A common obstacle for any business owner, regardless of which country they live and work in, is access to credit.
The twenty-first century has brought with it increasing dependence on loans and financial institutions for basic individual purchasing power – let alone entrepreneurial success.
An emergent non-profit organization has taken advantage of cell phones – a technology available to a growing percentage of the global population- to create wide spread access to these vital financial services.
For micro-business owners in the less developed world, there is an abundance of informal transactions and very little access to financial identity. Providing financial identity is something Shivani Siroya, a 2013 TED fellow, CEO and founder of InVenture, describes as the most important objective of her latest venture.
According to InVenture, 400 million people lack access to financial services due to insufficient credit scores, which means that they do not have a clear idea of how much they earn, spend or need to save. In other words? They lack financial identity.
Without financial identity it is not only challenging to manage a business, it is almost impossible to secure loans and credit lines needed to grow a business.
Siroya invented InSight, an accounting tool that enables individuals and small-business owners in the less developed world to keep track of their finances and build a financial identity for themselves. InSight is operated through SMS and compatible with any cell phone, it allows individuals to input their daily earnings and expenses, and utilize financial tracking tools. This process provides proof of growing businesses and the data collected is made available to financial institutions; making connections between those in need and those able to provide large-scale loans.
Siroya was inspired to connect micro-business owners to the credit market by creating a cell phone operated credit scoring service due to the misconception that divided the two worlds.
According to Siroya’s research, financial institutions largely disregard micro-business owners as potential credit recipients due to their “untrustworthiness,” a judgment passed based on the amount of their transactions comprised of cash, which is inevitable without access to financial institutions.
Siroya wants to change this perception and decrease the percentage of micro-businesses that currently operate under considerable credit constraints, which is currently an estimated 85 percent.
This is a dream that is being realized. As micro-business owners in the less developed world start to utilize InSight, their “buckets of receipts” are replaced with income statements on their cell phones.
Perhaps the biggest impact of all, has been for some InSight users who have reported doubling their savings for the first time.
– Zoë Dean
Sources: TED Blog, InVenture
Photo: Vintage 3D