It’s challenging enough to establish yourself in a disrupted industry as a start-up, but an even bigger challenge when your industry is taking baby steps in your region.
Ieva Ozolińa-Bērzińa said that unlike platforms operating in Western Europe, Twino had to market itself in an area unfamiliar with the peer-to-peer concept.
“In Latvia, unlike Western Europe where peer-to-peer lending has been around for six to eight years, it is a new idea here.”
That meant trust was as issue, Ms. Ozolińa-Bērzińa said. Twino, which was developed by FinaBay, knew from the FinaBay experience they would have to earn that trust.
So Twino introduced a loan buyback program where they purchase default loans, a move Ms. Ozolińa-Bērzińa said has attracted investors from more than 15 European countries.
“The buyback program protects the safety of the investor. If they don’t trust, they won’t invest.”
The guarantee understandably plays a central role in Twino’s marketing campaign.
“We won’t become big with regular marketing activities,” Ms. Ozolińa-Bērzińa explained. “We had to offer something more.”
That buyback will be a key part of Twino as it shifts away from lending and toward becoming a peer-to-peer marketplace, a transformation beginning in earnest this week.
Twino users will now be able to invest in FinaBay loans made to borrowers in Latvia, Poland, Czech Republic, Georgia, Denmark and Russia. Ms. Ozolińa-Bērzińa said in the three months the platform has been live, Twino investors have displayed a strong appetite for investing in high-quality loans with no risk class.
While the loans used to be assigned a risk class, Ms. Ozolińa-Bērzińa said they will now be differentiated by length and interest rate.
Latvia was hit hard by the recession, Ms. Ozolińa-Bērzińa said. People lost both their money and their trust in the biggest banks. They feared the banks would themselves go bankrupt.
“We have a saying in Latvia that it is better to put your money in a sock.”
This proved fertile ground for a host of startups that took advantage of the post-crisis mindset to develop new business models, she explained.
And those creative minds are necessary if the Latvian economy is to grow, Ms. Ozolińa-Bērzińa said.
“Because Latvia has few natural resources and a small population we have to promote our people. We have many beautiful minds behind startups in the Baltics. Take Skype in Estonia and AirDog in Latvia for example.”
“And hopefully Twino.”
Latvia has experienced a pair of momentous shifts in the past quarter-century, starting with the fall of the Soviet Union which was the first step in the country’s transition to a free market economy.
“As Latvia entered into the free market, people felt insecure. Many lost money in banks that went bankrupt.”
There was a transition period as the legal system was being rebuilt but corruption has been reduced and a safer business invest climate has developed, Ms. Ozolińa-Bērzińa said.
Because the Euro zone is so connected everyone feels the effect of the troubles plaguing Greece, Spain and others to the west, Ms. Ozolińa-Bērzińa explained, while adding the economy is stagnant and has yet to return to health.
That hurts the smaller countries, she said.
“Our economy is so small, unlike Germany’s or the United Kingdom’s. We feel every bad change.”
Many feel traditional finance tools have nothing left to offer, she added. Banks are not providing loans and new businesses struggle to establish enough history to even attempt to pursue such long shots.
Sound familiar America?
Ms. Ozolińa-Bērzińa said Twino and fellow platform Mintos are establishing a Latvian peer-to-peer association to further build credibility for the nascent industry. Like platforms across the world, she acknowledged the move will help address concerns of both investors and regulators.
“We are both pro-regulation, though if you look at England’s history, the industry regulated itself.”
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