The Provision Fund is designed to help provide investors with ongoing protection against borrower late payments or loan defaults. It is not a guarantee or an insurance product.
The money in the Provision Fund comes from charges paid by borrowers. When a borrower applies for a loan, they may be required to pay a charge (the Risk Assurance Rate or Risk Assurance Charge), the amount of which is determined by a number of factors, such as their credit rating from independent credit bureaus. Borrowers pay the Risk Assurance Rate or Risk Assurance Charge into the Provision Fund.
Although the Provision Fund is funded by borrowers, it has been established for the benefit of lenders. Plenti may, at its discretion, instruct the Provision Fund's trustee to pay an amount out of the Provision Fund to compensate lenders for a loss arising from a borrower default. Importantly, funds held in the Provision Fund are held for the benefit of investors. Plenti cannot use these funds for its own purposes. The Provision Fund can only be used to compensate investors for losses of principal and/or interest.