Mintos Risk Score Review
Mintos Risk Score is the new risk assessment rating system for loan originators that has recently been introduced by Mintos. This new rating system aims to give you a better tool to access the risk with every lender. However, is this accurate, or is it just another way to promote low-quality lenders?
Let’s find out.
Watch the full review about the Mintos Risk Score here:
Mintos Lender Ratings
Before we jump to the new Mintos Risk Score, let’s briefly review the old Mintos ratings, so we have a good idea about the differences.
Mintos lender ratings were introduced back in 2018, and it should have helped investors make more informed decisions.
The rating system scored every loan originator according to the following variables:
- Financial statements
- Market position
- Debt collection
- Loan portfolio quality
- Experience in the management
- Regulatory environment
This Mintos rating system should have also taken into account the outcome from meetings with the loan originators.
The result was a rating that should represent investors' risk by investing in loans from those lending companies.
The problem with this score was that it hadn’t been regularly updated. Mintos was growing, and the monitoring of lenders wasn’t the top priority.
The result was the suspensions of seemingly “great” (B-rated) lending companies.
As of today, there is €88 M of investors’ money in recovery.
Many investors have lost trust in Mintos as the P2P marketplace failed to protect investors’ interest.
Mintos needed to come up with a new way to revive the old and heavily criticized rating system.
The result:Mintos Risk Rating
Mintos Risk Rating Explained
Mintos has decided to ditch the letters but rate the lending companies on a scale from 1 to 10. The total score consists of four subscores, which are weighted according to their significance.
You can now view the ratings for individual subscores on the loan originator page.
If you are wondering what every subscore means, don’t worry, Mintos is sharing some additional information that will help you better understand the subscore calculation.
1. Loan Performance Portfolio
The subscore for the loan portfolio performance is determined by the:
- Loan portfolio quality
- Historical and current loan repayment trends
- Historical and current loss rates
- Issuance volumes
- Track record seniority
- Product characteristics (e.g. liquidity of the collateral)
What does it mean?
Mintos is looking at the default rate of the lenders’ portfolio and the volumes of loans the lender is issuing. The P2P marketplace claims to look at historical and current data when evaluating portfolio performance. Mintos, however, does not disclose any concrete KPIs or metrics to calculate this score.
2. Loan Servicer Efficiency
The subscore for the loan servicer efficiency is determined by:
- Business procedures, compliance, and quality control
- Company’s management and internal risk controls
- Loan administration structure and processes
- Management of non-performing loans
What does it mean?
This subscore represents the valuation of the lenders’ internal systems. It looks at how the lender controls the loans’ quality and whether the company is compliant with the law.
3. Buyback Strength
The subscore for the buyback strength is determined by:
- Financial profile, performance, and projections
- Management experiences
- The business regulatory and legal environment
- Diversification of revenue streams and geographies
What does it mean?
In this category, Mintos is looking at its partners’ financial performance and whether they are meeting the projections. The experience of the management team and the regulatory environment also impact the buyback strength of individual lenders. Again, Mintos is not disclosing any concrete metrics.
4. Cooperation Structure
The subscore for the cooperation structure is determined by:
- Access to borrower-related cash flows
- Recoverability potential based on the legal setup
- Transparency of cooperation structure for investors
What does it mean?
This section evaluates the setup between Mintos and its partners. It seems like Mintos does not have a standardized contract with every lender but rather individually negotiated contracts with different rights, which may or may not be favorable for investors.
New Rating Scale
As you have already noticed, Mintos has ditched the letters and introduced a numerical scale from 10 to 1, where 10 represents a low-risk investment, and 1 stands for high-risk investments.
In the graphic below, you can learn more about what every score stands for.
In the latest blog post on Mintos, the P2P marketplace claims that the new risk assessment models are not comparable to the old Mintos lender rating system as it’s based on different methodologies.
We agree with this. It’s indeed very different and certainly more eye-opening.
What does Score Withdrawn (SW) stand for?
Mintos is adding one more “score” into this scheme. Lenders that are scored with the icon SW are either suspended or defaulted companies.
This “score” is also used to flag lenders that had not lent money on Mintos for an extended time (no funding volumes).
As we write this review of the Mintos risk score, the new scores have already been rolled out to all lenders. Mintos promises to update those scores on a quarterly basis.
You can view the full list here.
Mintos’ list of lenders consists of 112 lending companies if we consider the individual countries in which lenders operate. Out of this list, 18 lenders have the status defaulted, and 12 lenders have 0 exposure on Mintos, which means that they are not listing any loans on Mintos.
Analyzing the Mintos Risk Score
Let’s look at what we can learn from the score that Mintos assigned to individual lenders in every country.
Loan Portfolio Performance Findings
In this section, we learn that lenders that operate in Spain have a significantly lower score than others.
The number next to the lender represents the subscore. Every lender has an assigned status: active, suspended or defaulted.
- Creamfinance ES (5 - active)
- Creditstar ES (3 - active)
- Dineo Credito ES (3 - active)
- Firefox ES (SW - active)
- ID Finance ES (5 - active)
We can see a similar trend for lenders from Indonesia and Ukraine.
- DanaRupiah ID (SW - active)
- JULO ID (SW - active)
- Kredit Pintar ID (6 - active)
- Pinjam Yuk ID (4 - active)
- Cashwagon ID (SW - defaulted)
- Akulaku ID (SW - suspended)
- SOS Credit UA (4 - active)
- E Cash UA (3 - active)
- Alexcredit UA (SW - defaulted)
- Finko UA (SW - defaulted)
When evaluating the risk within this subscore, you can tell that investing in lenders from Spain, Ukraine, and Indonesia is not the “safest” investment strategy on Mintos.
Loan Servicer Efficiency Findings
Mintos has rated all active lenders within this segment with a score of 6 or higher. The loan originators that received a rating of 6 are GFM KZ, Pinjam YUK ID, Sun Finance VN, E Cash UA, Dinero MX.
This row tells us that Mintos evaluates the internal procedures, compliance, and other relevant aspects of all active lenders as “good” or “very good.”
Buyback Strength Findings
The loan originator with the lowest score of 4 is E Cash UA.Dinerito MX and ExpressCredit NA are the only two lenders that scored 5 within this segment.
Cooperation Structure Findings
This is probably the most interesting category. Most of the lenders on Mintos scored below 5, which means that Mintos rates their legal cooperation with lenders as highly-risky.
There are less than ten loan originators that received a score of 6. No lenders were able to receive a higher rating within this category.
As most lenders within this segment received a higher-risk subscore, Mintos won’t be able to recover your money in a “swift manner.”
What does it mean:
- Mintos does not have direct access to the repayments from the borrowers and must rely on the lender to transfer the funds to Mintos
- There is no alternative servicer who would take over the servicing of the claims against the borrowers
- Legal actions will take a long time
If the lending company refuses to fulfill its obligations, you, as an investor, won’t have proper legal protection.
Just have a look at how Mintos rates its cooperation with other lenders. An interesting observation from this view is that the majority of those lenders are also lending money on other marketplaces, which means that it’s likely that they are excessively using P2P marketplaces to fund their loans.
Main takeaways from the Mintos Risk Rating
- The new Mintos rating system is more transparent than the old Mintos Lender Ratings
- The cooperation structure between Mintos and lending companies is rather very weak
- The rating system adds more complexity for investors
- Mintos has not shared more details about individual metrics and KPIs that are being used to calculate the subscores
- Mintos has not revealed information about why certain subscores are weighted with 40%, 25%, or 10%
This in-depth review of the new Mintos Risk Rating should help you to understand this particular feature better. If you want to know how to use it when adjusting your Auto Invest, head over to our Mintos Auto Invest Guide, where we dive even deeper into this topic.