Credit "Conundrum" that mars the financial inclusion agenda

Developing nations are battling the financial inclusion agenda . . un-banked, un-aware and digitally less savvy members of the society, the needful potentials, remain under-served and or un-served . . . .

Innovators are recognizing and toiling at containing the power of technological advancements.  Leading the pack are trendsetters like Lenddo, who have developed, differentiated underwriting models by aggregating and absorbing big data.  Many a business models have emerged across markets, over the last decade.  While each story is unique the capabilities are a harmonious blend of the art and science of business, led with next-gen technologies - namely big data, data engineering, statistical science, machine [deep] learning and artificial intelligence.  This article shares with you an independent view of leveraging technology to outsmart your competition before your business goes obsolete.

“Disruption”, from the life of a world-tea plantation worker . .

Imagine the life of a lady named Manali, working on a tea plantation in Darjeeling    She harvests tea leaves for a living.  For manufacture of ‘high-quality’ tea, the tea shoot at the precise maturity should comprise of an unfurled bud with two or three soft leaves.  Though Manali is an expert at what she does, the compensation is in cash, undocumented and just enough to get her by.  Manali’s livelihood maybe disrupted by automatic leaf harvesting and has the potential of robbing her of her livelihood.  We are all living in an age where we get to experience disruptive technologies each day.  Innovations are taking place every minute, every hour.  Most markets are facing ‘disruption’.  For example, Bitcoin disrupting banking with their block chain technology, Uber disrupting urban commute with their ride aggregation technology.  While one technology is out to destroy Manali’s current livelihood, another might offer her alternative livelihood.  Creating alternative livelihoods may require capital.  Does Manali have access to capital or credit?  Would banks be able to check her credit worthiness & extend credit?  Who appraises Manali and millions like her whose credit worthiness cannot be judged by existing systems?

Organization like Lenddo help bridge this gap.  We do not promote Lenddo.  Our interest is in actively studying emerging business trends to bring credible and independent opinions to our clients, to help them transform their business models.

In emerging economies, like India, people have cash but no credit, to have credit one needs credit history, and to have a credit history one needs credit, this is sort of a ‘Chicken-and-Egg’ situation.  A situation that has puzzled both banking and non-banking financial services institutions.  While the ‘Chicken and Egg’ conundrum survives its last breath, Lenddo is out to settle the ‘Credit-Credit History’ problem.  Lenddo has a goal of improving ‘Financial Inclusion’ for at least a billion people in developing countries around the world.

Who is Lenddo?

Lenddo co-founded by Jeffery Stewart and Richard Eldridge in the year 2011, has operations in Philippines, Colombia, Mexico, and in India.

Lenddo leverages alternate data like social media activities, online activity and smart phone data to derive an individual level Credit Score.  It analyzes these data points, with the help of Machine Learning capabilities, to determine a ‘willingness to pay’ or a ‘promise to pay’ score.  Lenddo score ranges from 0 to 1000, higher the score, the lesser the probability of loan default.  This Lenddo score can be used as an augmentation strategy prudently integrating it with traditional credit appraisal scores.  The disrupter does this by sending the applicant a permission request on his or her cell phone and once the applicant gives their consent, then the Lenddo algorithm scans recipients phone for data points and derives a credit score in less than 3 minutes.  With Lenddo’s help, financial institutions have reduced fraud by 20%, loan approval rates have gone up 15% and achieved an accuracy of more than 99.3%.  All these figures are very impressive.  Lenddo has a huge potential for playing a big part in unleashing the true capabilities of Micro Small Medium Enterprises (MSMEs) in developing countries by providing a non-traditional platform for credit appraisal.

. . returning to Manali's story . .

Although Manali works as a leaf harvester she has an amazing foresight.  Manali can recognize and understand trends and changes in the industry that may occur.  All this is possible because she has access to the internet on her cell phone and she enjoys watching TED talks.   Manali always had a dream of owning and operating a small café and living in a tourist destination is already a plus.  Connecting with her phone and seeking help from Lenddo she can approach banks for a small business loan and realize her dream of not just owning a café, but also her financial freedom.

Although a small story, but many such stories await to be realized.  With due government initiatives, oversight and active participation from Banking and Financial Services institutions, platforms like Lenddo can genuinely help the needful and the overall economy of countries, like India, with an innovative and highly accurate Credit Appraisal System.