Taking a page from Goldman Sachs' book, Morgan Stanley is beginning to lend to FinTech startups in Brazil as it seeks more of a return on its investments.
Bloomberg, citing four people with direct knowledge of the matter, reported that Morgan Stanley purchased $14 million in local subordinated bonds from online consumer lender Geru Tecnologia e Servicos. The Geru bonds, which the company issued in December of 2017, have a four-year maturity and pay about 11.2 percent each year, noted the report.
The company is also reportedly in talks with international investors about raising $50 million via an equity round that QMS Capital is handling. QMS has a 10 percent stake in Geru. General Atlantic could also be an investor in the round of fundraising, noted the report.
Geru has been expanding its service; since March, it has offered payroll loans wherein payments are taken directly from borrowers' paychecks. The company is offering the service via a partnership with BNP Paribas, reported Bloomberg.
Morgan Stanley's move comes at a time when the Brazil FinTech market is exploding. According to a Goldman Sachs report from May of 2017, there are 210 FinTechs operating in Brazil, representing the largest concentration in Latin America. The market has seen a 54 percent uptick in FinTechs since the beginning of 2015, and Goldman Sachs predicts the market will reach $75 billion in a decade.
The move on Morgan Stanley's part follows Goldman Sachs' decision last year to extend a credit line to Nubank, a FinTech that provides customers with credit cards and checking accounts via a mobile app. Fortress Investment Group also took part in that deal.
In addition to Morgan Stanley and Goldman Sachs, Bloomberg reported that Pacific Investment Management had also looked at offering credit to FinTechs in Brazil, but determined that the deals were too small, noted Bloomberg.