What is the legal status of my investment?
When you choose to invest into a particular project that is listed on the lendahand.co.uk platform you are issued with a bond (or promissory note) by a solar company (the Bond Issuer). These bonds and notes are unsecured and unlisted. Investment into unsecured bonds, which are not listed on a public market, is riskier than unlisted debentures as there is no tangible property provided as security for investors. By investing in an unsecured bond, you are lending your money to a business, with all the risks that this involves. These include the fact that the Bond Issuer is not subject to stock market requirements to make information affecting the price or value of the investment publicly available, therefore, you cannot choose to sell your bond if you want based on price fluctuations. It is also difficult to get out of the investment early. Unsecured bonds are ‘fixed interest’ investments. This means that the interest rate on the money you lend is set in advance. However, interest payments on your money and the return of your capital are not guaranteed and depend on the ongoing success of the Bond Issuer’s business model. Investors need to be aware that investments of this kind suffer from a lack of liquidity and that capital is at risk. In a worst case scenario, you may lose all (but not more than) the total amount invested.
What happens to my investment if the borrowers are unable to repay monies to the Bond Issuer?
The Issuer of your bond instrument will provide loan finance to individuals in the project country you have chosen to invest in. Money is typically spread across a large number of individuals and default rates by these individuals are generally low. However, in an instance where a large number of individuals default on their loans to the Bond Issuer, this may have an impact on the ability of the Bond Issuer to repay your interest or capital in part or in full. Where indicated on each project profile, UK aid are co-investing alongside retail investors and may provide first loss on their invested capital should any Bond Issuer experience difficulties in meeting their repayment obligations.
What are the risks if I invest in Solar Companies who provide loans to households in Sub Saharan Africa?
By definition emerging market economies have potential for growth. Nonetheless, the threat of economic downturn due to the factors outlined below are a possibility, which investors should consider before making any investment. The companies listed for investment on lendahand.co.uk have their main operations in Sub Saharan Africa hence investors have to consider the impact of changes in the political climate in the countries in which the Solar Companies (Bond Issuers) are operating. Elections often have a strong impact on the economic stability of a country and significant changes could create issues for foreign investors especially as new regimes might close the door or making repatriation of funds difficult/impossible. Political instability could have a very strong impact on economic stability, the judicial system, stability of the financial markets and institutions, and other similar factors. Such risks are difficult to assess but could have a detrimental effect on investment returns. Corruption in many emerging markets, may be more prevalent than in developed markets. In some cases, it’s rooted in cultural differences and thus strongly influential in people’s way of life. Corruption could affect a business’s ability to present fair financial statements. It may add costs that are hard to predict or manage. It could make doing business difficult and make contracts void in court. Natural disasters tend to occur more regularly and/or the effects have a more profound impact due to a lack of emergency (government) responsiveness or general infrastructure, than is the case in developed nations and can have a profound impact on local economies and communities. Investors should consider that a natural disaster (such as flood, drought or famine) may have severe impact on the ability of local people to make repayments to the Bond Issuer, which could have a knock-on impact on the Bond Issuer’s ability to make capital and/or interest payments to them.
Due to political regime change and/or other economic factors, emerging market countries may present a higher potential for the outbreak of conflict or other types of social instability. The displacement of local populations as a result of war or unrest may affect their ability to repay loans to Bond Issuers.
Further information regarding all identifiable risks associated with a project are outlined in the relevant offer document, which an investor should read in full before making a decision to invest.
How does Lendahand Ethex minimise the risks?
Lendahand Ethex Ltd ("Lendahand Ethex") has a strict set of criteria for all Bond Issuers listed on the platform. Every Issuer must also hold to our social mission and work with us to supply loans to African households as cheaply as possible. This ensures local people wishing to own and install their own solar equipment have access to affordable financing. An Issuer must also have a 'track record'; they must have proven themselves as meso-credit provider to individuals in emerging market countries. This means for instance a solid credit portfolio and enough buffers and equity to compensate for unexpected downturns. Lendahand Ethex also checks the organisational structure of the Issuer and how robust their internal procedures are. Finally, the loans that an Issuer receives via Lendahand Ethex must be in proportion to their total balance sheet. Where indicated on an offer, UK aid will be investing alongside the crowd and may provide first loss on their investment ahead of other investors. Where this is the case it will be clearly stated on the offer page. UK aid have also seeded a foreign exchange (FX) currency reserve that will be topped up over time (Lendahand Ethex plans to set aside up to the equivalent of 1% of all repayments made from Issuers listed on the platform into this reserve fund) to cover potential losses for investors that could be caused by large changes in exchange rates.
Is my investment covered by the Financial Services Compensation Scheme (FSCS) or Financial Ombudsman Service (FOS)?
No, you are investing in the unsecured debt of the Issuer, which is not covered by the FSCS. Investors should be aware that their capital is at risk which means that you may lose some or all of the money that you invest. If an Issuer is unable to fulfil the terms of the bond instrument there is no right to complain to the FOS or to get compensation from FSCS.
Is the return on my investment guaranteed?
No, the ability of the Bond Issuer to pay interest on your investment and make a full return of capital is dependent on the continued success of their business model. You should familiarise yourself with all risks outlined in this section of the website and in the relevant offer document for any project you wish to invest in. You should never invest more than you can afford to lose and you should never invest money you have borrowed.
Is Lendahand Ethex regulated by the FCA?
Lendahand Ethex is an appointed representative of Share In Ltd, which is
authorised and regulated by the FCA (FRN 603332).
Is my investment subject to any exchange rate risk?
Bond Issuers bear the exchange rate risks. Your bond is settled in Sterling, and the return of your capital and interest payments are also made in Sterling. However, you should consider that the Issuer of your bond has revenue streams in local currency in the emerging market countries in which they operate. Major depreciation of this local currency against pounds sterling may have significant impact on the day-to-day operation of the Issuer and may affect their ability to repay your capital and/or interest in part or full. In recognition of this risk, Lendahand Ethex has set up a small foreign exchange fund to cover potential losses to a certain extent.
What happens if a Bond Issuer goes bankrupt?
If a Bond Issuer goes bankrupt, there will be a chance that you lose part or all of the amount you invested. Lendahand Ethex will make every attempt to recover outstanding payments, but the success rate cannot be guaranteed in such situations. Investors have no right to take action against the Issuer or Lendahand Ethex. It is recommended that investors diversify their risk to any one Bond Issuer by spreading smaller investment amounts across a number of different Issuers. Investors should never invest more into unsecured bonds through the platform than they can afford to lose, and should make investments into this asset class as part of a diversified investment portfolio.
What happens with my money if Lendahand Ethex goes bankrupt?
If Lendahand Ethex were to go bankrupt, trades between Lendahand Ethex and the payment service provider (PSP) Mangopay would cease immediately. Mangopay would then transfer the funds from your personal wallet to your bank account (Note: if at this time the project you have invested in has been fully funded and the money has already been transferred to the Issuer, these funds will not be transferred back to your bank account). Mangopay would then, in consultation with a trustee, handle all repayments between the investors and investees up until the final repayment of the last project has taken place.
Should Lendahand Ethex go bankrupt, in order to prevent investors from losing their money, the notes/bonds are held in a segregated Collective Depot (or securities account) that is administered by Hands-On BV as allowed by the Dutch Financial Authority (AFM) under their license. The note/bond holders are the owners of this depot. This is a clear segregation from the assets of the Hands-On BV. The flow of money is also segregated, namely via the platform’s payment service provider Mangopay. There is also some operational risk at Lendahand Ethex. For example, Ethex, Hands-On BV, or both businesses may not be able to generate sufficient income or investment to finance their activities, which could jeopardise this joint venture between the two organisations. In that case Lendahand Ethex will handle outstanding loans as well as possible, but the influence to handle non-repayment by an Issuer legally ceases in this scenario.
What happens if Mangopay goes bankrupt?
Mangopay is the payment service provider (PSP) for the platform. Mangopay is a product offered by Mangopay SA incorporated in Luxembourg, listed under number B173459. As part of your registration with the platform a segregated investor ‘wallet’ is created with the PSP. Any investor funds held on this wallet are segregated from monies belonging to Mangopay, Lendahand Ethex Limited or any other related party, and will be returned to your nominated bank account should Mangopay cease their operations. For invested monies not held in your ‘wallet’ Lendahand Ethex will make alternative arrangements for the return of your capital and/or interest from the Issuer to your nominated bank account.
Why is my money going to a payment service provider?
Mangopay SA are approved as an electronic money institution by the financial regulator in Luxembourg (CSSF), which has granted them an E-Money issuer (EMI) licence. This licence covers their activity in all 31 countries of the EEA. Mangopay offer a seamless end-to-end payment solution, KYC (Know Your Client) and anti-money laundering management and the ability to hold monies from each investor in a segregated ‘wallet’. This means your money is safe and secure in your own personal ‘wallet’.