Catch-22 for unbanked: how can billion people find the way to the global economy
The catch-22 is a paradoxical situation from which an individual cannot escape because of contradictory rules. The catch-22 of modern banking is that if you need a credit, you need a credit score, and to get a credit score you need a credit. Logically enough, banks have to spend hundreds of dollars to scrutinize potential client’s credit worthiness. For example, in US banks pay $ 200–300, in Russia $ 100–150 for one loan issued, and wasting money is not what they want. People who can not escape endless circle “credit vs credit score” are called “unbanked”.
Those who don’t have a credit score do so for many reasons such as low incomes, no collateral or a person to vouch.
According to the McKinsey, two billion individuals and 200 million micro, small, and midsize businesses in emerging markets today lack access to savings and lending service, and even those with access can pay dearly for a limited range of financial products.
It’s not like banks do not put efforts to assess the unbanked client’s credit worthiness at all. Many financial companies learned to use alternative ways to explore it. For example, in the UK a bank during mortgage availability assessment can examine all of your purchases and check-ins in pubs within the year to determine your alcohol expenses. In Mexico, Banco Azteca sends its agents to the homes of borrowers to take an inventory of stereos, TVs and other appliances they possess to support their loan application. Sesame Credit, rating firm run by Alibaba, sees over 400m active users a month and relies on users’ online-shopping habits to calculate their credit scores. These observations lead to the conclusion that someone playing video games for ten hours a day might be rated a bad risk; a frequent buyer of nappies would be thought more responsible. Therefore, any software solutions that are able to accumulate and analyze information from all these additional sources are predictable for fintech market.
McKinsey used its proprietary general equilibrium macroeconomic model and detailed inputs from field research in seven emerging economies that cover a range of geographies and income levels: Brazil, China, Ethiopia, India, Mexico, Nigeria, and Pakistan. Agency reported that some 1.6 billion unbanked people could gain access to formal financial services; of this total, more than half would be women. $2.1 trillion of loans to individuals and small businesses could be made sustainably, as providers expand their deposit bases and have a newfound ability to assess credit risk for a wider pool of borrowers.
Rather than waiting for a billion people’s incomes to rise and traditional financial institutes to extend their reach, emerging economies have an opportunity to use mobile technologies to provide digital financial services for all, rapidly unlocking economic opportunity and accelerating social development.
Access to the payday loan, fast, paperless, with a favorable interest rate is what making MicroMoney the solution of financial catch-22. MicroMoney is a global fintech company providing the access to payday loans for unbanked people in emerging markets and the access to the emerging markets audience for banks, trade, and financial organizations. Its guiding principle is “MicroMoney for people, Big Data for business”.
Nine of ten of Micro Money’s customers take their loan for the first time. All they need to get a loan is to install MicroMoney’s mobile application to their smartphone, to complete the loan application and to agree to process personal data. Scoring system will analyze thousands of points of personal information no longer than in a few minutes, evaluate client`s credit worthiness and make approval or disapproval decision. If the application approved money will be delivered on client’s e-wallet.
Being misjudged by people who never needed a loan, microfinancing is proving benefits for those, who make their living for on less than $5 a day. Lending services allow people to support their families better, to create an opportunity for investments or an own business. MicroMoney not only gives the access to those opportunities for financially excluded people but making a social contribution, raising financial literacy, explaining how to spend money wisely.
Aspiring to growth and development, MicroMoney is preparing to launch an Initial Coins Offering (ICO) to carry out the business plan of shaping the legal market for creating and maintaining credit histories from scratch. Billions of unbanked people are ready to be the part of the global economy, want to improve their lives and the access to financial services gives them this opportunity.