RE: Price target3 Feb 2021 13:18
That default rate is not high. Also read the below from recent broker note, lots of the defaulted loans are actually paid back.
Aside from the Algorithm, Zaim also screen against several databases, including CBR blacklists, criminal databases (both national and international), and sanctions lists. An important consideration to make is that due to Zaim’s CBR regulated status, any borrower who defaults on a Zaim loan is put on the aforementioned CBR blacklist. Not only are individuals on this list unable to access financial services from any regulated entity, but also forbidden from leaving the country or working in the public sector. Since the defaulting loan needs repaid in order for an individual to be removed from the blacklist, Zaim consistently see customers repaying debts which had been written off, and can therefore count these repayments as extraordinary revenue items for accounting purposes.
In 2018, Zaim reported an 8% default rate for existing customers, and a 38% default rate for new customers. Given that the company has stated a 50:50 split between these two groups, an average total default rate of 23% can be inferred. Whilst this might seem high, the company also reported that 89% of loans issued in 2018 were repaid. Note that this implies 11% outstanding loans in default, and therefore that over half of loans written off as bad debt were in fact repaid within the calendar year. This incentive to repay bad debts, combined with the risk mitigation provided by the Credit Scoring Algorithm, allow Zaim to operate without any use of repossession services or repeat calling to debtors, either of which might be considered uncompliant or a punishable abuse of power upon examination by the CBR.
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