Estateguru has recently implemented several changes to our credit policy, with the aim of strengthening our portfolio and elevating our investors’ experience on the platform. The changes, which went into effect as of the 1st of August, underscore our commitment to prudent lending practices and sustainable growth. We will go over them below.
Credit policy changes:
- Refined Concentration Limits:
Credit Concentration risk describes the potential for loss when too much credit is invested into a single borrower or borrower group. This results in an increase in the vulnerability of a portfolio to market fluctuations and economic slowdowns. The better diversified a portfolio, the less concentration risk.
Estateguru’s new credit policy introduced stricter concentration limits, ensuring a well-balanced distribution of risk. For new borrower groups, encompassing related parties and loans, the maximum credit exposure is now capped at €2.0M in Latvia and €3.0M in other countries. Existing borrower groups are subject to a maximum exposure limit of €4.0M. Instances where exposure surpasses this threshold will necessitate the execution of an exit strategy. Exceptions to this rule will only be made after intense scrutiny by our risk committee.
- Prudent Probability of Default:
In order to maintain a resilient risk profile, we have set a ceiling on the probability of default for projects, guided by Moody’s assessment system. Projects with a maximum probability of default no higher than 5% will be considered consistent with our risk tolerance. Projects with a higher chance of default will be rejected.
- Focused Project Scope:
In line with our strategic evolution, we are discontinuing large-scale development projects. This transition will empower us to adopt a more focused and targeted approach to project selection, aligning our efforts with optimal risk management policies aimed at sustainable outcomes.
- Transparent Approach to Related Party Loans:
To further improve transparency and accountability, we have ceased the provision of related party loans. This step underlines our dedication to robust and ethical lending practices, with the aim of instilling greater confidence in our investors and fostering a thriving lending community.
- Timely Valuation Guidelines:
Informed decisions are the cornerstone of successful lending. Our revised policy mandates that the valuation of collateral for new credit evaluations may not exceed 6 months. This pragmatic approach ensures that our assessments remain current and accurate, further safeguarding the integrity of our loan portfolio.
- Evolving Collateral Ownership:
To augment the security of our loans, we have discontinued the acceptance of privately owned collateral. This strategic shift makes it easier for us to secure our investment projects, in keeping with our commitment to providing our users with high quality investment opportunities.
The changes outlined above reflect our proactive approach to safeguarding your investments and shaping a sustainable future. We invite you to explore these refinements and their impact on our collective journey toward financial success.
