Are all Mintos loan originators audited?

About a month ago there was a discussion in Telegram and CEO of Mintos made a bold claim - that all Mintos loan originators are audited. Is that really so? I checked.

Here are the things I looked for:

  • Are financial reports in English?

  • Are they audited by reputable auditors?

  • Are the reports audited according to the International Financial Reporting Standards (IFRS)?

  • How often are financial reports published?

To make a comparison, I also came up with a simple scoring system: for each “yes” or a positive sign I assigned 1 point. An additional point was given, if loan originator is publishing their financial reports at least twice per year.

50% are audited by reputable auditors

Here are the results:

  • 41 Mintos loan originators are audited by reputable, international auditors

  • 12 Mintos loan originators are audited by less reputable auditors

  • 18 Mintos loan originators have reports for 2019, but they are not audited

  • 13 Mintos loan originators don’t even have reports for 2019

Of course, some of these loan originators are suspended or defaulted, so no reason to wait for an audited report, but still - the overall quality of reporting is quite bad. Only 7 loan originators got the highest score:

Why is this important?

There are couple of reasons why investors should care about the quality of financial reports:

  1. If you cannot trust the data, then why even consider investing in such a company? A bad example was set by Creditstar and Capella Consulting OÜ.

  2. If a loan originator does not share financial reports or they are not audited by reputable auditors that shows a very relaxed attitutude to investors. The so called “dumb money“ won’t read them anyway, but do you want to be part of this group?

  3. If audits are done according to national accounting standards - the financial performance of a company might look better in some cases. If IFRS is used, you can compare the numbers across different companies and different countries.

Potential investment strategy: “Avoid junk”

Most of Mintos loan originators are extremely speculative and some of them even act in bad faith (Capital Service, Rapido Finance). If a loan originator runs into issues and refuses to cooperate, there is not much that Mintos can do - lawsuits take years and the longer the process goes, the less likely to recover anything.

For example, Eurocent ceased its operations in 2018, but even in 2020 Mintos is still waiting for Polish Court to approve the creditor list. Eurocent expected recovery = 0%. Right now there are € 96 million at elevated risk from suspended or defaulted loan originators: Finko, Kredit24, Dziesiatka Finanse, Cashwagon, GetBucks, ExpressCredit, Akulaku, Capital Service, AlexCredit, Extra Finance, Monego, Rapido Finance, Aforti.

Current estimate is that 40-50% from that will be recovered, but that is not guaranteed, and even in cases where recoveries are successful - it will take years.

How to avoid junk? Filter all Mintos loan originators through this checklist:

  • Are financial reports available for 2019?

  • Are financial reports available in English?

  • Are financial reports audited by reputable auditors?

  • Are financial reports audited according to IFRS?

  • Are financial reports published 2x a year or more often?

In short - look at the table above and select those who have a score of 5. On top of that check for following:

  • Is Loan Originator providing a group guarantee?

What is the result? Only 4 Mintos loan originators passed this filter:

  • DelfinGroup

  • IuteCredit

  • Mogo Finance SA

  • Sun Finance

Note that DelfinGroup, IuteCredit, Mogo Finance offer group guarantees for all their entities, but Sun Finance offers group guarantee only for Kazakhstan, Mexico, Vietnam.

What about profit and leverage? Check the reports of these 4 groups and maybe narrow it down further, but in my view this is a good starting list.

Potential conflict of interest

Note that my wife works in Mogo and I participated in Mintos crowdfunding campaign by buying 327 shares, so I will own about 0.000019% of Mintos.

Key takeaways

  1. Only 50% of Mintos loan originators are audited by reputable auditors

  2. The quality of financial reports is important. If you ignore it, expect your investments to go into “recovery“.

  3. Investing on Mintos is not passive. Do your research, avoid Mintos strategies.

P.S. Join “High-risk investments“ Telegram group for an informal discussion.