Boost Capital: Financial education data de-risks and expands small business credit
Innovation Fund Winner
Testing the viability of a virtuous circle in which businesses performing well in financial training are rewarded with better access to financial services
Why this program?
Why this program?
- Access to finance is critical to the growth of small businesses. Yet they are notoriously underserved with credit; the global small business financing gap is estimated to be $5.2 trillion every year. Most financial services providers deem small businesses too risky or expensive to serve.
- Strive Community and Boost Capital believe there is an opportunity to de-risk small business financing by using learning data in credit underwriting. If we can prove that small businesses engaging in training are more creditworthy, there could be global impact.
- Micro- and small businesses need money and expertise to increase their resilience and grow. This project will test a model that could support access to both: financial education could help entrepreneurs reduce their risk profile by becoming more financially savvy, better qualifying them for affordable financial services.
As part of our Strive Community Innovation Fund, this program seeks to test a correlation between financial literacy education and loan performance. If we can prove that small businesses engaging in financial literacy education programs are lower risk for credit default, financial services providers worldwide could be incentivized to connect education programs to their lending decision engines. This could result in more financially savvy small businesses with access to more affordable loans around the world.
Currently, microfinance banks and rural money lenders do not differentiate well between high-risk micro-enterprises and low-risk ones, and so either offer services at overly high interest rates or choose not to serve this segment entirely. Providers rely on in-person qualitative assessments of an applicant’s financial sophistication and lack a robust quantitative mechanism for assessing their creditworthiness. Training is mostly provided offline, en masse, with no personalization and no rewards for customers who improve their financial understanding. The result is a lack of scale and interactivity in the offering of both credit and training.
To test ways to address this gap, we’ve partnered with Boost Capital in Cambodia, where two-thirds of enterprises report that access to finance is a challenge to their growth.
Boost’s platform enables customers to interact with financial service providers for loan applications, financial education, and savings products—all through chat and video calls. The company onboards customers through a chatbot, gives them a credit score, and then offers the most appropriate financial services products. Their product is built for inclusivity, allowing customers to access financial services 24/7, from anywhere, via messaging programs they already use and understand, rather than requiring them to download a new app.
Boost Capital has already tightly integrated financial literacy content into their proposition, to ensure that customers can safely take charge of their financial lives. Education modules are offered through chat and live digital learning sessions, all in local languages.
With support from Strive Community, Boost Capital will be able to connect these core offerings of financial services access and financial literacy education. Business owners will be able to distinguish themselves as responsible and improvement-oriented by engaging in financial literacy education and be rewarded with a tangible benefit: access to financial services with favorable terms. In turn, financial service providers will be able to sustainably offer access and discounts to these businesses by factoring financial education participation into financial service underwriting.
It is expected that increased access to credit and savings, and the financial literacy education itself, will increase the resilience of small businesses.
This program will kick off in June 2022, and insights will be shared with the community by June 2023.
About Boost Capital
Boost Capital is a platform that enables small businesses to access financial services and learning through smartphones. The company is on a mission to make it cheaper and easier for people globally to access microfinance services and financial education by utilizing technology. Boost has been recognized globally as an innovator, winning the Fintech Innovation Challenge 2021 and being selected as one of the the Inclusive Fintech 50 in 2021.
“Thanks to the Mastercard Strive Innovation award, Boost Capital will be able to deliver financial services and education to 150,000 small businesses in Asia Pacific. We are excited that through this award, the Mastercard Strive Innovation Fund is highlighting a new generation of financial services and education solutions. Boost is so excited and honored!”
Co-Founder, Boost Capital
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