A fund that helps lenders in the event of delayed repayments and defaults
GenieShield is a new initiative for lenders’ protection offered by Crowd Genie. Its primary purpose is to help ensure that you receive exactly what you’re expecting - on time.
It is probably the first provision funds launched by a crowdfunding platform in Singapore, and possibly in South-East Asia.
GenieShield can be used to advance funds to lenders in the event of a delay in repayments or default from the borrowers. This helps to buffer the impact on the Lenders’ expected returns due to delays or defaults by borrowers.
All the funds are kept in a segregated reserve fund that is managed by our Escrow Agent. This provides the assurance to our lenders that funds are ring-fenced and cannot be used for any other purpose.
GenieShield is not an insurance product or guarantee to safeguard your potential investment losses.
Your capital is at risk, as with all forms of investment.
The decision to advance funds from GenieShield is subject to the availability of funds in the Genie Shield and is at the sole discretion of Crowd Genieshield's Directors.
Please read our Risk Disclosure statement for more details.
Benefits of GenieShield
- Potential for lenders to get back the Principal invested in the event of a default
- Securing higher returns for lenders, by minimizing the delays in repayments
Challenges in Lending
Small and Medium sized enterprises (SMEs) in general, are very vulnerable to slight changes in business environment and payments from their vendors. They do not have the cushion of bank credit lines, and access to short term funds, that a large corporate might have.
Therefore, when they borrow from crowdfunders, such as www.crowd-genie.com, there is a higher risk that some repayments might be delayed or in the worst case there may be a default.
Currently, in the Singapore and South-east Asian market, most crowdfunding platforms would typically invoke the personal guarantees of the Directors in the event of delay or default, but resolving this through court is often expensive and time consuming.
The longer the duration a lender does not get back his repayment, more his Rate of Return decreases.
Therefore, we are introducing GenieShield, to minimize the loss of returns by the lenders in the event of delays or default.
GenieShield funds can be used in the following scenarios:
- Default: If repayment is not fully paid 120 days past the due date
- Delayed payment: If repayment is delayed by 21 days past the due date.
If the instalment is not paid for more than 21 days past due date
GenieShield advances payment, both Principal and Interest to lenders, while repayment is expected from borrower
If the instalment is not fully paid for more than 120 days past due date
Crowd Genie advances payment of the Principal outstanding to the lenders from GenieShield
In the event of a delay in payment, or if committee formed by Crowd Genie Financial Services Pte. Ltd. believe that the borrower will default, the GenieShield Committee may make a claim to GenieShield on behalf of the lenders. They will inform the Escrow Agent to advance the funds to the lenders.
As the above scenarios show, in the event of delayed payments, the expected repayment, both Principal and Interest, will be advanced to the lenders; and in the event of expected default, the outstanding principal may be advanced to the lenders. The decision to advance funds from GenieShield is subject to the availability of funds in the GenieShield, and is at the discretion of the GenieShield Committee.
Impact on lender returns
To see how it helps Lenders, let’s take (a) Default Scenario, and (b) Delayed payment...
(A) Default: If the full installment is more than 120 days past due, then Crowd Genie’s Directors may use GenieShield to pay the Lenders the total outstanding Principal.
From the table below, in the event that say the borrower pays for 6 months, but does not pay the remaining 6 instalments, without GenieShield the Lender would lose 47% of their invested capital, while with GenieShield, the Lender would still make a return of 3%.
(B) Delayed payment: If the instalment is more than 21 days past due, then GenieShield can be used to pay the Lenders the expected installment, while Crowd Genie continue its debt collection effort on the borrower. By advancing fund from GenieShield, the Lenders’ loss of return is reduced.
As seen from the below table, if a Lender is expecting 12% return on a loan over a 12 months duration, then if the borrower delays payment by 45 days, the Lenders’ effective return falls to 10%.
|No Delay||45 Days Delay|
|Loan Amount||S$ 100,000||S$ 100,000|
|Lenders’ Effective Return||12.3%||9.9%|
(Note: Loan amount: S$100,000 for 12 months, at 12% interest rate)
What happens when funds are recovered from borrowers or borrowers catch up on their repayments?
The money in the GenieShield comes from charges paid by the borrowers. Every time a borrower repays, a certain risk-adjusted charge is paid into GenieShield.
The risk-adjusted charge is paid into GenieShield at the time the loan is established or over the life of the loan (or a combination of both).
For initial establishment, Crowd Genie will be depositing funds into GenieShield. Moving forward, GenieShield will be built up by monthly contributions from each loan made. In the event that GenieShield gets exhausted due to previous default cases, no advance will be given out until GenieShield gets refilled either by:
- Monthly contribution of new loan made, or
- Debt recovered from past delinquent borrower for which GenieShield had made advances to lenders towards repayments.
GenieShield is part of multi-faceted approach to protect the interests of all members on Crowd Genie.
1. Meticulous Credit Underwriting
Our team of credit assessment experts make sure only the most creditworthy borrowers are approved. During due diligence, we evaluate multiple parameters including:
- Borrower financial checks – including industry assessment, cash flow and profitability checks
- Credit checks - we perform multi-bureau credit assessments
- Identity checks - we use sophisticated software to verify borrower identity
- Fraud checks – we use fraud prevention software
All available information on the borrowers and guarantors are assessed and shared with our lenders, which include credit score, clientele base, products list and cashflow in bank.
2. Crowd Genie Directors Investment:
Crowd Genie’s Directors co-invest in each listing alongside the lenders to ensure that there is our “skin in the game”. Therefore, our interests are aligned with those of the lenders and we want to make sure that only borrowers who pass our strict due diligence can be listed on our platform.
3. Personal Guarantors
All loans on Crowd Genie platform have personal guarantee from the borrower company Directors. Our team will conduct a scrutiny screening and due diligence on the personal guarantors as well, which include reviewing their personal credit history, loan facilities, gearing ratio, annual income etc. By doing so, we ensure that personal guarantors’ financial position is healthy as they are the ones who will be assuming the repayment obligation should the borrower go delinquent in its repayment obligations.
On our platform, a wide range of listings are available. All listings are different in terms of industry, clientele base, guarantors’ profile and more. Hence, we always encourage our lenders to diversify their investment across various listings to greatly reduce risk of default. Although the likelihood of both the borrower and its guarantors going bankrupt is very low, it is always a good practice not to put all eggs in a single basket.
5. Structured Debt Recovery Management
We have a debt collection agency for debt recovery purpose, on record. The agency has more than a decade of experience in debt recovery and holds a good track record in providing debt collection services. In the worst-case scenario, Crowd Genie will take legal action.
Frequently Asked Questions [FAQs]
Q1: Are loans guaranteed by GenieShield?
A: No, GenieShield will not act as a guarantor for any loans advanced by the lenders. It is subjected to the availability of the funds in GenieShield and the discretion of GenieShield Committee. Once it gets exhausted, there will be no pay outs for delayed repayment or default listing until it gets refilled through the two channels mentioned above - assignment from each new loan amount and debt collection effort.
Q2. In the event of delay or default, does Crowd Genie take over the loan from the lenders?
A. No, the Promissory Note remains between the lenders and borrowers, as originally signed. Crowd Genie does not take over the loan.
In the event of a delay in payment, or default, GenieShield Committee may choose to give an advance to the lenders from GenieShield, subject to availability of funds in the GenieShield.
In such a scenario, the ownership of the Promissory Note does not change; it still remains between the borrower and lender who had originally invested in the loan.
Q3. Will the funds always be released in the event of delay or default?
A: No, funds will be advanced from GenieShield at the discretion of the GenieShield Committee and subject to availability of funds in Crowd Genie. In the event your funds are matched to the loan that is delayed or expected to default, GenieShield Committee will decide on the quantum of GenieShield to be released. You may not be fully or partially compensated for a number of reasons, including:
- Crowd Genie may elect to not make a claim or make only a partial claim to the GenieShield;
- GenieShield may not have sufficient funds to provide you with any advance;
- The likelihood of the borrower repaying the late payment or default in near future; or
- Expected future claims to the GenieShield funds from on-going loans.
Q4. How does GenieShield ensure that funds are segregated and available?
A: Funds of the GenieShield are kept in a segregated account with Crowd Genie’s escrow agent. The escrow agent is a Singapore-registered Trust Company.
Additionally, the assets of the GenieShield do not form part of the assets of Crowd Genie Platform.
Finally, the money in GenieShieldis held in cash, or fixed deposits only. Any interest earned on the money over and above the fees of the trustee is retained by GenieShield. Crowd Genie has no beneficial interest in the capital or income of GenieShield and it cannot use these monies for its own purposes.
Q5: Is there a premium that I have to pay for GenieShield protection?
A: The GenieShield is funded by borrowers, lenders do not pay for protection. The risk-adjusted charge is paid into the GenieShield fund from monthly repayments or initial charge (or a combination of both).
Q6. Would the borrower have to enter into any agreements with the lender in relation to the loan?
A: Yes, the borrower and lender will sign a Promissory Note at the time of concluding the loan from the Lenders, which will record binding terms and conditions governing the loan (“Promissory Note”).
Q7. What happens in the event of default by the borrower and inability to repay the loan?
A. In the event of a default, that is non-repayment of installment for more than 120 days past due date, Crowd Genie may use the GenieShield to advance the outstanding principal to the lenders. In parallel, we work with debt collection agencies and legal teams to recover funds from the borrower.