The future is green: Exclusive interview with HeavyFinance’s Darius Verseckas

Darius Verseckas, co-founder and chief marketing officer of HeavyFinance, tells Marc Shoffman how his peer-to-peer lending platform is supporting farmers across Europe

Peer-to-peer lending platforms have always given investors access to a variety of sectors and HeavyFinance has developed an offering that lets users back Europe’s important agricultural industry while supporting the environment.

The Lithuania-based platform was launched in 2020 and lets investors provide much-needed finance for farmers.

Its founders have plenty of P2P lending experience, including Laimonas Noreika, who started FinBee and former NEO Finance interim chief financial officer Andrius Liukaitis.

The platform has built a total loan book of €40m (£34.2m) and is targeting further growth, especially as it rolls out its green loans.

Co-founder and chief marketing officer Darius Verseckas explains how the platform is supporting sustainable farming and helping investors go green at the same time.

Marc Shoffman (MS): Why was HeavyFinance set up?

Darius Verseckas (DV): The agricultural sector is very attractive for investors. Farmers are heavily underfunded.

What we saw, especially after the financial crisis, is that the banking sector got stricter and stopped funding small- and medium-sized enterprises (SMEs). It is not that SMEs are even getting higher borrowing rates, they are just not getting funding. There is a €40bn funding gap in agriculture across the EU.

The sector has incredible potential to tackle climate change through methods such as organic fertilisers or covered crops that allow the soil to store C02 emissions. These techniques have the potential to take agriculture from the third biggest polluter to a climate positive sector. We have launched green loans to help with this.

MS: How do your green loans work?

DV: Investors can help businesses generate carbon credits and make big returns out of doing a good job for the environment.

We send scientists to every farm that takes a green loan. They take soil samples to analyse how much carbon is generated and then follow up a year or two later. We measure the difference and one tonne of C02 equals one carbon credit. This then generates a certificate that can be sold to traders or companies looking to offset their own emissions.

Read more: HeavyFinance announces carbon credit plan

The investor gets returns from the loan and how much the carbon credit sells for, while HeavyFinance gets an administration fee from this as well.

MS: Who can invest?

DV: Anyone with an account in the EU can invest. The minimum investment is just €100. We do have some British investors but they aren’t in our top 10. The platform has roughly 9,000 investors, with most from Lithuania, France and Germany.

MS: How is HeavyFinance regulated?

DV: We are already regulated under Lithuanian rules and we are expecting to receive our pan- European crowdfunding licence soon. [Editor’s note: HeavyFinance received its EU licence on 20 July.]

It will be tougher for platforms in other countries where they didn’t have crowdfunding regulations prior to the new EU rules.

We see different platforms are taking different routes, for example in Latvia many firms are getting financial brokerage licences. In our case, there won’t be any significant differences under the new regulations, we see it as a good thing for the company.

MS: Where do you invest?

DV: We originate loans directly from five markets: Lithuania, Latvia, Poland, Bulgaria and Portugal.

Farmers are just like other businesses. They have profit and loss statements and balance sheets. We analyse their business data, how many years they have operated, and whether there are any commitments they are late on. There are 20 data points we evaluate.

Read more: HeavyFinance sees growth in investors from Germany, France and Spain

When people are investing in agricultural loans, it is not investing against collateral, it is investing against business. If there is a need for recovery, we are tackling the business first.

The interesting part of agriculture is that even though farmers operate as companies, they are personally liable. If they are thinking about taking a loan, they think about it very hard. That provides an important layer of security for investors.

MS: Have you taken any inspiration from the UK P2P lending market?

DV: We did some analysis of the UK market and how they present projects. It is the most mature market in Europe so is definitely worth following. There are differences in the regulatory framework though that makes it harder for us to enter.

MS: What is your outlook for the P2P lending sector?

DV: I think crowdfunding markets in real estate may be under pressure because of the economic environment.

We see agriculture as a different sector from all others. One reason is because of the security of it. We cannot as a continent afford to be starving so we can’t let this sector die. As Europeans, we will always be trying to save this sector.

We are actually seeing an increase in investor registrations. Investing in agriculture is seen as a way to diversify a portfolio.

MS: What are your plans for the future?

DV: We closed a €3m fundraising round in March. That round was aimed at helping us to expand our green loans. We launched them early this year and have already funded more than €2m. We are expecting our green loan book to reach more than €5m by end of the year.

We still have in mind that the project is quite new so we want to evaluate every step of the process. This year is about working together with the farmers, explaining how sustainable products work and next year will be the time to reach a much bigger scale.

The €3m we raised is enough to expand for some time, but next year we may consider another venture capital round.

Read more: HeavyFinance boss says new sustainability standards “will help fight toward net zero”

Our most recently published financial statements showed some losses. We are operating as a typical tech start-up. The business is going through rapid expansion so we won’t see profits for several years.

Our green loans will become the biggest product in the long-term. There is a lot of meaning to it and it is basically our mission now with sustainable farming and helping the environment. A lot of capital is going into this area because of the urgency of it. We are also in talks with institutional capital providers who want to support this work.