Israeli Fintech Group Launches Diamond Lending

RAPAPORT... An Israeli financial-technology company is set to offer almost $8 million in credit to the diamond industry every month after receiving a license to operate in the sector.MDPS, which stands for Mazalit Digital Payment Solutions, claims to be the world's only accredited non-bank financial institution dedicated to the diamond industry. It has promised to fill the gap left by traditional lenders, many of which have exited the diamond sector or reduced their exposure because of perceived risks."In the next five to 10 years, we might see more banks withdrawing from the industry," Zeev Maimon, CEO and cofounder of MDPS, told Rapaport News on Monday. "The [credit] vacuum...will be filled with non-bank and fintech companies that will find the right product [and] services to give the industry."MDPS is the trading name for parent company Mazalit, which has operated in the digital-payment space for more than three years. Maimon and the other cofounders - including a former executive at money-transfer company Payoneer - started the business by launching a mobile app that enabled traders to clear payments in seconds.However, banks in Israel refused to allow their accounts to be used by diamond dealers transferring money around the world, forcing Mazalit to shift its business focus toward lending, Maimon revealed.MDPS obtained a license from Israel's diamond controller, part of the Ministry of Economy and Industry, in January, allowing it to trade in precious stones. In April, it received approval as a credit provider from the Ministry of Finance's Capital Market, Insurance and Savings Authority.Based inside the Israel Diamond Exchange (IDE), the company has NIS 25 million ($7.8 million) available to lend to clients each month and will begin by serving the domestic market, noted Maimon, a former diamond dealer. It could expand to the US or Belgium by next year, he added. It currently has around five clients, all of them Israeli.Fintech companies have fewer operational and regulatory constraints preventing them from offering services outside their home country, and usually have better technology than banks, Maimon argued. As a diamond specialist, the company is also in a stronger position to evaluate customers' rough and polished goods and use them as collateral, he explained.The business has amassed almost $3 million to date by selling stock to equity investors. The funds available for lending derive from debt it has raised from financial institutions and private-equity companies.Image: Zeev Maimon. (Mazalit)