A small review on Debitum Network
Debitum Network is a decentralized p2p lending marketplace from Latvia, that started offering business loans to worldwide companies in September 2018.
So far, it managed to finance loans worth a bit over 6 million EUR, and the platform already has more than 3500 investors registered.
The average interest rate for the loans available is 8.5%, and the minimum amount to invest in a loan is 10 EUR.
- Launched: 2018
- Headquarters: Latvia
- Loan types: Business loans, Invoice financing, Trade financing
- Loan terms: from a few days up to 3 years
- Loans funded: 18 million EUR
- Investors: 4700
- Interest rates: 8% to 12%
- Fees: no fees
- Minimum investment: 10 EUR
- Currency: EUR
- Secondary market: no
- Auto-invest: yes
- Buyback guarantee: yes, not on all loans
- Accepts investors from: Europe, Asia
- Bonus: 10 EUR bonus when you invest at least 250 EUR on the platform (with the link below)
How does Debitum Network work
Debitum Network is an ecosystem containing 3 different types of actors:
- Borrowers, which are small and medium-sized companies looking for financing
- Investors, willing to lend money to businesses for an interest rate
- Service providers, offering their expertise in risk assessment, credit insurance and debt collection
Debitum Network puts these 3 types of actors in touch and makes sure borrowers find a credit assessment company when they request a loan and investors rights are protected by a debt collection agency when borrowers can’t/won’t pay their loans.
The platform considers itself decentralized because it uses its proprietary DEB token, with which different actors pay (are paid) for services they receive (provide).
The below process flow taken from their website explains better how this works.
Investing in Debitum Network
The available loans are already pre-funded, and we only see loans offered by loan originators (lending companies). The loan amounts range from a few 1000s EUR to 1 million EUR. The loan terms range from less than a month to up to 3 years. This limit might increase with the addition of new loan originators.
While the minimum investment is 10 EUR, the minimum amount by which you can fund your account is 50 EUR. If you try to add less money to your account, you might get an email from Debitum Network saying that the minimum amount is 50 EUR, but they’ll approve this time your transaction.
All loans available are secured with some assets and most of them come with a buyback guarantee. Depending on the loan originator, some of the loans are bought back while paying back the principal and accrued interest, while others only pay back the principal.
Since the platform is relatively new, there aren’t that many loan originators so far: Debifo (owned by Debitum Network’s founders), Factris, Chain Finance, Trade Backing, Mikro Kapital Romania and Vihorev Investments. These are all loan originators from either Central or Eastern Europe.
The good news is that the platform is constantly growing and adding new loan originators. Aforti Finance only joined Debitum Network in April this year (and left a few months later), Vihorev Investments only joined in August Mikro Kapital Romania joined in November.
The available loans are rated from A to F and based on their credit rating an interest rate is offered. So far, the interest rates ranged from 8% to 12%. You can also check the probability of default on each rating on their page. This is helpful when you want to decide what level of risk you’re ready to take.
One cool thing Debitum Network offers is that borrowers pay a penalty when they’re late with the loan payments. Depending on the loan, sometimes this is lower than the interest rate and sometimes is a lot larger.
Primary market (a.k.a the assets list)
This is how a typical loan on the platform looks like:
I like the extensive details Debitum Network provides on each loan: borrower description, collateral, payment schedule, credit score. Some of the available loans also contain documents attached related to the loan or the collateral.
If you don’t plan to spend too much time on the platform looking for loans to invest in, you can also set up an auto-invest profile and let it do the work for you.
The auto-invest tool is relatively easy to use. You select the credit ratings you’re interested in, interest rates, loan originators, amounts to invest in each loan and loan terms.
Exiting your investment early
This is the biggest drawback when investing in Debitum Network. You can’t exit your investment before the loan matures or the loan originator buys the loan in advance.
Debitum Network has no secondary market or any buyback program.
The DEB token
The DEB token is supposed to fuel the entire activity on the platform and link different service providers in the lending process.
Borrowers need DEB tokens to pay the platform fee, credit assessments and insurance. Investors would pay in DEB tokens a debt collection agency to handle defaulted loans recovery. Since nobody actually uses DEB tokens in real life, the process seems rather artificial. Borrowers use fiat money to buy DEB tokens and pay credit rating agencies. Credit rating agencies don’t receive DEB tokens, because they’re converted back to fiat money when they withdraw their earnings. And so on.
Debitum Network did an ICO at the height of the crypto craze in 2017. It managed to raise 20.000 ETH (16.5 million USD at the time). Since then, crypto prices collapsed, and a token bought at the time of the ICO with 0.1 EUR collapsed to 0.003 EUR at the beginning of 2019. As you can imagine, ICO investors are not too happy right now.
The selling point of the DEB token was that as the platform grows, more and more DEB tokens will be used, and the limited supply of tokens would make its price increase. So far, it doesn’t seem to be the case.
It doesn’t help that DEB tokens are only available on a few platforms like Kucoin or Latoken.
If you’re interested in the token, you can read more about it on their whitepaper. (They used to keep a link to it on their site. Lately, they’ve removed it and it looks like they’re trying to distance themselves from their early ICO days). Frankly, I’m waiting for them to forget the blockchain hype and just build a proper and safe platform to invest in.
Summary on Debitum Network
Debitum Network is certainly an interesting platform if nothing else. Its use of the DEB token to help decentralize the activities involved in the lending process could make it a great platform in the near future.
It does offer buyback guarantees on most of its loans, and this makes it at least a safe platform to invest in. While the advertised returns are not as high as others promised by platforms like Monethera, Wisefund or TFG Crowd, it’s still a good platform to diversify your portfolio.
It is still small, with around 3500 users, and it needs to invest a bit more in marketing in order to get more investors to the platform.
The major drawback of Debitum Network is that it doesn’t have a secondary market or any other way to exit your investment before the loan matures. One other drawback is that the amount of loans is relatively low, and the low number of loan originators makes it difficult to have a diversified portfolio here.
For now, I’m playing around with 500 EUR invested in about 15 different loans and monitor how they perform. I’ve started with Debitum Network in April, and while the interest rates offered are not great, they seem more sustainable long-term and all the payments come in time. My annual return in November was 10.21%, a number I’m happy with.
If you wish to try out Debitum Network, you could use my referral link and win a 10 EUR bonus when/if you invest at least 250 EUR on the platform.