The phrase “Skin in the game” is commonly used in the corporate finance industry and refers to when an owner or a principal of an investment vehicle maintains an equity stake in circumstances outside investors seek to invest. This is to ensure the interests of the Loan Originator of the asset are aligned with the interests of the investor, as both sides have a stake in the investment.
All Loan Originators that place loans on the Monestro Marketplace must keep a certain percentage of each loan, which is their stake in the loan. If a Loan Originator with 10% Skin in the game issues a €1 000 loan to a borrower, and then places this loan on the Monestro Marketplace, only €900 of this loan will be available for investors to invest in and the Loan Originator will keep a stake of €100.
Skin in the game of 10% implies that up to 90% of the particular loan’s principal can be assigned to investors.