The Dubai-based company that is creating a buzz Beehive has quickly become the UAE’s leading online marketplace for peer-to-peer (P2P) finance since its launch in November 2014. In little over a year it has attracted 2,600 investors who have channelled more than Dhs27 million to more than 55 SMEs.
Described as ‘a mini stock exchange’, P2P financing has existed for about a decade in both the UK and the US, but is a fairly new concept here in the Gulf. The idea is to ensure that SMEs get faster access to lower cost finance and investors get better returns and manage risk by diversifying their investments.
To achieve this, Beehive encourages regionally based SMEs seeking investments of between Dhs100,000 and Dhs1 million to bypass the standard funding route of bigger banks, and to rely on investor funding. Individuals can join Beehive by setting up an account with only Dhs1,000 and can invest from as little as Dhs100 into businesses listed on the platform. Beehive then facilitates the loan agreement between the business and investors, charging a small percentage fee of the loan amount.
Craig Moore is the founder and CEO and he first got interested in the concept after selling his previous business, a software firm. And indeed one of the key aspects to Beehive is its technology. As an online platform it allows investors to gain access to a real-time dashboard of companies, with all the information they could possibly want, including returns, investments and disparities.
“Technology has allowed us to even the playing field. It allows the information to be directly linked to the investor instead of having to go to other people to receive it,” says Moore. “In fact, we have launched an app, which will make Beehive so widely accessible that you won’t even need your desktop. You can simply be on the phone and see what comes on the marketplace. It’s geared towards professional investors.”
“Technology has allowed us to even the playing field. It allows the information to be directly linked to the investor instead of having to go via other people”
Thanks to this level of connectivity, it’s easy to see why P2P lending is a rapidly growing industry. Last year it was estimated to be worth almost $9 billion globally, and forecasted to deliver $1 trillion by 2025. By comparison the International Finance Corporation (IFC) estimates the current SME funding gap in MENA to be approximately $260 billion. There is clearly a need for this sort of service.
But, as expected, not any business can gain access to Beehive’s marketplace. Because the system relies on monthly payments to be made to them, the platform is strictly for established businesses that have been running for two years or more, rather than start-ups. Applicants must pass a risk assessment before being put up on the platform, where they are then visible to a pool of investors. “We have to look at both the qualitative and quantitative data of a company, while also remaining realistic. The strength of Beehive works because we only want reputable business to show up for investors to look at,” says Moore.
With such high levels of access and flexibility offered by Beehive, the platform encourages people to diversify their investments. According to Moore investing as little, or as much, in multiple businesses will make it almost impossible for people to lose all their money.
Craig Moore, Founder, Beehive
So just over a year since its launch, has it been a success? “Many brands have started to recognise the platform, and what you tend to find is that the owners of those businesses are entrepreneurs themselves,” says Moore. “Coffee Planet was our first client and, in the first six months, we were able to fund more than 20 businesses and attract over $500,000 in investment. We have thousands of registrations, and it grows daily. The goal in 2016 is to expand into other territories.”
It makes good reading for Moore and, as he points out, the importance of SMEs in the region is only going to increase as the Gulf steamrollers its way towards the two region-shaping events on the horizon: Expo 2020 and the FIFA World Cup in Qatar, two years later.
“One of the region’s big focuses is job creation,” says Moore. “This isn’t going to come from large businesses hiring 1,000 people, but from 100,000 smaller businesses hiring three or four people. That’s where you get real momentum. Across the region, you have a young and increasingly educated demographic, so we will need the infrastructure to keep their talents and entrepreneurial spirit in the region rather than losing them to other parts of the world.” And at a time when falling oil revenues makes diversification even more critical to growth, platforms such as Beehive have an important role to play in shaping the future.
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For more visit beehive.ae