Afranga Review

April 26th, 2021
6 minutes read
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A new platform from a Bulgarian loan originator with high advertised interest rates

FAST FACTS

Launch Date2021
Total Investment Volume€700k+
Average annual interestUp to 18%
Minimum Investment€10
Investment FeesNone
Who’s eligible to investEU/EEA residents
Investment TypePersonal lending
Secondary MarketNo
Auto Invest FunctionYes
Investor ProtectionBuyback Guarantee
CurrenciesEUR
Website LanguageEnglish

PROS & CONS

Pros

  • High advertised interest rates
  • Loan originator with a decent track record
  • Skin in the game

Cons

  • High expected risk and elevated expectations
  • Very limited diversification
  • No early-exit option

Pros Explained

  • Afranga advertises “up to 18%” annual ROI, and if it can deliver what it’s promising, this could give them a strong competitive edge. But there are some red flags. As of now, all loans available on the platform offer 16.8% interest rates, which doesn’t quite match the promised ROI. One explanation could be that Afranga calculates compound interest into the advertised 18%, which would be a really bold move.
  • Although the platform itself is new, Afranga offers loans from a well-established loan originator – Stikcredit, which launched in 2013 in Bulgaria and has since issued over €30 million worth of loans. Stikcredit also offers a good level of transparency and has performed well financially, even amidst the COVID crisis – you can check out their 2020 financial statement and 2019 annual report for more details.
  • Stikcredit keeps 10% of every loan on its balance sheet – a practice referred to as “skin in the game”. This is always good news as it helps to ensure that the incentives of loan originators and investors are aligned.

Cons Explained

  • High returns inevitably mean high risk. In this case, you need to add high customer expectations to this equation. Afranga seems to be pursuing quite an aggressive campaign to draw its customers to the new platform through an advertised over-ambitious 18% ROI, a generous referral programme (see below) and interest rates considerably higher than Stikcredit used to offer on P2P lending marketplaces (16.8% vs 12-15%). This strategy seems to be working so far – Afranga funded over €700k worth of loans in just slightly more than a month. Although questions must be posed about the sustainability of such a business model – I won’t be surprised if this is just a short-term strategy, and they correct the rates once their new site has grown.
  • Afranga doesn’t allow for much diversification in any key aspect from geographical market to loan type to credit rating or interest rate.
  • Afranga says it’s working on introducing a secondary market “very soon”. As of now, to cash out, you need to wait until your investments mature, which can be up to two years.

Who is behind Afranga?

Afranga is another example of the visibly growing trend for loan originators to leave large marketplaces. Stikcredit still lists its loans on Viventor and Bondster but withdrew from Mintos when establishing its own platform. Creditstar’s Lendermarket adopted a similar strategy last year.

So, what do we know about Stikcredit? It has operated on the Bulgarian market since 2013 via its retail network, but since 2017 it has been increasingly shifting to online presence. In 2018, it joined Viventor and Bondster, and in 2019 – Mintos. Their financial results have been quite impressive, and the profits have grown even throughout the tough 2020 (€2.3m compared to €1.7m in 2019 and €0.9m in 2018). Viventor’s decent B+ rating also reflect its good performance. Finally, peeking into the future, Stikcredit signals its bold plans for expansion by both further market penetration in Bulgaria and the entry to foreign markets in Albania, Macedonia and Kosovo. This could become a nice diversification option for quite uncommon yet appealing markets.

The people behind the platform remain somewhat mysterious. Both Afranga’s and Stikcredit’s “About us” pages list only a few team members with little or no information about them, which is an unfortunate defect on their otherwise good transparency. Nonetheless, it looks like Afranga’s COO Yonko Chuklev has quite an impressive track record in finance and investment management.

What does Afranga offer?

You can invest in two kinds of personal loans:

  • Payday loans of €50-€400 that last from 5 to 30 days and involve a single repayment at maturity.
  • Instalment loans are granted for between €100 and €2,500 and last 3 to 24 months. They are repaid at equal monthly instalments.

At the time of writing, though, only instalment loans are available.

How much can you earn?

Having just launched in February 2021, Afranga can’t provide any data on its past performance, so estimating the realistic ROI remains elusive. Currently, all listed loans have an interest rate of 16.8%, so this is roughly what you can expect to make given that the provider honours its buyback guarantee. This is higher than for Stikcredit’s loans listed on Mintos, where interest rates used to be “up to 12%” or on Viventor, where the average interest is 15%.

Additionally, you can cash in a bonus of up to €500, which you can receive by inviting a friend into the platform. You will get 1% worth of your friend’s invested funds in the first 30 days from registering their account.

Who is Afranga best for?

Investors who seek above-average returns could definitely give it a try. Afranga can also potentially become a good diversifier in any P2P lending portfolio, especially if it 1) proves that it can deliver on its high promises and 2) improves diversification – the planned expansion into other Balkan markets seems a particularly interesting option.

How to invest on Afranga

Opening an account takes less than a minute, and you’re not required to submit any documents until you decide to invest. To verify your account, you will need to upload a copy of your ID – then you can add funds and start investing. You can either pick the loans manually or use the auto-invest function to “create different strategies tailored to your investment goals”. I’m not sure how you can design those various strategies, given all available loans are pretty much the same in terms of loan type, interest rate and origin. Nonetheless, automating your investment is probably the way to go on Afranga.

Summary

Afranga sets the bar quite high for itself. Advertising exceptionally high returns, setting interest rates way above what they (Stikcredit) used to offer on other peer-to-peer lending marketplaces, and introducing a generous referral scheme seem to be working well as an aggressive entry strategy. It’ll be interesting to track what happens next – will Afranga slowly tune down the interest rates as the platform grows? Or will it manage to keep such an incredible offer over the long term? Time will tell!

Methodology

At P2PMarketData we are dedicated to providing unbiased reviews of peer-to-peer lending, real estate crowdfunding and crypto lending platforms. Among other, in our mission to bring more transparency to the market we closely monitor and track over 70 platforms funding volumes.

When reviewing an alternative investment platform, we consider a variety of factors such as:

  • Number of investors
  • Minimum investment requirement
  • Historical annual returns
  • Diversification opportunities
  • Reinvestment opportunities
  • Educational and informational offerings
  • Platform fees
  • Total capital invested
  • Features (such as secondary market and automatic investing)
  • General transparency (the difficulty of finding who the owners are, how they make money on the platform (fees), terms & conditions and more)
  • Management team

We also look into the company’s online reputation (for example customer reviews, news, complaints, average monthly searches and social media).