The Smartphone Does It Again: Building Credit Scores For Microentrepreneurs
Tuesday, June 10, 2014
In 2010, when Shivani Siroya started developing an idea for a new microfinance model, predatory lending practices were changing the way people saw microfinance. Pioneer microfinance institutions like Muhammad Yunus’s Grameen Bank were groundbreaking, high social impact endeavors, but in recent years some microlenders had started to use the practice abusively, as a tool to exploit the poor. Ineffective risk assessment was also a factor in loans and payment plans that proved burdensome to borrowers. Thus, micro entrepreneurs often found themselves unable to repay their loans, and the results of this were often devastating.
Rather than viewing the possibility of effective microlending with cynicism, however, Siroya saw these problems as an opportunity to search for gaps in the system. She found that while 4.5 billion people did not have any kind of formal credit score that could help them qualify for loans, 90% of the world’s population did have access to mobile phones. So, Siroya thought, why not use that mobile access to give the underserved and unbanked access to a financial identity that can help them understand what they can afford and qualify for the resources they need? Now CEO of InVenture, based in Santa Monica, CA, Siroya has developed an app to put the unbanked on the map.