Monedo, once Germany’s largest fintech startup, files for insolvency proceedings

The coronavirus pandemic is taking its toll on the world economy. GDPs of many countries are down as unemployment numbers rise, and companies are shutting up shop. One of Germany’s largest fintech startups Monedo can now be added to the list as it has filed for insolvency. The fintech’s insolvency application was granted by the Hamburg District Court that has also opened the preliminary insolvency proceedings.

Provisional insolvency administrator appointed

The news of Monedo filing for bankruptcy was first reported by Manager Magazin. According to an official statement, on September 7, the Hamburg District Court also appointed restructuring professional Dr. Christoph Morgen from the Germany-wide law firm Brinkmann & Partner, as provisional insolvency administrator.  

The provisional insolvency administrator Dr. Christoph Morgen says, “I plan to continue  operations and have already started talks with potential financiers. It is my goal to bring the  investor process, which was started before the insolvency application and which according to the Monedo management looks promising, to a successful conclusion.”

Did COVID-19 push a fintech to bankruptcy?

Monedo was founded back in 2012 but was called Kreditch back then – rebranded to Monedo in March 2020. Its primary goal was to enable microcredits or microcredit loans but it later pivoted to using algorithms for granting loans. A report suggests that the company was already struggling due to high default rates on the loans it granted and was under heavy criticism for charging high interest rates, which was apparently calculated due to its customers’ low credit worth. 

In its home country Germany, it was never allowed to offer loans as it used potential customers data, gathered from online sources, to assess lending risk, which is not allowed in the country. Back in 2018, the startup had again almost gone bankrupt when its value dropped from €200M to almost zero when several private individuals from India and Russia defaulted on repaying their loans, reports Manager Magazin.

While the company managed to bag €45M under the new name Monedo, it was still unable to sustain its business. The coronavirus pandemic didn’t help either. However, some new laws were passed due to the pandemic, which Finance Forward reports spelled trouble for Monedo. Due to the pandemic, Spain and Poland, two of the company’s largest customer bases, passed new laws enabling borrowers to postpone repayment of their debts, which meant Monedo would have to wait for its returns.

Monedo is headquartered in Hamburg,Germany where it employs around 100 people. Another 200 people work for it in subsidiaries, mainly in Poland, Romania, Russia, Spain and Thailand.

Image credits: Shutterstock