The impact of IFISAs
Innovative Finance ISAs (IFISAs) are not just tax efficient investment tools, they can also be used to provide a social good and have a positive impact on the country.
Just ask Rishi Zaveri (pictured), chief executive of education finance platform Lendwise.
“We offer a real impact investment,” says Zaveri. “Ultimately, our investors are making a serious difference to someone else’s life. And they are also being compensated well for that.”
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Lendwise provides postgraduate education funding through its IFISA, while also paying investors approximately nine per cent per annum in tax-free interest. The platform primarily funds postgraduates, who face higher university fees but have a much higher chance of employment following graduation. As a result, the platform’s default rate remains low.
“Interest obviously accrues, but repayments don’t start until after they have graduated,” explains Zaveri. “But thereafter monthly repayments come in. So the investor has an opportunity to get a stable income that comes in every month.”
While steady returns and low defaults are a bonus, Zaveri believes that Lendwise’s investors are more attracted to the opportunity to make a real difference in another person’s life.
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This is one of the reasons why Lendwise has won the Consumer Lender of the Year award two years in a row at the Peer2Peer Finance Awards. At the most recent ceremony, judges heralded the platform’s commitment to underserved borrowers as well as its strong track record of delivering for investors.
“I think we’ve delivered every step of the way,” says Zaveri. “We do what we say we’re going to do. We’re saying, if you want to study, if you have the ability to get into a university, whichever university that may be, don’t let the fact that you don’t have the funds stop you.”
The platform is also mindful of its investors’ needs – namely, diversification and the ability to manage risk. Investors can spread their investment across a range of loans on the platform, effectively de-risking their portfolio. The platform has an auto-invest function (called AutoLend) that can be used to set parameters around potential investments, so that investors don’t miss the next suitable opportunity.
“It’s for investors to decide how they wish to allocate their investments across the risk spectrum,” says Zaveri.
“You can define your criteria, whether you choose to narrow that down by university or by interest rate range or a combination of things, that’s entirely down to you. But there are plenty of tools and on Lendwise, I think it definitely makes sense to diversify your investment. So I would say being invested in many loans is better than being invested in a few loans.”
Lendwise has been in business for over five years, and its track record speaks for itself. Lendwise’s IFISA account has been in operation since the tax year 2021/22. To date, the platform has originated more than £50m and over £0.6m has been invested via the platform’s IFISA which continues to grow.
But Zaveri is most proud of the work that the platform has done in educating students and changing people’s lives.
“With our platform, you have the ability to make a credible difference because people are going on and getting better jobs and I think this is reflected in our low default rate,” he says.
“It’s really rewarding personally, and I speak on behalf of my co-founders and the entire team here. Everyone is very passionate about what we do because it makes such a difference to people’s lives.”
“The track record is there to see,” he adds. “I think that’s really something powerful. Combine that with the difference that we’re making, the subject, nature of what we’re doing, and you have the data to back that up, and there are investors who’ve experienced this. I think it’s very powerful together.”