Why I'm saying goodbye to Bondora...

For the last 2 or 3 months I've been thinking about how much value is Bondora actually adding to my P2P portfolio after all. I was first drawn to the platform by their amazing liquidity promise and low maintenance investing mode, however a few things have changed so here are my reasons why I'm leaving the platform.

Bondora Go & Grow basics

Unlike most of the P2P platforms, where to recover your money you would have to either wait for loans to be repaid or sell your active loans on a secondary market, on Bondora (with Go&Grow) your money is not directly tied to any loans so is very easy and has almost no costs (€1 withdrawal fee) to just withdraw all your funds. 

In a nutshell Bondora takes your Go & Grow money, lends it at higher rates through their own originated loans (in Finland, Estonia and Spain) and provides you a fairly steady return rate of up to 6.75% p.a. According to them this 6.75% return rate (although NOT guaranteed) is more than covered by their 9% average annual return in the past.

We could say that Go & Grow works under the following conditions:

• People don't add money faster than Bondora can allocate it in Loans. 
• If they can't loan investors' money fast enough they risk having to pay interest for money that is not generating any interests yet!
  
• People don't withdraw money too fast.
• If they do, Bondora would face liquidity problems since in theory most of the investors' money should be allocated in loans that take time to be repaid.

Past promises are not that strong anymore

Shortly after the pandemic started the whole P2P Lending industry went through a bit of a shock since no one really knew how bad this was going to be (and we still don't xD). Many investors started to withdraw money from their platforms trying to protect themselves and this took some of the P2P platforms to their limits (even exposing the ones doing things wrong like Grupeer...). Bondora was already going through a bit of a rough patch as can be seen from their publicly reported metrics. Their net returns have been slowly decreasing since 2014 going from roughly 21% to 8.5% in 2021 (this last one being below their 9% minimum net return rate). This means Bondora's "money buffer", the difference between the returns they get from their originated loans and what they offer to Go&Grow users, has gotten smaller and smaller the last few years (worth mentioning Go&Grow as product came to light in 2018).

In April 2020 they announced they lowered loan origination in response to the economic situation. A month later in May 2020 while the pandemic started to hit harder in Europe they decided to stop originating loans in both Spain and Finland while keeping their presence in the strong Estonian market. They recover the Finish market in November 2020 but the Spanish origination remains closed to date. 

Anyways... On September 9th 2020 Bondora in an attempt to maintain liquidity introduced a monthly investing limit for investors in Go&Grow of €400:

To ensure that we can provide everyone with the opportunity to grow their money online in a simple and affordable way, we’ve implemented a net limit of €400 on the amount each person can invest in their Go & Grow account per month. You can add more money to Wallet, but it will be invested in your Go & Grow account the following month.

This move of course raised some questions regarding their Go&Grow liquidity. Chances are all these measures they took, made a difference considering their numbers seem to be getting better by the month, despite still being far away from pre-pandemic levels.

Overall Bondora seems to be struggling a bit, but they have been actively fighting against the effects of the pandemic, and what's more important they have been always very VERY transparent all of it. Also worth mentioning that I was expecting the withdrawal to take several days, however big was my surprise when I saw my money in my bank account the very next day!

Is pulling down my overall P2P yield

So, no... I'm not leaving Bondora because of their numbers getting a bit tight. The reason I'm leaving Go&Grow is because 6.75% yield for a P2P lending platform is just not worth it... clearly the platform is still under the same threats other P2P platforms are so is not safer. Then, if is not safer, then why settling for a smaller return? 

Since the rest of my platforms are yielding above 9%, effectively Go&Grow is pulling the whole portfolio yield down. If I take March's yields, the overall average portfolio yield was 9.84%. So I decided to distribute Go&Grow money moving:

• Mintos: €145
• Robocash: €200
• Peerberry: €200
• Finbee: €200
  

Which in theory should take my portfolio average yield to somewhere north 10.60%.

There's a few caveats here I would like to mention:

• Yes, we could say I'm reducing diversification a bit here. But honestly for a platform that is currently only originating loans in 2 countries, I don't see the problem.
• Maybe this whole move was an overkill to just get less than 1%. Maybe ...
• I'll probably see some cash dragging in the platforms next month due to the money movement. Particularly concerned about Finbee, because of this I've enabled auto invest ONLY for loans A+, A and B. And plan to daily review for good Business loans.
  

Let's see how this goes :)