All Borrowers on Maple pay an Establishment Fee when they drawdown their loans. The Establishment Fee is set at the MPL Governor level at 1% of the Loan amount. It is proposed that this fee be adjusted to 0.5% by a Governance vote of registered MPL holders (Mapes).
The Establishment Fee of 1% does not account for the loan’s duration and therefore punitively increases the effective all-in rate on shorter duration loans.
Example (1): 90 day loan = 365/90 * 1% = 4% annualized Fee
Example (2): 180 day loan = 365/180 * 1% = 2% annualized Fee
This renders borrowing on Maple less attractive for high-quality borrowers with the greatest market access.
Adjusting the Establishment Fee to 0.5% will drive further growth.
- Borrowers taking out second loans on Maple are taking 180 day tenors. This annualizes the Fee to 1% and attracts larger borrowers.
- This will help scale Maple’s TVL by creating a virtuous cycle in which high quality borrowers in-turn attract lenders to provide capital.
Basis for the conclusion
- Conversations with existing borrowers have highlighted that the Establishment Fee renders Maple’s rates less competitive.
- Adjusting the fee will not impact the Fees earned by Stakers.
- The fee is currently 1%, with 0.5% going to the Treasury and 0.5% going to the Pool Delegate. The split will remain even.
- It is expected that the adjustment will drive a meaningful increase in loan volume, more than offsetting the lower fee.
Approval is requested for the Maple Governor address to adjust the Establishment Fee from 1% to 0.5%, split evenly between the MapleDAO Treasury and the Pool Delegates.
A solution to annualise the establishment fee within Maple’s Smart Contracts is scoped into the product roadmap and will be included in the next version release of Maple’s Smart Contracts.
Author: Sidney Powell
Date Created: 07/19/2021
Discussion: Maple Discord
Maple Improvement Proposal: MIP-005