A Microfinance Platform To Improve Micro Entrepreneur’s Welfare
Microfinance has a long history around the world and for centuries has filled an important need. In fact, various forms of microfinance had a major impact on economic development in Western Europe in the 18th and 19th centuries. In the past 50 years, microfinance has started making an impact in Asia and Africa through organizations like Grameen Bank However, traditional microfinance has limited reach, and solutions have been targeted towards poor farmers and small business owners. Middle class consumers and business owners in developing countries have an unmet demand for credit, but the current financial infrastructure in these countries does not support credit underwriting.
The Problems faced during the Time Underwriting :Traditional consumer and business credit reports used for loan underwriting in developed countries are generally unavailable, and loans without proper underwriting will result in high loss ratios.
Lack of bank credit :Traditional bank loans are not available to the vast majority of the population in developing countries.
Microfinance targets the poor only Consumers :farmers, and small business owners in developing countries above the lowest poverty level have few opportunities to obtain credit
Solution By L-Pesa
The idea for L-Pesa was incubated for a decade, and the business was launched at the time four important market forces converged to allow for rapid scaling.
New tools allow for storage of vast amounts of data and extensive data analysis at a fraction of the cost from just a few years ago. Advancements in artificial intelligence provide new opportunities for automated loan underwriting. Blockchain technology allows for faster, safer, and less expensive exchange of value. Blockchain technology has just started to revolutionize financial services and will lead to enormous efficiencies over the next ten years – blockchain has been described as the internet of money and will do to financial services was the internet did for information and commerce.
Just a decade ago, there was very little data available on most of the people in the world. This has changed with the advent of social media and related trends. New tools have been developed to make this data useful for decision-making in loan underwriting. L-Pesa has developed a unique, proprietary credit scoring model based on user behavior combined with traditional and alternative credit data. L-Pesa competitors have developed their own proprietary models.