Disclosure

What is the service which FundColony provides?

FundColony provides a peer-to-peer lending service, under which borrowers (individuals or small businesses) may seek loans to be funded by retail investors and/or wholesale investors through this service (the Peer-to-Peer Service). FundColony may also provide or make available ancillary services to its peer-to-peer lending service, such as credit checking.

What are the key risks of using this service?

Participating in peer-to-peer loans through FundColony’s service has the potential to provide Investors with greater returns but may also carry a higher level of risk and provide for less liquidity than traditional investments, such as bank deposits and investment-grade bonds. It may therefore not be suitable for all investors. Accordingly, prospective investors should assess for themselves whether investing through FundColony’s peer-to-peer lending service is suitable for them in light of their particular financial circumstances and goals and should if necessary, obtain independent financial advice.

Some of the key risks of lending on FundColony’s peer-to-peer platform which investors should consider carefully before investing include:

Key Risk	Description
Credit risk	Borrowers who are lent Investors’ funds may delay making their repayments or default on loans. The sole recourse for repayment is to the Borrower. There is no security for the loan and no person guaranteeing the loan. Where a Borrower fails to make payments, Investors will not receive part or all their principal and interest payments that are due to them. FundColony has robust systems to determine the suitability of a Borrower and his or her ability to afford loan repayments. FundColony may take debt recovery steps, which may or may not recover any funds. FundColony may also sell loans to a collection agency or third party. If it does so, Investors will receive a proportionate share of the net loan sale proceeds.
Borrower risk	Investors may be affected by differences in the creditworthiness of Borrowers in the event of late payment or default. In addition, a Borrower’s creditworthiness may change over time, reducing potentially their ability to repay a loan. FundColony’s assessment of a Borrower’s creditworthiness for a loan is made as at the date of their loan application. If a Borrower does not repay their loan, FundColony will take debt recovery steps and may sell loans to a collections agency or third party, as outlined above.
Liquidity risk	Investors may suffer loss from other events through their inability to sell a loan investment or demand early repayment (should they need their funds early). FundColony’s does not permit secondary trading of investments and Investors cannot demand early repayment of a loan. Only FundColony is entitled to require Borrowers to repay the total amount outstanding on a loan if Borrowers breach their loan contract. Investors are only able to withdraw or reinvest their funds if they have funds available in their wallet. Investor funds may also need to remain on loan beyond the initial term if the Borrower(s) to whom their funds are lent have not repaid their loan(s) in full when they fall due.
Fraud risk	FundColony has a thorough and robust credit assessment process to guard against fraudulent applications. There is, however, a risk that Borrowers may be fraudulent, with no intention to repay. Borrowers may be the victims of identity theft, in which case the person receiving the money has misappropriated the details of the person whose identity has been used to apply for the loan. Borrowers may also fabricate their expenses, liabilities, or income. In such cases, they may be unable to afford to repay a loan and may default on their loan obligations. It may also mean that FundColony assigns a risk grade which does not accurately reflect the Borrower’s risk and therefore that Borrower’s ability to meet his or her loan obligations.
Loan availability risk	There may be insufficient new loans available at any time on the peer-to-peer marketplace that meet an Investor’s criteria for investing, and consequently the Investor’s available cash (being the cash it deposits in the wallet for investment, together with any repaid principal and interest held for it in the wallet for reinvestment) may not be able to be invested.
Early repayment risk	A Borrower can repay his or her loan at any time. Should a Borrower decide to repay early, then an Investor will not receive the total interest income that would have been earned had the loan run to its full initial term. Current experience shows that a substantial proportion of loans are repaid before maturity.
Concentration risk	Investors who do not diversify their investment across loans and risk grades could face exposure to a concentration of Borrowers of the same type. Having a spread of investments across various Borrowers and risk grades should provide an Investor some protection from a Borrower default.
Operational risk	FundColony regularly monitors and updates its internal systems to seek to gain efficiencies and improve service standards and experiences. However, there is a risk of financial loss and/or damage to FundColony’s reputation if there is a failure of FundColony’s information technology systems, internal processes, people, or operating systems. This could also arise from external factors such as failure of a supplier to provide a service at agreed service levels or an unforeseen disaster. Should any of those events occur, this could have an adverse effect on FundColony’s financial performance and on the performance of loans
Macro risks	There are several factors that may affect FundColony’s Peer-to-Peer Service over which it has little control. These include an economic recession, political turmoil, changes in interest rates, natural disasters, and terrorist attacks, some of which may affect a Borrower’s ability to make loan repayments. FundColony regularly monitors local and global economic and business conditions in order to identify and assess any potential risks that may affect FundColony’s business operations. However, economic conditions are not always predictable, and significant changes in the Nigerian economy could have an impact on FundColony’s business and the performance of loans.
Cybersecurity risk	FundColony is an online web-based business. As such, FundColony relies heavily on information technology and computer based-systems that could be a target for illegal hackers. FundColony is very aware of this risk and therefore has security measures and systems in place that are designed to ensure the system’s security. A security breach is a possibility, and should this occur it may materially affect FundColony’s ability to operate and to provide access to loan information and loan recoveries.
Legislative risk	Failure by FundColony to comply with (or changes in) laws, codes of conduct and policies could result in legal action and in financial loss.

The information in this Disclosure Statement should not be taken as financial advice and is intended to provide information only, without considering an Investor’s investment objectives, financial circumstances or specific needs. Other risks may exist in addition to those identified above. Investors should consider the risks considering their personal circumstances and, if necessary, seek independent financial advice before deciding whether to invest.

How do potential investors apply for and obtain access to the FundColony service?

Peer Service as a retail Investor must complete the Investor application process set out on the Website:

provide details about themselves (including full name and contact details, BVN number, Designated Nigeria bank account number);
provide suitable documentary evidence of their identity; and
agree to the terms of the Privacy Policy, this Disclosure Statement and the Investor Agreement.

FundColony can refuse to accept any person as an Investor if that person:

has not completed the registration process to FundColony’s satisfaction; or
does not satisfy the eligibility criteria for being an Investor (as set out below).

FundColony’s eligibility criteria for registering a person as an Investor are as follows:

The person must satisfy FundColony’s “know your customer” requirements.
In addition, if the person is an individual, he or she must be a Nigeria resident or Citizen (which FundColony will verify through the person having a Nigeria residential address and a bank account with a registered Nigeria bank); and o be 18 years of age or older when registering.
FundColony may terminate (or in some circumstances, suspend) a person’s status as an Investor at any time in accordance with the Investor Agreement.

How do potential Borrowers apply for and obtain access to the FundColony service?

Individuals and small business can be Borrowers. Any borrower wishing to access and use the FundColony service as a Borrower must complete the Borrower registration and application process set out on the Website, which requires the person to:

provide details about themselves (including full name and contact details and Nigeria bank account number);
provide suitable documentary evidence of their identity;
agree to the terms of the Privacy Policy, the Loan Disclosure Statement, the standard terms for a loan contract and the Things You Need to Know About Your Loan Contract and Customer Service Terms.

FundColony can refuse to accept any person as a Borrower if that person has not completed the registration process to FundColony’s satisfaction or does not satisfy the eligibility criteria for being a Borrower.

FundColony’s eligibility criteria for registering any person as a Borrower are that the potential Borrower:

must be an individual or registered small business
must be a Nigeria resident, citizen or a small business with operations in Nigeria which FundColony will verify through a Nigeria residential address and a bank account with a registered Nigeria bank;
must be 18 years of age or older when registering as a Borrower or an incorporated small business; and
must have an acceptable credit record, as determined by FundColony at its discretion.
FundColony will apply its Fair Dealing Policy when considering any application by a person to be a Borrower.

FundColony may terminate (or in some circumstances, suspend) a person’s status as a Borrower at any time in accordance with the customer service terms.

How are loans made using the FundColony Peer-to-Peer Service?

Investors can invest in a minimum of N10,000 per loan. All funds being invested in a loan by Investors will be pooled. Accordingly, each Investor who has invested in a loan will have a beneficial interest in that loan and in the underlying loan contract, in proportion to the amount that Investor invested in that loan. That beneficial interest entitles the Investor to a proportionate share of:

the principal amount lent to and repaid by the Borrower; and
any returns on that loan (including any interest on that loan paid by the Borrower).

Loan Applications

A person who has successfully registered as a Borrower may apply for a loan. The Borrower’s loan application will include:

the amount sought
the repayment term sought (which may be either 1 to 6 months)
the purpose of the loan
income and expenses
assets and liabilities (in the case of small businesses)

FundColony will use credit score and the financial data provided by the Borrower to determine the Borrower’s loan affordability and the maximum amount and term for the proposed loan to the Borrower.

Submitting Loans to the Peer-to-Peer marketplace

Details of loans requested by Borrower that are allocated to the peer-to-peer marketplace will be listed on the Website/App. Only persons who are registered Investors will be able to view the complete details of that loan submission, which will include:

the amount approved by the platform
the recommended market interest rate
the monthly repayments on the amount invested
the purpose of the loan

The Borrower’s actual name and personal identifying details will not be made available in the loan submission, or at any other time. A loan listing will be displayed on the Website for consideration for 7 days or until the loan has been fully funded (whichever occurs first). “Fully funded” means that orders have been placed for the full loan amount or (if applicable) the lesser amount the Borrower is prepared to accept, as specified in the loan submission.

Placing Orders

A person who has successfully registered as an Investor will be able to access the Website to view submitted loans. Investors may make an offer to fund a portion of any loan, by placing an order through the Website. The Investor must have sufficient funding in the Wallet with FundColony in order to cover that offer. Any order, once made, is a legally binding offer and cannot be revoked by the Investor. Investors can see and assess individual loan submissions prior to placing orders on them. They also have the option of placing orders through the Website’s auto-lend function (based on the investment criteria and subject to the investment limits they have specified), as described in the Investor Agreement.

Loan Contract

Once a loan is fully funded (as defined above), a loan contract will be formed between the Borrower and the Agent (as bare trustee for the Investors who are funding the loan), under which the Borrower agrees to repay the loan amount plus interest at the specified interest rate, over the term of the loan. Under the Investor Agreement, each Investor appoints FundColony to settle the loan and to provide collection services in respect of the loan. The Investors will pay certain fees to FundColony for providing these services. Those fees will be deducted from the payments received from the Borrowers. The balance of those payments for the Investors in accordance with their proportionate share will be credited to their individual wallet. Even though there will be a loan contract between the Borrower and FundColony (for the benefit of each Investor who has funded that loan):

the actual identity of the Borrower and the Investors who have funded the loan to the Borrower will not be made known to each other unless required by law (only FundColony will hold these details); and
the Investors will not be able to enforce the Borrower’s payment obligations directly against the Borrower; only FundColony (acting as their agent) will be entitled to take any enforcement action against the Borrower.

Any loans which are made through the FundColony Peer-to-Peer Service are not guaranteed by FundColony. There is no guarantee that any Investor will recover any or all the amount advanced to any Borrower and/or any interest on that amount advanced. Both Investors and Borrowers will be able to access details about their loans on the Website.

How is money provided by Investors dealt with by FundColony?

FundColony holds an account with Stanbic IBTC Bank, into which FundColony will deposit all funds it receives from investors for investment in loans. Any money paid to FundColony by an Investor will be received by FundColony into the account for the benefit of that Investor. However, some funds are also held with payment gateway providers such as Flutterwave Technologies and Paystack Limited. If an Investor makes an offer to fund all or part of a loan, the amount which has been offered by that Investor will be “locked'” in the Wallet until the offer is accepted (by the relevant loan being fully funded) or the loan submission expires. On settlement of a loan, the Investor’s funds will be transferred by FundColony to Transit Account, which is a trust account held by FundColony with its payment gateway provider. Those funds will be aggregated with the funds of other Investors who are investing in that loan and whose funds are similarly held in the Trasit Account. FundColony will then use the aggregated loan amount to settle the loan.

A Borrower will make loan repayments to the Collections Account for the benefit of all Investors who are invested in loans (to the extent of their entitlements) and which FundColony. Any recoveries made from a Borrower will similarly be paid into the Collections Account. FundColony will:

deduct any fees which the Investors must pay FundColony for it’s services in relation to the loan; and
then transfer each Investor’s proportionate share of the balance of the amounts received from the Collections Account to the Wallet for that Investor’s benefit (where it will be available for reinvestment in other loans or for repayment to the Investor, depending on the Investor’s instructions to FundColony).

An Investor may withdraw any available amounts from its Wallet at any time (subject to any banking restrictions and any loan offers which are outstanding at that time). FundColony may of its own accord transfer such amounts back to the Investor.

What checks and assessments are made by FundColony in relation to Borrowers?

FundColony will carry out credit checks and identity verification steps in respect of borrowers who wish to be registered with FundColony as a Borrower. FundColony makes an assessment of the affordability of a loan for a potential Borrower based on the verified financial data provided by the potential Borrower, including income, expenses and debt servicing information. It is important to note that a credit score attributed to a Borrower in respect of a loan:

represents subjective interpretation of the information which has been provided by the Borrower and other information which has been obtained by FundColony itself or through third party credit report providers;
does not guarantee that the Borrower will in fact be able to (or will) repay all or part of any loan or all or part of any interest charged on that loan; and
is a reflection of the information available to FundColony at the relevant time and will not be updated by FundColony during the term of any loan.

What happens if a Borrower gets into arrears?

The following key steps are taken by FundColony (as agent for the Trustee) to ensure effective collection of debts.

All Borrowers are required to agree to a direct debit authority as part of signing up for a loan. Borrowers can update their direct debit authority at any time online or by contacting FundColony directly.
A succinct and regimented debt collection procedure is systemised.
FundColony platform methodically tracks and monitors all arrears transactions through the arrears lifecycle, to ensure appropriate action is taken at the right time.
Arrears reporting is updated daily and monitored by FundColony senior management.
Regular internal reviews are undertaken by FundColony to ensure that procedures are followed and are effective.
FundColony applies the use of automated technologies including e-mail and 2 way SMS to maintain contact with Borrowers, to ensure efficiency and effectiveness is achieved in managing loans.
Automated workflow tools direct collections activity, ensuring that items are actioned as per the collections plan.
If a Borrower makes a successful application for undue hardship, the loan contract will be varied to provide relief to the Borrower.
If a Borrower to whom Investor funds are lent defaults on a loan, and FundColony is unable to recover the outstanding debt owing, FundColony may assign the defaulted loan to a third party, such as a collections agency, for an amount it is able to negotiate. Once a loan has been sold to a collection’s agency, Investors may not benefit from any recoveries that may then be made from that Borrower, but Investors will receive their proportionate share of the net loan sale proceeds.

What will happen if FundColony goes into liquidation or fails to carry out its collection activities?

If FundColony goes into liquidation or ceases to provide a peer-to-peer lending service in Nigeria for a period of 10 business days, a back-up servicer has been contracted to carry out collection services in respect of the loan portfolio, and will collect repayments from Borrowers and make payments to Investors as the replacement agent.

What interest is payable by Borrowers?

A Borrower is charged interest on the amount he or she owes, calculated as a percentage of the loan amount (as set out on the loan contract). If a Borrower repays a loan or any portion of it early, the prepaid amount will not bear further interest. As a result, the Investors will not receive interest on the prepaid.

What charges are payable by Borrowers?

FundColony will charge Borrowers an origination fee for using the its service. The origination fee is due and is paid upfront, by way of a deduction from the principal amount of the loan prior to the balance of the loan amount being advanced to (or for the benefit of) the Borrower. Borrowers are liable to pay late payment fees where loan repayments are late. If enforcement action is required against a Borrower, any legal and associated third party costs incurred will be charged to the Borrower’s account. The amounts (or calculation methods) and the types of fees charged in connection with the FundColony service or under loan contracts are subject to modification from time to time.

What fees are charged to Investors?

Fees for loan administration and collection services

FundColony will receive two types of fees for the administration and collection services it provides to the Investor in respect of a loan:

FundColony will charge a retail Investor (through the Trustee) a fee (“Lender Fee”), being a percentage of that Investor’s share of the interest amounts FundColony recovers. The Lender Fee will be calculated on the basis of a percentage-based tiered structure that recognises the principal amount which the particular Investor has outstanding on the platform. It will be paid as a deduction from the interest component of loan repayments recovered. FundColony is not entitled to payment of the Lender Fee except out of the interest component of loan repayments it actually recovers.
Additionally, FundColony will be paid a fee (“Loan Administration Fee”) that is equal to the retail Investor’s share of all fees and charges payable by the Borrower under the loan (not being fees for optional services such as the Payment Protect Fee) – eg of all account maintenance fees and any overdue fees and dishonour fees the Borrower must pay. FundColony is not entitled to be paid the Loan Administration Fee except out of the fees and charges it actually recovers from the Borrower. In practical effect, the Loan Administration Fee is not a net cost to retail Investors (through the Trustee).