Japan’s Crowd Bank enters Australia, partners with Zagga
Japanese crowdfunding platform Crowd Bank is venturing into the Australian market in an exclusive funding deal with alternative lending platform Zagga.
The initial investment of up to AU$50M heralds Crowd Bank’s expansion into its third international market, following previous investments in the US and Hong Kong. CrowdBank is the third largest crowdfunding platform in Japan with Funds Under Management of ¥20B (~AU$260M), total loans of ¥116B (~AU$1.5B) and 34,000 investors as at November 2020.
President of Crowd Bank, Mr Hajime, commented, “Australia is a marvelously attractive environment for investors driven by political-stability, government efficiency and a sound fiscal balance sheet, and we intend to invest aggressively in this market.”
”We believe the most important element of success, in terms of finding a good investment destination, is to collaborate with a strong local partner that we can trust. In Zagga, we are partnering with a well-established loan manager with a proven investment track record, good corporate governance, advanced risk management and a focus on transparency.”
Crowd Bank’s investment will further support Zagga’s growth ambitions for 2021, following a strong performance in 2020, which saw AU$162M in loan originations, up 42 per cent on the prior year.
Peter Clare Chairman and co-founder of Zagga, commented, “There is huge opportunity for continued growth in the Australian alternative lending market, which is being recognised by global investors like Crowd Bank. We’re very pleased to be embarking on the next phase of our growth journey with Crowd Bank, and continuing to support Australian businesses with flexible funding to help them realise their own growth objectives.”
Zagga’s funding comes from its growing investor base which includes several financial institutions, investment managers and family offices, and now also Crowd Bank, and also from the Zagga Feeder Fund, an internal ‘warehouse’ that has grown by 40 per cent since July 2020. With a strong and stable funding base, Zagga aims to grow total originiation by more than 33 per cent in 2021, targeting an active book in excess of AU$250M.
Clare added, “We have a flexible platform that allows us to meet a range of needs and is therefore very compelling to many institutional-like investors. In addition to the structure for Crowd Bank, which is tailored to their regulatory needs and structured as a fractional investment trust, we have also outsourced our platform through two white-label arrangements, another key area of growth for our business.”
The Australian alternative lending industry has experienced continued growth throughout 2020, offering a lifeline to many borrowers as traditional banks tightened lending during the pandemic. RBA1 data from September 2020 shows that demand for bank-based finance appears to be low, as the use of non-traditional finance, while still a low in terms of overall funding for SMBs, is increasing.
CEO of Zagga, Alan Greenstein, said, “We’ve seen phenomenal growth throughout 2020, as more businesses turned to alternative finance due to banks effectively closing their doors to many of their existing clients, including SMBs. A large majority of our new borrower clients are those who historically have had long-standing relationships with traditional lenders, but who are increasingly seeking the flexibility, speed and transparency offered by alternatives lenders like Zagga.”
Australia has the largest non-traditional finance market in the Asia Pacific region after China, and the seventh largest globally as of 2018, with 31.6 per cent market share in Asia Pacific, totalling US$1.15B2.
Approximately 60 per cent of funding for finance provided by non-traditional finance entities in Australia is provided by institutional investors, compared with a global average of around 50 per cent1.
“With a strong regulatory framework and competitive returns, the Australian alternative finance market offers an attractive investment for institutional investors and we expect to see growing interest from international players in the market,” Greenstein added.
Since launching in 2016, Zagga has originated almost $400M in loans across more than 100 transactions, offering a range of benefits for borrowers including transparency, flexibility, competitive rates and fast approvals. Zagga’s average loan size is AU$5M, however the lender regularly funds loans up to AU$30M.
Once a loan is approved by Zagga’s experienced credit team, settlement can happen in as little as three business days, in comparison to weeks or even months from traditional lenders. For investors, this means access to solid investment returns with transparent credit metrics and manageable risk, underpinned by a first mortgage over real property.
