Financial exclusion is a business inhibitor, hinders the risk management of MSMEs and enhances other forms of socio-economic exclusion. When a financial hardship is encountered the low-income cannot find a good option to solve that financial problem. They run onto bad options, such as loan sharks and payday loans. These options are exploitative and they create a cycle of indebtedness. This lack of access to credit restricts the massive potential that these businesses have. CloQ is an app that offers access to nano-credit to low-income and unbanked in order to build a credit history that can be used to (re-)include them in the financial system.
Initially, CloQ is focusing its operations in Brazil. CloQ is focusing on the low-income population, with income of one minimum wage or less (about USD 300). This market would be about 50M people in Brazil alone. CloQ partnered with a financial institution in Brazil in order to offer its services over the entire country. CloQ is developed to offer 3 basic tools for financial inclusion: access to nano-credit via an app to request and receive a nano-loan quickly in times of need, nudges on financial education to allow people to improve their own situation, and a CloQ behavioural credit score that can be used to bridge and facilitate the use of other financial services. Apart from the basic service of access to credit, CloQ clients are also building a positive credit history in the process. To use CloQ, a person has to download the app and make an easy sign up that takes 7 minutes. In the sign up, the client will share simple information such as name and email, take a selfie and a photo of their ID. CloQ performs a complete KYC, fraud detection and credit scoring. The user is then able to make credit simulations and requests. Today, a client's first nano-credit request is of USD 40 max, to be repaid in instalments (2-5 months). While repaying the nano-loan, the client receives information about personal finances. Clients that pay the installments get CloQ points. Once the client finishes repaying the nano-loan, they can request a higher amount based on the number of points they collected. CloQ's main focus while interacting with clients has been to create trust and loyalty. Because of this focus, CloQ has been able to create a customer experience that has led to 0% churn and allowed to achieve exponential growth with zero spending on marketing, solely via mouth-to-mouth.
About 70% of CloQ's users were deemed too risky by credit bureaus and were given a negative mark. With that mark they weren't able to acquire credit with banks or other traditional credit providers. The other 30% of our users are formed of business owners that had never acquired credit on a formal institution. Since go-live (2 years), CloQ has provided access to credit for over 900 informal entrepreneurs all over Brazil. Around 75% of them are women, aged 25-45 and they are usually mothers that help supplement the family income, which is roughly equal to a minimum wage. The credit was either used as working capital, or to make small investments into their business. To this date CloQ has saved clients over USD 140k in interest rate charges that they would have incurred if they got the same loans from loan-sharks. Besides that, every client from CloQ is building a positive credit history that helps them improve their likelihood of accessing other financial services.
Enabler: (1) The founders have personal and professional experiences with the financial exclusion problem; (2) CloQ strategy of growth is 100% on mouth to mouth, which built a community based on trust; (3) The Corona crisis pushed the need to build such a solution; (4) we got support from many organizations; (5) technology development is helping to lower costs; (6) Clients are our biggest support. Constraints: (1) regulation changes in the credit business; (2) bank partner could cease partnership and delay developments; (3) default could increase with financial crisis.
Our product is a mobile-only application, for which exponential growth on a large scale has always been the base. The agility of our product should allow us to easily expand into other developing markets in the years to follow. At this moment, we intend to do this via white-labeling the app to local credit providers. Thus, we will be B2B. We aim to cover the entire South-American market. This market presents strong similarities concerning barriers to access formal credit, such as: high percentage of the adult population without bank accounts, exorbitant interest rate and high bureaucracy. Our plan is to go to nearby countries first, such as Colombia, then Peru, which presents a high acceptance of such technology.
CloQ project video - https://www.youtube.com/watch?v=gIJMKMBURt8 https://www.forbes.com/sites/allysonkapin/2018/09/19/60-women-led-start… https://vilcap.com/current-programs/finance-forward-latin-america-2019 CloQ was part of the SDSN youth leader - http://www.youthsolutions.report/2019report
Informal entrepreneurs and MSMEs are the ones who are affected the most by the economic crisis caused by Covid-19. - Banks more than ever create barriers that exclude and ignore those who don't have a perfect credit history; - quarantine minimizes the income of the informal worker and MSMEs, which therefore need small working capital. On the contrary to the credit market, CloQ has kept its services during the pandemic, increasing the number of users month by month while keeping default stable. By leveraging behavioral data, we can gain insights into our clients and quantify their risks without a financial history. We see the CloQ score is an alternative and more inclusive credit score that can help people that were affected financially by COVID-19 to keep accessing formal credit when needed.
SDGS & Targets
Deliverables & Timeline
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CloQ beneficiaries are informal entrepreneurs, like street sellers, cleaners, plumbers, etc. They are between 25-50 years old, have kids and live in low-income communities. In order for CloQ to work we have partnered with a bank, a payment institution and a KYC provider. We have had great support for development and growth from the Google Advisors Program, SDSN Youth, Village Capital and the Cartier Women Initiative.