Fintech is exploding in Russia, albeit from a very low base. bne IntelliNews editor-in-chief Ben Aris sat down with Campbell Bethwaite, the managing partner of Redstone Capital (recently renamed from Finteca) to talk about the sector and its prospects. Redstone is a holding company that has set up a number of fintech businesses in Russia that are seeing exponential growth.
Redstone's lending business, Simple Finance, has already built up an $80mn loan book and is currently extending about $5mn worth of new loans per week by offering credits to SMEs that can’t borrow from Russian banks. The company has already taken in a private equity investment and issued its first $30mn Eurobond in June of this year to fund what is expected to be double digit expansion for the foreseeable future.
The problem Simple Finance addresses is that small Russian companies cannot meet all 12 of the CBR requirements, which require banks to put aside 100% of the loan value as a provision against potential losses. The result is that, despite a government drive to promote the SME sector, banks cannot profitably lend to them.
SimpleFinance can. Using its technology-based platform to assess applications it can make a loan decision in one hour. It is licensed as a micro-finance lender instead of a bank, meaning its prudential requirements are much lower. This means that it is both disruptive, as it takes business from banks, but also complimentary, as banks make a commission when they pass on clients to Simple Finance – clients that are otherwise off limits to them.
And fintech will only grow from here. Simple Finance has a range of financial products aimed at all the different niches that lie outside the competence, or interest, of established banks, yet for which there is high demand.
“Compared to other markets I have worked in around the world, in many ways Russian financial services, in terms of functionality and speed, are better,” says Bethwaite.