AECM Seminar 2014 – ISTANBUL Assemblée Générale – 16 octobre 2014

New products :

Crowdfunding : Where to position guarantees?

Michel COTTET, Managing Director of SIAGI, France

Crowdfunding

Assemblée Générale AECM - ISTANBUL - 16 octobre 2014 Le CROWDFUNDING - Michel COTTET 2

Crowdfunding, 5 segments of market

3 non speculative models

Free donation

1.2 bn €

2 speculative models

Social Lending

(no interest)

1.1 bn €

Donation with reward

0.8 bn €

Peer to peer lending

(with interest)

1.4 bn €

Equity

0.15 bn €

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A fast growing market x4 in the next 2 years

2012

• 536 platforms

• 2.2 bn € collected

• 1.1 million projects

• 72% North America

• 26% Europe

2013

• 800 platforms

• 5 bn € collected

• 2.2 millions projects

2015

• 20 bn € collected

2020

• 1 000 bn € collected

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The French market

2012

• 25 platforms

• 22 M€ collected

• 17 500 projects

2013

• 75 platforms

• 80 M€ collected

• 50 000 projects

2020

• 2.2 bn€ collected

• 1.5 bn € Peer to peer lending

• 1% of the French savings market

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Peer to peer model : « the funding circle » UK

Created in 2010

5 500 enterprises financed

32 000 lenders

390 M£ cumulative lends

100 M£ over the last 6 months

From 5 000 £ to 1 M£

Interest rate up to 10%

5 Years monthly repayment

Fees up to 4%

6 Assemblée Générale AECM - ISTANBUL - 16 octobre 2014 Le CROWDFUNDING - Michel COTTET

The French crowdfunding regulation

2013/06 position from the supervisors (both savings and banking)

2014/02 public announcement from the Government

2014/05 publication of the 1st Order (ordonnance)

2014/09 publication of the implementing legislation

2014/10/01 the status comes into force

7 Assemblée Générale AECM - ISTANBUL - 16 octobre 2014 Le CROWDFUNDING - Michel COTTET

The French framework for lending

A new type of body: IFP (Participative Finance Intermediary)

Another body for equity as CIP (Participative Investment Advisor)

Light regulation

• Listed on a register of insurance intermediaries

• Manager professional skill

Double Limits

• Max 1 M€ by project

• Max 1 000 € by project by person

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An example of criteria

Target : very small and sme’s

Minimum 2 balance sheets

Growth project including working capital

Maximum 5 years

Interest rate from 4% to 10% according to an internal rating (before taxes and losses)

Up front fees 4% on the capital

No collaterals

30 days to collect funds from the crowdfunder

3 days to provide funds to the enterprise

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The potential role of a mutual guarantee society

Secure lenders

Secure borrowers

Secure the transactions

Secure the platform ?

10 Assemblée Générale AECM - ISTANBUL - 16 octobre 2014 Le CROWDFUNDING - Michel COTTET

Secure lenders

Datas • Verify the informations and the sources of information from the

borrower • Verify the consistency of the datas

Analysis of the project • Cross referencing with external datas • Assessment process

Risk mutualisation • Diversification • Selectivity rate

Flows collections • To be allocated to the enterprise • To be allocated to the project of the enterprise • To be allocated to the lenders (interest, capital, unpaid collection)

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Secure borrowers

Protection of datas

Confidentiality of transactions

Adequacy between enterprise, project and type of financing

Adequacy between costs and return on (E, I etc..) ?

Preliminary advices ?

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Secure the transactions

Individual basis

Collective basis

Proportional losses

First losses

Losses in excess

Collaterals

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Secure the platform ???

Risk of reputation

Legal prosecution from lenders and borrowers

Insurance

Money laundering

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Guarantee positioning

Opportunities

• Fast growing market

• Unlimited resources (apparently)

• Securing transaction

• New type of mutualisation

• Revenues

• Bank complementarity

• Technique of securization

Threats

• Low volumes, low unit size

• Fragmented market

• Poor sensibilisation to risk

• Diversification vs Mutualisation

• Costs

• Bank generalization

• Finance generalization

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Agenda SIAGI

Understand the model

• Work on the inside

• Participate in the risk policy, in the individual decisions…

Create an appropriate guarantee scheme

Encourage « cross-financing »

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Thank you for your attention.

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