Generation S: Beehive has created a buzz about peer-to-peer lending

In addition to loans, the company offers an invoice finance service, where SMEs sell their receivables at a discount, often to improve cash flow

Craig More, founder of Beehive – Dubai-based peer to peer lending platform.
(Photo: Reem Mohammed/The National)

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Beehive, the Dubai-based peer-to-peer lending service, is set to see cumulative loans made through its platform reaching the Dh500m mark in November, the month in which it celebrates its fifth anniversary.

“It’s a milestone we’re particularly proud of and I think we’ve been able to give investors on average a very good return against a backdrop of global rates (that are) very low,” says the company’s founder and chief executive, Craig Moore.

Mr Moore also makes the point that so far, these loans have all been provided by individuals, backing small and medium-sized enterprises that have historically struggled to raise cash.

“Only now are we bringing on institutional cash. In five years, it’s been funded by people like you and me,”  he adds.

With hindsight, it may seem like success for a venture like Beehive was inevitable. After all, there were already several hugely successful peer-to-peer lending companies like Funding Circle in the US and Zopa in the UK, and the Middle East was an untapped market.

Moreover, Mr Moore has the type of trackrecord that gives it a strong chance of success.

“My background is a mixture of finance, technology consultancy and sales,” Mr Moore says.

The combination of skills had helped the growth of a previous business, Butterfly Software. Mr Moore had been one of three co-founders and chief strategy officer of the UK-based company, which helped firms migrate their data infrastructure to the cloud. It was eventually sold to IBM for an undisclosed sum in 2012.

“Once the acquisition had gone through I started to look for my next available entrepreneurial opportunity and I became interested in the whole peer-to-peer lending space,” Mr Moore says.

“I thought there was an opportunity to potentially set up a Middle East platform and that was really how Beehive was born.”

Yet despite the market opportunity, and the founder’s aptitude, building Beehive has not been easy.

Mr Moore arrived in the UAE in mid-2014, with Beehive launching in the following November. Within those few months, the oil price began a downwards spiral from over $100 per barrel in June 2014 to below $40 by the end of the year.

“That had a big knock-on effecting terms of confidence on the market,” Mr Moore says, particularly for peer-to-peer lending. He was launching a business trying to convince individuals to lend to SMEs at a time when lenders were posting higher non-performing loan (NPL) rates due to SME defaults.

Secondly, trying to create a market where one doesn’t exist proved difficult.

“It can be good to be the first one out of the gate, but it means you carry all of that industry burden and cost. It’s your marketing dollars being spent on educating the market on what is peer-to-peer before you are even educating them on what is Beehive.”

Thirdly, being first meant Beehive was entering into an unregulated market, which can be dangerous when operating in financial services.

“We were always very open to discussions with the regulators, but the regulators weren’t ready to regulate at that time. They wanted to understand the models, and what was happening in other parts of the world.”

Mr Moore says he took solace in the fact that it was providing a service that was essentially beneficial to the UAE, in providing a quicker and easier way for SMEs to access cash in a country which is trying to develop its SME sector as part of wider economic diversification plans.

“At some point, as an entrepreneur, you’ve got to make the call on it and say ’do we launch and hope we can make all of the different stakeholders comfortable? Or do you never get around to taking the risk?’ We took the risk.”

It eventually became the first peer-to-peer lender to secure a license from the Dubai Financial Services Authority in March 2017, having built credibility quickly, hiring former Emirates NBD chief executive Rick Pudner as chairman, and ensuring its platform gained Sharia compliance within months. The latter has been useful not only for marketing the service to investors in the Middle East, but also for its push into South East Asia.

The company now employs about 50 members of staff - 30 of whom are in the UAE and 20 in Thailand. It has raised $15.5m in funding to date and expects to close its current Series B fundraising round next year.

As well as straightforward loans, the company offers an invoice finance service, where SMEs sell their receivables at a discount, often to improve cash flow.

“They may be selling to some of the large organisations here, payment terms are being stretched out and they may just need access to working capital,” he explains.  “So we’re trying to match the right product to the right business.”

He says the fact Beehive offers fast (within 48 hours) access to cash at rates that are below those offered by high street banks means it can be selective about which firms make it onto its platform, with more than 80 per cent of applications rejected.

The investors lending to firms, meanwhile, can make returns of up to 10 per cent, which is considerably higher leaving money on deposit at a bank, or buying savings bonds. There are also higher levels of risk, though, as when defaults happen it is the individual lenders that take the hit, although Mr Moore argues that Beehive's NPL rate of about 1.2 per cent is lower than most high street lenders.

“We’re the first to say we’re an interesting asset class that would make up a small part of a diversified portfolio. Never be putting more than 3-5 per cent of your net wealth in a platform like Beehive,” he says. “But it is an interesting alternative asset class If you can be earning 8-10 per cent on a platform like ours then it does makes up for holding treasuries at 2-2.5 per cent and everything in between."

Beehive’s growth plans are based around entering new markets, and offering new services. Last month, the platform made its first loan in Bahrain, and other GCC markets are obvious avenues for growth. It is in talks with banks and financial institutions about partnerships both in the Gulf and South East Asia, he says.

Although some FinTech leaders see banks as incumbents that must be defeated, Mr Moore has more often preached collaboration, likening financial services to the Peloton in the Tour De France. There are those who break away, but usually they are absorbed by the chasing pack.

“The fintechs are great disruptors and also change agents, but it’s about ultimately how you can work with the wider financial ecosystem,” he says, pointing out that banks have a better understanding of the regulatory side, longevity of customer relations, stronger balance sheets an a more developed infrastructure.

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