Interview with SAVY director Audrius Žiugžda 2023

SAVY is a Lithuanian peer-to-peer lending platform that has been operating since 2014. The platform offers a wide range of products from consumer loans and small business loans to mortgage loans. Most recently it has acquired the European Crowdfunding Service Provider license and introduced a mobile application.

In this interview, you will learn from the chairman of the board Audrius Žiugžda what it means to invest with SAVY. Get a brief overview of SAVY or read the analysis of SAVY from Sep. 2023 to learn more.

How was your journey to becoming the CEO and now Chairman of the Board at SAVY?

Audrius Žiugžda: Most of my professional career spanning over 30 years, I worked at major traditional commercial banks, including CEO and other executive roles. However, when Vytautas Zabulis, the founder of SAVY, proposed the idea of creating a peer-to-peer (P2P) lending platform, I immediately agreed. At that time, we were considered rebels, aiming to disrupt the established norms of banking and provide people with the opportunity to participate in the lending business. And so, almost 10 years ago, SAVY was born. Initially, I joined SAVY purely as a financial investor, but for the past three years, I've also been the CEO of this platform. I recently stepped down from the CEO position, which is now held by Danatas Čerjazdanovas. However, I remain in the SAVY group as the Chairman of the Board.

What is unique about SAVY in the digital lending industry?

Audrius Žiugžda: We have developed unique risk management tools and offer investors the widest range of loan products. Apart from personal and business loans, we are the only platform that provides mortgage loans, secured by real estate, to individuals in Lithuania. Additionally, we are the pioneers in Lithuania in introducing a mobile app, which further facilitates investment management and ensures the possibility of earning a constant flow of passive income with just a few clicks.

How much can investors expect to earn on SAVY after delays and defaults?

Audrius Žiugžda: At the end of 2023, the weighted average interest rate of the outstanding loan portfolio was 17%. Naturally, those who started investing on the SAVY platform from its inception were the ones who gained the most. As competition increased over time, the average loan interest rates decreased.

Investing always involves risks and some of the borrowers may be late in fulfilling their obligations. The share of loans that become overdue for more than 90 days amounts to 5.2% of all issued loans. Nevertheless, even if a loan is late, the platform makes every effort for the borrowers to fulfil their obligations over time through clear and verified procedures. As a result, most borrowers who are late to pay eventually start paying their instalments or their loans are collected through legal means. In such cases, investors earn extra by receiving late payment fees.

Since the beginning of SAVY operations, the share of totally lost loans is less than 0.1%, so new investors can expect an average return of 12 -15%, depending on risk appetite, by investing in consumer loans, and 13% on average by investing in business loans. The lowest average return of 9% is offered by mortgage loan investments, but it's also the safest lending product with 0% overdue.

How does SAVY source potential investments and ensure a positive treatment of the borrowers?

Audrius Žiugžda: Our aim is to achieve a balance between borrowers seeking the most favourable terms and investors striving to maximize their returns, and we have successfully managed to accomplish this goal. Even though investors can access information about the loan recipient's age, gender, work experience, education, and income, we uphold the privacy of personal data. This ensures that loan recipients can feel completely secure, knowing they won't receive unsolicited calls from investors.

The platform communicates with late loan recipients, unless they refuse cooperation, leaving no alternative but to terminate the contract and initiate legal measures. Since the beginning of this year, we also provide loan repayment insurance to loan recipients. This additional coverage offers protection by covering payments in the event of job loss, prolonged incapacity due to illness, or in case of death, securing the remaining loan balance up to 25,000 Euros.

How does SAVY manage inherent risk and ensure the security of investors?

Audrius Žiugžda: One of the key advantages of investing in loans is the measurability of risk, as each loan on SAVY is assigned a credit rating that indicates the probability of default. There are a total of 5 credit ratings for consumer loans, ranging from A rating with the lowest risk to E rating with the highest risk.

Investor trust is one of the key drivers of our operations, and thus we transparently provide information about potential investment risks and share statistics. This statistic demonstrates that the share of loans overdue by 90+ days for each rating does not exceed the theoretical probability of default assigned to that rating. Moreover, more than 90% of all issued consumer loans consist of lower and medium risk, i.e., A, B, and C-rated loans.

We assess risk responsibly, resulting in loan approval for only 5% of all applicants. Such a rigorous selection process ensures accurate risk assessment even for participants who, in pursuit of higher returns, accept higher risk.

For those seeking to mitigate investment risk, we offer investing with the Investors’ Fund, which helps reduce investment risk. In case a loan recipient fails to meet their obligations for 90 consecutive days, the Investors’ Fund covers the outstanding loan amount and accumulated interest for the entire 90-day period. The Investors’ Fund is a unique tool in the market and has compensated over 1.1 million Euros in delinquent loans since its inception.

What does it mean for you that SAVY recently acquired the ECSP license?

Audrius Žiugžda: Last year marked a pivotal period for the crowdfunding services sector, as the existing Crowdfunding Law of the Republic of Lithuania will be replaced by the European Union's (EU) Crowdfunding Regulation from November 10th. We are pleased to be among the first platforms to have received the EU Crowdfunding Service Provider License from the Bank of Lithuania.

This license will allow us to operate across all EU member states under the framework established by the recently adopted Regulation (EU) 2020/1503 on a European Crowdfunding Service Provider for Business (ESMA). The harmonized regulatory approach within the EU signifies the maturity of crowdfunding as an alternative financing option for businesses, providing investors with greater certainty when including the business loan asset class in their investment portfolios.

How does SAVY manage the impact of economic fluctuations?

Audrius Žiugžda: Amidst the rise in geopolitical and economic uncertainties, we raised loan interest rates and enhanced risk evaluation to ensure that the augmented returns would adequately offset the heightened risk. These measures reinforced investor confidence, resulting in a significant growth in investor portfolios. The increase in invested funds during the fourth quarter of 2023 averaged more than 700 thousand per month, marking 14% surge in comparison to the 12-month average.

Furthermore, peer-to-peer lending remains an attractive option even in these turbulent times for achieving consistent returns aligned with the associated risk. Investors are presented with extensive diversification opportunities and tools to manage their portfolio returns and risk. Once an investment is made, the interest rates are locked in for the entire duration of the agreement.

Meanwhile, we have grown significantly stronger than before, consistently investing in IT security, placing even greater emphasis on working with borrowers who do not meet their commitments on time and broadening our service spectrum to accommodate the preferences of both risk-averse and risk-tolerant investors.

How do you see the future of Peer-to-Peer Lending?

Audrius Žiugžda: Time has proven the reliability of the P2P platform model. More institutional investors will enter these platforms, and their contributions will increase turnovers and the speed of lending. This will further contribute to the growth of the P2P market share, leading to reduced interest rates and heightened competition with traditional banks for the most desirable borrowers.

On the other hand, we anticipate the increase of individual investors as people become more financially savvy, and investing via mobile application becomes more user-friendly and accessible. Furthermore, we are currently in negotiations with several institutional investors and actively considering expanding operations to European Union countries following our receipt of the new European Union Crowdfunding License.

Where do you envision Savy in the next five years?

Audrius Žiugžda: We believe that we will establish the largest community of investors. This growth will be driven by the ongoing improvement of our mobile application, the introduction of new features, and the broadest loan product offering. Our strategy involves expanding into at least three foreign markets. We will also consider conducting an Initial Public Offering (IPO) to support and drive forward our expansion and growth initiatives.