Of the 900 million cellphone subscribers in India, 400 million lack a financial identity, and specifically, credit scores. Imagine trying to get a loan without a financial identity. Imagine how complicated it is for banks and microfinance institutions (MFIs) that are trying to lend to the bottom tier.
That’s what is driving Shivani Siroya to build a social enterprise, which offers people an easy way to get a credit score—through a mobile phone and SMS. Her one-year-old company, InVenture, offers a financial product, InSight, which goes beyond just credit scores. It enables individuals to send their financial data via SMS and in return get a breakdown of their expenses, costs, transactions—basically a simple analysis of their monetary lives. Currently, InVentures has 6,000 users in south India.
Siroya compares her venture to Mint.com, a seven-year-old company that dissects her financial life into convenient charts to see how her major expenses—rent, food, travel, entertainment—stack up. She's applying that same concept to the customers she's working with in South India, giving them money management tools and financial literacy.
"Why is it that we in development just say, 'We know this will be useful for you?' Instead, we need to switch the power to the user, and really make them a part of their own financial planning for the future. It's a switch in attitude and respect," Siroya says.
InSight has proved helpful not just to individuals and small businesses but also to lenders. It reduces costs for the lending institutions by outsourcing field staff and due diligence to InVenture; it helps lower default rates, which recently have seen an increase among MFIs; and it increases profit margins for them. So far, three financial institutions, including Muthoot Finance and Vistaar Finance, in India have signed up to receive InSight's credit scores.
InSight can procure a credit score from 30 days of financial data. Most individuals are aiming for loans ranging from 35,000 Rs to 3 lakhs ($650 to $6,000). These are not seed MFI loans, which are generally group loans, Siroya explains. "Rather, this is a growing market of individual loans, which have considerable risk and need more credibility, which is why a credit score is critical."
Mike Catalano, managing director of EMQuanta and an expert in mobile financial platforms, takes Siroya’s point further, noting that InVenture is not only offering a service to low-income communities but also collecting data about a demographic that has been cash-based and hard to analyze due to lack of data.
“InVenture has a unique approach to streamlining household economic data collection,” he says. “Typical household economic surveys may include credit worthiness question biases, and may not evaluate the acquisition of new household assets for determining an appropriate credit amount.”
Leveraging the mobile phone for InSight, household respondents have much more than a loan disbursement as the carrot for motivation. Mobile subscriber users can now own the process of providing their own meaningful granular data based on actual economic transactions occurring across their daily lives. A dashboard of data, Siroya explains, is what brings this innovation full circle. It’s not just about getting people to use InSight, it’s also about the direct link to financial institutions that can offer people loans and other financial services. It’s also about the data gathered, says Siroya, which can help the development and finance sectors understand a massive market that’s been largely neglected by the credit industry. This data is beneficial to nonprofits, international organizations, any institution targeting that market.
Jonathan Hughes, general counsel at Barclays and an adviser to Siroya, agrees. He believes the potential for the InVenture market is near limitless—not only is it apt for India and Kenya but also for low-income communities in East London, downtown Los Angeles, or Harlem, New York. In other words, it is not restricted to the bottom of the pyramid.
Looking forward, Siroya is hoping to partner with nonprofits in areas such as health and education. InVenture’s mobile platform can provide information to its users about education options for their children or local vaccination services. But that’s another project for the new year, says Siroya. For the moment, the InVenture is focused on serving a cash-based society that needs more innovative approaches to financial literacy and money management.