Promoting access to finance by bringing private capital to emerging markets
AlliedExchange’s mission is to help to improve access to finance for underbanked companies and projects in emerging markets by increasing market liquidity.
The AlliedExchange debt platform aims to address the financing gap for SMEs and projects across SSA by allowing retail and institutional investors from across the world to buy debt from organizations and firms that have already committed to financing certain companies or projects.
The key innovation is the capitalization of both new (syndication, co-lending models) and existing (refinancing model) loans that have already cleared due diligence by established financial institutions, which significantly reduced costs. This is a unique crowdfunding model.
The aim is to spur economic activity in emerging markets, creating jobs, and encouraging more innovation in financial markets.
Below are the loan origination models we’ll be looking to implement.
SYNDICATION: A syndicated loan is one “which is provided to the borrower by two or more banks known as participants, which is governed by a single loan agreement.” Syndicated loans work best in cases when a borrower is seeking too much capital for a single bankor financial institution to provide. The deals are typically arranged by a lead bank, though the funding can come from a number of parties. The funding can be raised internationally (as long as this doesn’t break any regulations).
REFINANCING: The second way the platform may be able to attract loans is by offering banks to refinance their existing loans by placing a certain portion of the loan on the platform. This can work for loans that are smaller than those typically involved in syndication, and would enable banks to deleverage their balance sheets, opening up more credit for new lending.
CO-LENDING: Finally, AlliedExchange would look at co-lending as the third loan origination strategy. In this model, the platform would work with a bank to fund a portion or perhaps an over-allotment allowance of a new loan. Like in the syndication model, the portion of the loan to be funded by AlliedExchange would need to be underwritten, either by the co-lending institution itself, or by a third party (preferably, a DFI).