Empowering Micro and Small Business Entrepreneurs through Financial and Climate Resilience: Why We’re Excited About Ábaco
In Central America, small- and medium-sized enterprises (SMEs) are the backbone of export-oriented, agriculturally driven economies under increasing pressure due to climate change, yet they face critical barriers to growth. Ábaco is bringing the best-in-class global fintech building blocks to this segment for the first time.
The Market Need
Access to affordable, flexible, and timely working capital remains a significant challenge in Central America, particularly for SMEs and micro-SMEs (MSMEs). These enterprises are crucial to the region’s economy, representing about 90% of all businesses and accounting for over 60% of employment.
The region is also heavily export-oriented given the important role agriculture plays in the economies, with exports as a percentage of GDP exceeding 40% in countries like Costa Rica, Nicaragua, Panama, and Honduras, and 31% and 19% in El Salvador and Guatemala, respectively. Businesses in these economies struggle with cash flow due to long payment cycles from international buyers, often ranging from 90 to 120 days. Exporters typically transfer payment delays upstream, which affects the smaller suppliers, cooperatives, and producers in the long-tail of the supply chain. These entities are often left without the funds needed to sustain or grow their operations, create capital buffers to withstand shocks, and invest in more resilient models to plan for the future.
Despite their importance to the economy, smaller businesses with financial needs ranging from $700 to $30,000 USD are typically excluded from formal credit markets. These micro-entrepreneurs are often forced to either forgo growth opportunities or resort to borrowing from informal lenders charging exorbitant rates exceeding 8% per month. The capital scarcity is historically more pronounced in rural and agricultural sectors.
Moreover, the lack of digital solutions for efficient credit assessments and loan management further hinders the ability of financiers to provide effective support to a wide range of MSMEs. Inefficient manual processes often lead to weeks or months of delays in loan approvals, exacerbating the financial challenges faced by these businesses.
The Solution
Ábaco is reinventing financial services for the region’s long-tail suppliers — suppliers that comprise 80% of corporate supply chains but are excluded from the financial system.
Ábaco allows every growing company to reach its full potential by simplifying financial management and access to capital through its all-in-one digital platform. By leveraging existing electronic invoicing and tax infrastructures across Central America, Ábaco is able to provide low-cost, real-time credit analytics to automate invoice factoring for underserved MSMEs and SMEs. Not surprisingly, the logistics and agricultural sectors have quickly become its largest customer segment, representing north of 30% of the total portfolio.
Founded by Carlos Villalobos, Alejandro McCormack, and Moises Hasbun, Ábaco’s leadership team has an impressive fintech background in some of the leading small business finance fintech players, regionally and globally. All from El Salvador, the founders have strong knowledge of the financial ecosystem in the region and have been involved in scaling some of the leading fintech companies including Jeeves, n1co, and C-Presta in Latin America and Raisin in Europe. Their combined experience and commitment to the region’s economic and social development make them uniquely positioned to understand and address the local market dynamics and networks.
Ábaco currently provides three core products, with intention to extend into additional product verticals over time based on their customer needs:
- ProntoCash: A real-time digital factoring product for accounts receivables which offers instant lending decisions against customer invoices sitting in receivables. Payments are made directly to Ábaco by the MSMEs’ clients upon invoice due dates.
- AbacoPay: A digital expense management “confirming” product for accounts payables cash flow management which provides financing to export-oriented businesses who need additional working capital extensions before paying their long-tail vendors, using a web-based interface.
- CashX: A factoring solution for micro-enterprises who aren’t yet part of the Ábaco network, which helps convert their accounts receivable into cash.
In MercyCorps Ventures we found a partner that aligns fully with our vision for a more prosperous and sustainable future for SMEs in Latin America. We are particularly excited to continue making the most of MCV’s extensive expertise and platform support as we execute on our impact goals.
Alejandro McCormack, co-founder
By leveraging access to digital invoicing and tax platforms in each market, business bank accounts and expense management dashboards, Ábaco is able to make real-time lending decisions, streamline credit assessments, and enhance portfolio management, significantly reducing the time and cost associated with traditional financing methods while driving down default rates into low single digits. By doing so, Ábaco is able to meet customers where they are, ensuring more inclusive financial support.
Since launching in July 2023, Ábaco has originated $6.5 million in loans to over 230 companies, achieving a 38% month-on-month growth rate. Their technology allows for automated underwriting and credit risk analysis, independent of market segment size, industry, or location. This scalability, combined with lower overhead costs, enables Ábaco to tackle smaller transactions efficiently.
Investment Rationale
Over the last several years, we have been focused on the intersection between digital financial services and financial and climate resilience. Ábaco lives at the center of this thematic focus area. Their innovative approach empowers MSMEs and SMEs by providing access to affordable, flexible, and timely working capital in sectors crucial to, and entirely underserved by, the Central American market. This not only enhances their growth potential but also strengthens the resilience of value chains in the region.
Ábaco’s commitment to economic development, coupled with its best-in-class digital solutions, positions it as a crucial player in addressing the unmet financial challenges faced by small businesses in Central America.
We are excited to be joining some of our most respected VCs in the region — Caricaco Capital, Innogen Ventures, and leading angel investors — to support their journey to driving transformative impact for businesses and economies.
