AMA: Branch Series 3

Announcements
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Branch Series 3 AMA

Centrifuge Official Telegram | Wednesday 23nd June 18:30 | 12:30

In this Telegram AMA the Centrifuge community is invited to ask questions to the issuer 1754 Factory and the Asset Originator Branch. You can gain a deeper understanding of the details of Branch Series 3 pool: the structure, nature of the underlying asset, etc. The assets of the Branch Series 3 pool are secured non convertible debentures used to fund micro loans in India, providing access to capital for individuals who would previously be shut out from the financial system.

This is a great opportunity to hear first hand from Azer Songnaba, Alex Liege representing 1754 Factory (the Issuer) and from Branch International CEO, Matt Flannery, and Chief Business Officer, Premal Shah.

About Branch

Branch India is a regulated non bank financial company, organized under the laws of India which offers unsecured loans to consumers. Branch International (Parent Company) was founded in 2015 and has operations in Kenya, Nigeria, Tanzania, and India, and has since originated over $500M in loans to over 4 millions borrowers. Branch raised $270M in debt and equity from reputable investors including Andreesen Horowitz, Visa and the World Bank.

Prior to Branch, Matt and Premal co-founded Kiva, a peer to peer lending model that allowed consumers to provide over a billion dollars in financing to micro financing institutions.

Pool Description

The Issuer (1754 Factory) will issue two tranches of ERC-20 tokens: DROP Tokens and TIN Tokens. The DROP Tokens will make up 90% of the total asset pool. The TIN Tokens will make up the remaining 10% of the total asset pool, and will be subject to first losses up to the full amount of their value. Davoa Capital, the manager of 1754 Factory LLC, Series 3 will purchase a portion of the TIN Tokens to demonstrate their confidence in the asset pool and to act as a buffer against losses to investors in the DROP Tokens.

The aggregate value of the assets owned by the Issuer is expected to be 10,000,000 Dai. The assets will be issued in three separate tranches of 3 year maturity each: ~1,000,000 Dai (tranche 1), 4,000,000 Dai (tranche 2) and 5,000,000 Dai (tranche 3).

Read more here and check out the pool here

Please start submitting your questions below and we’ll ensure they are answered in the AMA.

Be present in the Centrifuge Official Telegram at 18:30 CEST / 12:30 EST on Wednesday 23rd June to take part :seedling: :cyclone: :dizzy:

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What guarantees get TIN investors (if any)?

And second question is: Will 10% TIN ration enaugh to fully protect DROP investors?

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We believe the 10% TIN ratio is enough to protect the DROP investors for the following reasons:

  • The asset financed by the pool is a secured debenture backed by all assets of Branch India (not just their loan book) up to 1x the loan amount. Upon an Event of Default, 1754 has power of attorney from Branch India to direct their bank accounts.
  • Branch portfolio is very healthy with a 60d+ delinquency at only 3%
  • Branch team is experienced in lending in emerging markets having founded Kiva over a decade ago. Branch is also well backed having raised over $100 million in equity from Andreessen Horowitz (biggest investor), Visa and IFC (the private investment arm of the World Bank)
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Thank you Sam. Appriciate the answer :wink:

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Branch.co, behind Branch Series 3 (1754 Factory), appears to levy very high interest rates on its loans: for loans in Kenya, rate is 17-35%; Tanzania, 18.8% – 49%; Nigeria, 17-40%. These rates seem unjustly high.
Are they? If so, was this taken into account in selection of this company as an AO?

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Davao Capital, the manager of this pool ensured that Branch has all the necessary regulatory approval to conduct business in India and is in compliance with all laws and regulation with respect to their operations (including the applicable interest rates for their loans).

Branch is providing much needed access to capital and financial services to people who often do not have access to traditional banking. The rates charged by Branch are to compensate for the cost of funds for the markets that they operate in and the unsecured nature of the loans they provide to their customers. As customers build a credit history with Branch, the rates for their next loan go down. Furthermore, Branch customers often build their credit score with local credit reference bureaus — enabling customers to qualify for credit access at more places, including traditional banks.

We believe Branch plays an important market role in providing the financially excluded a first rung on the credit access ladder. And in our diligence process, we concluded Branch lends responsibly honoring principles of pricing transparency and fair collection practices. Finally, Davoa is not the only group to come to this conclusion. Major social impact investors such as the World Bank Group’s IFC have diligenced and invested in Branch.