Social Lending | Type, Characteristic and Risk

Social lending funds can be divided into several themes.

This time, we in Loquidity would like to consider what kind of features each theme has. Even if the theme is the same, the content will differ depending on the service provider and fund, so please be careful when investing.

 

Social lending fund theme

First of all, what are the themes of social lending?
I think there are various classifications, but here we divide them according to the investment target as follows.

Domestic business fund
We lend to various domestic businesses such as companies, stores, and restaurants.
The funds are used for starting new businesses, investment funds, working capital, etc.

Domestic real estate
We will lend to domestic real estate related businesses that are engaged in real estate development and renovation. The funds are used for real estate acquisition funds and construction/renovation funds.
Real estate is often set as collateral.

Energy
We will lend to domestic energy-related businesses such as solar power, hydropower, and biomass power generation.The use of funds is for the acquisition of land and facilities for power generation and construction funds.

Overseas business fund
We will lend to various overseas businesses. The funds are used for starting new businesses, investment funds, working capital, etc.

Overseas real estate
We will lend to overseas real estate related businesses that are engaged in real estate development and renovation.
The funds are used for real estate acquisition funds and construction/renovation funds. As in Japan, real estate is often set as collateral.

Overseas personal loan
We will lend to overseas individuals.
However, instead of lending directly, loans are often made through local banks and microfinance institutions.

Domestic business fund
A unique risk is the failure of the domestic business. It is handled by many service providers and banks.

Domestic real estate
Specific risks include falling collateral real estate prices and failure of real estate development.
There is also the risk that the developed real estate cannot be sold as expected and that the building will be damaged by a natural disaster.

Energy
Specific risks include the failure of energy development projects and natural disasters as well as real estate development.
In addition, since the selling price of electricity fluctuates depending on the policy, there is a risk that profits will deteriorate due to the decline.

Overseas business fund
In addition to business failure, specific risks include foreign exchange risk and country risk.
* Some funds are currency hedged and have virtually no foreign exchange risk.

Overseas real estate
Similar to domestic real estate, the unique risks include falling real estate prices, failure of real estate development, real estate sales not as expected, and natural disasters.

There are also foreign exchange risks and country risks.
The service providers we handle include Gaia Funding and American Funding.

Overseas personal loan
Specific risks include foreign exchange risk and country risk.
In addition, because loans are made to multiple individuals, the rate of bad debts is higher than others. (Some funds are designed to be profitable, with the expectation of bad debt at a certain rate.)

 

Conclusion

Some people have a preference for the theme, but be aware that if you are too biased toward a specific theme, you may be exposed to unexpected risks. When choosing a fund to invest in, you have to be aware of the characteristics and risks of each theme based on the content of this article.

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