The view from the field: existing MSME credit solutions aren’t closing the gap
We all started in microfinance. There, we spent years in the field, talking to entrepreneurs in developing countries, getting to know their challenges and trying to find solutions to help them achieve their ambitions. But what we found is that existing credit solutions are slow, expensive and often don’t meet the needs of the micro, small and medium enterprises (MSME) they’re supposed to help. And credit institutions often lose their way in costly digital transformation initiatives that make little immediate impact in the lives of their customers. It had resulted in an estimated $5 trillion MSME finance gap, with 131 million MSMEs (41%) in developing countries having unmet financing needs.
Tech solutions can enable quick wins for lenders and MSMEs
To do something about it, in 2018 we started Rubyx, with a mission of helping lenders focus on what can make the biggest difference, for the most people, as profitably as possible. In the years since, we’ve created sophisticated algorithms that facilitate fairer credit scoring models, and successfully launched products such as a nano loan with flexible repayment terms. We’re already making a difference. Advans followed up a successful pilot with loan disbursement to 15 thousand people in 5 countries. And we’ve partnered with CGAP to deploy our solutions in 5 MFIs around the world. And that’s just the beginning.
The MSME digital transformation opens up new lending opportunities
In 2020, Covid kicked the worldwide digital acceleration into high gear, and saw a fast increase in the rise of digital platforms, the promise of embedded lending and API-led product growth. At Rubyx, we see this as the greatest opportunity since the dawn of microfinance to give people throughout the developing world the finance they need, the way that they need it. The real financial flow data platforms provide (as opposed to proxy “alternative” data like mobile phone usage) are the best raw data for evaluating business creditworthiness. When we equip lenders with risk assessment and decision models that intelligently make use of this transactional platform data, we can help them understand whether entrepreneurs are truly creditworthy – and build the best product to serve them.
How we can make a difference together
We’ve never lost sight of our original goal of helping put credit in the hands of the individual entrepreneurs and family businesses we got to know in our years in the field. Today we believe that the best way to do that at a massive scale is by facilitating partnerships between digital platforms and banks. We’re the link between partners with a cloud-based lending platform that covers end-to-end services for profitable lending operations. And while we’re currently focused on lending, tomorrow we’ll deliver a whole range of new data-driven services to the benefit of entrepreneurs and small businesses. We’re certain that anyone with MSME data can unlock new business opportunities. Let’s close that finance gap together.