Sometimes there can be ambiguity as to what counts as “social lending”. Often, it’s simply characterised as expanding access to finance, but that doesn’t quite tell the whole story.
If you’re lending further down the credit spectrum, but charging higher rates, you might be broadening access to finance, but you’re getting paid for it.
Proper social lending means reaching prime customers who are otherwise unable to access credit while charging prime rates.
As Tom Hall argues this week, Islamic finance firms like StrideUp, which brought its debut RMBS this week, are a perfect example of this.
StrideUp’s portfolio pays a weighted average coupon of 6.4% according to Morningstar DBRS’s presale. That’s only slightly more than 5.5% paid by the portfolio backing LendInvest’s mostly buy-to-let Mortimer 2025-1, which also priced last week.
That gap could narrow further for StrideUp deals, at least based on the RMBS pricing. Investors charged LendInvest 81bp and StrideUp 85bp for their respective senior tranches. StrideUp also got the slightly bigger triple-A tranche.
That’s before you even take into account that repeat issuers often get better pricing. LiveMore, for instance, priced its first later life RMBS at 88bp in 2024 and its second deal in July this year at 76bp, while prime RMBS from high street lenders has remained at a similar level.
There are other lenders with similar propositions to StrideUp, such as Offa, which is looking at a public RMBS deal next year. Watch this space!