Risk And Credit Assessment new

Risk And Credit Assessment

Initial Summary 

 

Beehive is the Middle East’s only regulated peer to peer lending platform, connecting established, creditworthy borrowers with both retail & institutional investors. The platform applies the innovative technology of crowdfunding to eliminate the cost and complexity of conventional finance whilst offering borrowers fast access to low cost finance.

Application Icon

SMEs submit complete loan applications

Beehive performs through risk assessment of application

Approved applications listed on Beehive Platform

 Investors fund loans that fit their risk appetite 

Businesses grow and so do investor returns

Beehive places large emphasis on only listing established & creditworthy SMEs on the platform. To be considered for finance, the borrower must meet certain criteria such as length of business, sector, revenue threshold, and level of debt.

 

Each funding proposal undergoes an extensive internal credit & risk assessment that is supported by robust external verification. To initiate the process, all the relevant financial documentation is collected and then analysed to collate hundreds of data points which are used as part of the final credit report.

Using a proprietary credit scoring database, the data points automatically produce a score that is proportionally weighted to reflect the value of the inputs. This results in a Beehive suggested risk rating being applied to each funding proposal. 

 

Beehive then uses a variety of Application Programming Interfacing (API) integration & customer information to monitor the financials of the borrower over the course of their facility with Beehive. This is to ensure that Beehive keeps up-to-date snapshots of the borrower’s performance throughout the duration of the facility. 

 

Since launching in 2014, Beehive has lent over AED 300 million on 400 SME Requests. The default rate has remained low and currently stands at 1% since inception (This figure decreases to 0.5% if only the last 3 years are considered). As a result of this, investors have been able to achieve a Net Yield of 10%-11% per annum over the past 3 years.

Credit Assessment

The Beehive Credit Team risk assesses each funding proposal based on the borrower’s ability and willingness to repay. Data points are analysed, verified and finally scored with an overall risk weighting. The data points can be summarised into the following three categories:

  1. Repayment Strength
  2. Owner Commitment
  3. The Analysis of External Reports

With a team of experts demonstrating over 10 years of regional credit experience, the financial analysis performed by Beehive goes into more detail than the average Financial Institution in the region and is done to ensure that default rates remain low.

 

Repayment Strength

This is where the Beehive Credit Team will analyse the financial performance of the SME over the previous 24-36 months in order to assess the borrower’s ability to repay the requested capital. Financial strength can be analysed in multiple ways, but Beehive focusses on the following areas:

  • Changes in Profitability
  • Changes in Revenue
  • Liquidity Ratio Performance
  • Working Capital Management
  • Changes in Debt Position
  • Changes in Equity
  • Cash Cover in Bank Statements
  • Repayment History with Beehive & Other Financial Institutions
  • Supplier Repayment Analysis

 

Owner Commitment

Due to the transient nature of the UAE, Beehive places a large emphasis on the background of all SME owners (>5% shareholding). This is done to gauge the commitment of the respective owners to both the UAE and the company itself. To do this the Beehive Credit Team evaluates the following:

  • Do shareholders have family based in the UAE?
  • Do shareholders have children in school in the UAE?
  • Do shareholders own property in the UAE?
  • How much debt do shareholders have in the UAE and how much has been paid off?
  • How much equity have shareholders invested into the business since conception?
  • To what extent are shareholders withdrawing funds from the business?
  • What are the shareholders current credit bureau scores?

 

External Reports

To supplement the internal risk analysis, Beehive uses a variety of established private & public third parties that specialised in the analysis of SMEs across the UAE. These include: 

  • Dun & Bradstreet – Market Leading Providers in Business Information Reporting.
  • Al Etihad Credit Bureau (AECB) – Federal Credit Bureau in the UAE.
  • ABC Criminal – Criminal Check Services in the UAE.
  • Thomson Reuters World Check – Market Leading Screening Reports.

(To pull information from the AECB & Thomson Reuters databases, Beehive uses Robotic Process Automation, which significantly helps to reduce application time and the occurrence of human error.)

 As part of the Beehive Risk Assessment, a mandatory site visit report is completed by a member of the Beehive Credit Team. During the visit, business specific questions will be asked, the working site will be observed, and the management will be interviewed.

 

Risk Bands

Risk A Plus

Top tier funding request 

Supported by a Corporate / Parental Guarantee.

Repayment Strength: Excellent

Owner Commitment: Excellent

Analysis of External Reports: Excellent

Risk A

Top tier funding request  

No Coporate / Parental Guarantee.

Repayment Strength: Excellent

Owner Commitment: Excellent

Analysis of External Reports: Excellent

Risk B Plus

 Repayment Strength: Very Strong

 Owner Commitment: Very Strong

 Analysis of External Reports: Very Strong

Risk B

 Repayment Strength: Strong

 Owner Commitment: Very Strong

 Analysis of External Reports: Strong

Risk C

Repayment Strength: Strong

Owner Commitment: Strong

Analysis of External Reports: Moderate

Risk C Minus

Repayment Strength: Moderate

Owner Commitment: Strong

Analysis of External Reports: Moderate

Risk D

 Repayment Strength: Moderate

 Owner Commitment: Moderate

 Analysis of External Reports: Low