.”
Read more: P2P lending retains its edge as base rate rises
Mouzouros says the firm never lends to borrowers with a bad credit record, so the quality of the borrower is calculated on the type of qualification they are receiving and the university they are attending, and thus their earning potential afterwards.
“You would typically expect loans with higher maturity to be on the higher side of returns,” he says. While, on the flipside, he adds, “although we are not an elitist platform, in the sense that we do not exclude anyone from applying, it’s fair to say that graduating with an MBA from a top UK university – top 10 let’s say – would definitely bring down your lending interest rate. So it’s up to each investor to decide where they want to where they want to be.”
Lendwise communicates with its investors through a mix of email campaigns, Google ads and search-engine-optimised online content, as well as social media channels and through investment aggregator platforms and investment websites.
Looking ahead, Mouzouros believes pressure on interest rates will continue but he expects demand for postgraduate education to remain strong and thus so will the request for funding, particularly after the tuition fee increases imposed by most universities.
Read more: Six ethical investment IFISAs