January 19, 2018 / 1:00 PM / a month ago

Russia's Sberbank plans crowdinvesting platform for small firms - sources

* Sberbank CEO bets on new technology

* Targets small companies deemed unbankable

* Lending to small firms can offer high returns

By Andrey Kuzmin

MOSCOW, Jan 19 (Reuters) - Russia’s biggest lender Sberbank plans to help small firms raise funds from private investors with a peer-to-business platform, three sources familiar with the plans said, competing with two other ventures that support the cash-starved companies.

The state bank’s foray into p2b lending suggests it sees a revival in fortunes for small businesses as consumer spending picks up. It also reflects the commitment of Chief Executive German Gref to enhance the bank’s use of new technology.

Such platforms, offering a service known as crowdinvesting, target small firms deemed unbankable by bankers, such as bakeries, kids clothing stores or football schools, because they do not have a high enough credit score or cannot offer sufficient collateral.

But private investors are attracted by lending to small companies, as it offers better rates than bank deposits or fixed income assets of up to 17 to 25 percent, albeit at higher risk.

By matching the two sides, p2b platforms earn a commission on every transaction of about 4 to 5 percent, while handing 100 percent of default risks to investors.

One banking source told Reuters that Sberbank was planning to launch a p2b project this year. Two financial sources said the bank was ready to announce the project as soon as the first half of 2018. All the sources asked not to be identified.

Sberbank, which declined to comment on the matter, will pitch its platform against the Stream project of Russia’s top private lender Alfa Bank and the largest peer-to-business platform StartTrack financed by the Internet Initiatives Development Fund that is backed by the state.

Both rivals are still lossmaking, their CEOs told Reuters, but they aim to boost turnover and show a profit in two years.

UNREGULATED MARKET

Russian crowdinvesting platforms mimic Western firms that have launched initial public offerings (IPOs), such as U.S. firm LendingClub with a market capitalisation of $1.8 billion or Britain’s Funding Circle with 320 million pounds.

Russian p2b lending market is small, standing at about 2.5 billion roubles ($44 million) last year, while Sberbank’s net profit was more than 670 billion roubles in 2017..

Crowdinvesting is not regulated in Russia, making it easier for small firms to secure loans via p2b platforms, StartTrack CEO Konstantin Shabalin said.

“There’s no law governing crowdinvesting, and we fit poorly within the law we currently have. We all are in a somewhat grey area,” Shabalin said.

The Russian central bank did not respond to a request for comment.

Russian consumer spending began rising in mid-2017 after falling for two years, the statistics service data show.

Small firms, which rely on consumer confidence, contribute about 20 percent of Russian economic output, about three times less than in the developed world, Gref said in November.

“Russian companies are choking on the lack of funding. You may ask any company - big or small - they don’t know where to raise money,” StartTrack CEO Shabalin said.

$1=56.7534 roubles Additional reporting by Darya Korsunskaya; Writing by Andrey Kuzmin; Editing by Katya Golubkova and Edmund Blair

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