More than 50% of the economic activity is informal in Latin America, and so, because of that, they don't have access to capital for growing their businesses.

And what we are trying to do is to help out to Yeah, to make it a little bit more fair for economic growth for everybody.

Obviously, you can do it with a pen and paper, but you know, I can say from experience, or at least the experience that we have, that doing it manually really doesn't work! And so really our scoring, what we are building, is to try to analyse the informal business.

One of the key highlights for me is not necessarily something that you see in the impact report and on the first paragraph, but what do you do, for example, with war in Ukraine, and I remember that we had a project life funding, Mikro Capital Moldova, microfinance institution in Moldova. And I think we'd launched it on like a Sunday and Monday morning, the Dutch national news broadcaster as a headliner, will Moldova be next? Right?

That's not the greatest marketing for an investment product that you can get. And so we had an internal discussion, right? Do we pull the project off the website, because we always have to weigh investor risk versus what we think is right, the right balance for our crowd.

And we actually decided to leave it on there, but to allow all the initial investors already in there, we send them a message, we updated the project description that they could get their money out if they want, but we will keep the project on. And actually, it was one of the fastest funded projects on the platform for this company.

The paradigm of 'let's collect as much information on a customer ahead of time, try and score them, and then provide them with an unsecured product'. We just don't think that works as well as putting an asset in someone's hands, asking them to pay a small deposit. And knowing that once they have access to that smartphone device, it's actually going to improve their ability to make a living. It helps them power the hairdressing salon and helps them advertise their business on WhatsApp, you're actually improving their ability to earn a living and also then to pay back the instalments just a much more compelling and sustainable model for working in the markets where we want to have an impact.

I mean, behind this there is a very sophisticated predictive credit model and we make adjustments all the time to pricing and instalment plans, and we have a lot of investment on the connected estate IoT side. And our loan book actually has been remarkably consistent. And particularly when it looked over the last three years, despite massive disruptions, and it's also been resilient in the face of high inflation.

What happened was that, when we started providing the service, we guarantee the bad debts in the service. And that's why we start actively use different kinds of analytics to develop the different kinds of scoring systems. And these scoring systems will work very fast on the fly will make the scoring on the fly. We start from the basic one, and then we start to improve it till we now use machine learning for our scoring.

The technological approach for this task grows year by year.

In the first three days we provided over 700 credits in Azerbaijan with our first operator - we were not expecting such success.

We're talking in India of about over 50 million customers. So numbers are huge.

And this is only in India we're talking about. But even here, in Canada, also, you have some microfinance, a lot of people are involved in this. And there's some very large institutions in India, which does this.

But actually, I'm going to defy the odds, I'm going to still find alternative ways to grow my business.

And they've come to us, we've got them the funding products they need. And then the same banks that said no to them when they first started, now that they're doing 2/ 3/ 4/ 5/ 10 million in revenue, have come back to us, Lendoe as a platform and said, 'how do we now work with these clients?'... and that's why we call them underestimated.

And we have a number of examples like that.

There are great founders out there. They're great at doing what they do, which is running their business, but what they need is someone who can actually break down all of the options that are available to them, but also someone that can give them that confidence to actually apply once they've broken down those options - because the fear of rejection, the fear of the unknown, the fear of not knowing what you're getting yourself into, is often what prevents people from going ahead and saying, 'actually, I believe I can do this'.

We have a lobster-catching business in north Wales, and it's a story about a guy who was a scuba diver in Thailand and came back to be with his family and wanted to start a lobster-catching business and needed some money for some nets and lobster pots.

And it's like, yeah, ‘people helping people’, it still hasn't really changed from that. I just think, you're gonna see projects funded that are really organic and natural.

85% of folks have bank accounts, but only about 20% of them actually use the bank (for borrowing). They rely on other forums to meet their financing needs. These guys don't have access to credit.

As a startup, when we launched back in 2018, the lending market in Sri Lanka was $5 billion - and what we understood this from this 5 billion requirement, almost 40% relied on loan sharks and individuals who have very dubious practices of charging excessive interest rates, as well as very unpleasant collection methods.

And coming from a tech and a finance background, we realised there might be a potential for us to provide credit underwriting through a blockchain solution.

We always take a very commercial and common sense attitude to everything that we're lending on: if there's a solid business story as to why they want the money; if there's a clear route to how we think they're going to pay it back; and if there's an asset that we can secure against to make sure we've got something to go after if it all goes wrong,...then for me that's 95% of the underwriting there.

As oversimplified as that may sound that really is the truth.

Because I mean, ultimately, as a lender, what more do you want than a good business that's got the ability to pay you bac

How do we let brands get in front of first party data customers with the highest intent the world has ever seen? I mean, our click to sales ratio is 55%.

Brands are paying billions in marketing budgets, so that you can see the advert you then clicking the advert getting to their site or going to their store pulling your credit card out and paying billions in interest and fees to credit card companies to buy the products.

What we've done is we've sort of said, why don't we circumvent the middleman? Why don't we let brands rather pay our customers? In other words, use the brand's marketing budget to subsidise the cost of credit to our customer, and convince our customer to buy from that brand.

The whole equation makes more sense. The customer has more sustainable buying power, because the brand is subsidising the cost of credit to the customer. So the brand can make a sale.

Lenders want to wait until somebody has established their track record some place else, really proven themselves to be able to manage their debt, and then they want to jump on them and create a loyal relationship... well, that's a very expensive proposition, because it means you have to dislodge somebody from where they've been previously.

That's one of the things that we wanted to shine a light on is to understand, are these people really riskier? In other words, do you need to wait? Or do they reveal themselves pretty quickly.

And that's really what we found, is that based on the performance of consumers, when they open those subsequent products over the first two year journey, in many cases, they actually perform better controlling for credit score performed better than those that have established that track record.

And then the credit scoring engine started taking shape. And over, you know, Covid, after Covid, we started bringing defaults down from 50 to 40, 40 to 30, 30 to 20, 20 to 15. And then, you know, the tougher bit came because it was not only about the credit scoring, it had to be a lot of engineering, then it's about the experience of the consumer, how is the product structured, you know, the first interaction of the consumer with the company till after he or she has repaid, everything matters. How the lead generation happened, how is the customer support interacting with the customer, or what has been experienced in app, what is experienced at the point of repayment, you know.

We've seen many times if the customer faces challenges in repaying whether or not it was our issue or an issue at the wallet side, the customers could turn rogue.

There was so much to it that we learned over time. And you know, when we actually closed our lending book pre-acquisition, the latest cohort actually close it under three per cent default

The refugee population is very much not a monolith, right. In fact, it's a very diverse group. It's 90 million people who broadly are all tied together by the fact that they've been forcibly displaced from their homes, whether to another country - and thus have become refugees - or within their existing country - and are those internally displaced. So if we're looking at this population of 90 million people, similar to any other kind of group or population of the size, the needs are going to be diverse and differ from different people and from different communities.

Refugees come from different socio-economic backgrounds. They are or were doctors, lawyers, restaurant workers, employees, brothers, sisters, mothers, fathers, and so on. And so we often see in the media this image of refugees in a refugee camp, living out of a tent - for many refugees, that's not the reality, right? They've settled in a city or a town or a village. They're not in a camp where they're receiving direct humanitarian assistance, they're looking for opportunities to start small home-based businesses, retail out of home, selling food products, sewing businesses, and so on. Many are looking to start small shops or kiosks even refugees in camps, right?

That's the way this has been for the last 20 years in the United States. And it's only the last five years that things have really kind of changed. Unfortunately, we've been at the front of it, we're enabling the bank account opening. So a bank account origination for any companies within the United States that are looking for bank accounts, either in hemp hydroponics, cannabis, any kind of frontier industries, those kinds of markets are very difficult for those guys to get bank accounts, we have multiple banks, we can introduce them to and then on the backside, where we make our money is in the lending process.

So when somebody like Brendan wants to expand his store, or he wants to go grab some inventory, or he wants to buy some lights, and he needs to finance it, you'd come back to Payzel all after you've gotten your bank account all squared away, and you'd say and I'd like to have some access to some lending.

So what I actually did was, I saw this potential for people who were underserved in a multitude of different ways to actually be empowered and take control of their own future through social impact businesses, which I think microfinance really comes under. And so what I started doing is leveraging my background in ERP solutions and tech platforms, and got involved in microfinance or banking tech platforms. And so it was really combining the two.

But what was really interesting was that, everywhere I went, despite the fact that countries were so different geographically and demographically, that I saw this underlying resilience and determination amongst people who just didn't have opportunities presented to them on a plate, and that given the right support, and the right tools at the right time that they could actually then forge their own futures, pretty much everywhere I was going, which was from Sierra Leone to Pakistan to Vietnam.

I had a conversation with the Mortgage Club yesterday and it's the same conversation. It's, you know, how do we make sure how do we bridge the gap between the innovation that we're bringing to the market versus what they know, and what their what their their fears could be based off of past products that have been a market. So really, it's it's right now. It's about communication. It's about patience. It's about empathy for us. And we want to make sure that we partner with these intermediaries because they provide the crucial advice to first time buyers who are vulnerable in this process. They've never bought a home before and the home buying process is to put it simply an absolute nightmare to go through. So a broker that can, you know, take a accurate financial snapshot for that customer, break down the process a bit for them, make them feel comfortable about them, you know, making the largest purchase their life is important for our customers. And that's why we want to make sure we partner with them.

Mukesh Bubna 7:30

Sure. First of all, we've done a slight pivot and "led grow, borrow grow" we've changed that very recently, so it's not on our website, but we moved to "delivering financial happiness".

What does that mean? From an investor point of view, in India, the fixed deposit interest rates have plummeted in the last two years from 9% to 5%, while the inflation rate runs close to 6% officially (unofficially it runs much higher). And then there's a 35% tax on the interest income. So you can imagine anybody keeping money in a bank on a fixed deposit is losing money in India. So our proposition to them is risk adjusted yield - we should be able to give you 2x of fixed deposits. And that's happens, right? Your money is growing. And that's a good thing to happen for you.

We tell our consumers to diversify across at least 100 borrowers. Now, that gives them a comfort of ability to absorb any shock from delayed payment or delinquencies.

Second is that we also have certain innovation, what we have launched also is a monthly income plan. So if somebody brought somewhere around 5 million Indian rupees on our platform, we are able to give them an income of 50,000 rupees a month, which goes back to their account for their own need, whether they want to shop they will travel, whatever they feel like. No, it is not 50,000 like a fixed deposit system. It's an arrangement giving you a ballpark on our app. Investors can start investing in less than two minutes, and can fun transfer 24 by 7, I don't have any human intervention required anymore for any investor, individual institution to on board themselves.

Now on the show, we love a credit score and the Thai credit bureau score is one that I'm obviosuly very fond of, having helped roll it out initially a few years ago. But for those that are unfamiliar with the market, who are maybe in the US or the UK, is that a score that's going to be very familiar to them? that looks and operates like a score in a big developed market?

Marco Chu 15:30

It would feel pretty much the same. I mean, it is still a credit score, it gives you a number that tells you how risky that particular consumer is. Nothing has really changed in that aspect. But in the back, there's a lot of changes, different countries have different credit markets, and each is a little bit unique in their own way. I mean, for example, in the US, you will have vast amount of auto loans, because you need to have a car in the States versus in Singapore or Hong Kong where not everyone will have a car.

And so is Thailand, right? Thailand is, I would, say credit under-served. But considering the size of the adult population, and among people that actually have a credit history, you can expect that a lot of them don't have conventional consumer lending products we would imagine in developed countries. One thing that's very interesting that they have, and we recently included in the score is, agriculture loans. Thailand have a good part of the GDP in agriculture, and farming loans work differently compared to most consumer loans. And we simply need to add that to serve our credit inclusion mission.

When people look at your website, they're going to see the line "we provide repayable finance to help social enterprises" and for most of us, the first time we read that line, it's going to stick a little bit and people might be thinking why "repayable"? Why are you lending money to these charities, isn't it nicer to give a donation that doesn't have any strings attached?

Yeah, so lending has a few advantages over grant-giving in certain situations. What we're trying to do is to help organisations become better at doing what they do, becoming more efficient, so that either they can do things they weren't able to do before, or they can do them more efficiently - because they've been able to build some infrastructure, or expand into a new area, or possibly set up some trading activity which generates income, if that's what they're looking to achieve.

We try and fill a gap. It's very difficult to raise grant funding for anything that isn't directly related to a charity programme. Anything that has the word 'admin' in it is the anathema to many philanthropists. And that's where we come in, because we believe that a well run organisation needs opex, it needs capex.

So even if that exists, it's very hard to get women to complain. And often the complaint process puts the person that complains, the woman, in the limelight, or investigates the complaint in an insensitive way. And so there is, you know, there is all incentive to stay quiet and just stop using the service. And that's a problem, because what we need to see is actually greater use of the service. And that then leading to better life outcomes in some way.

So there's a lot that needs to be done by policymakers and regulators in creating easier complaint processes to check if the information that's being asked for by lenders is necessary and proportionate to the services that they provide. So does the lending app really need access to my phone messages or phone gallery or call records? And if you are accessing that information, then how you're going to use it, which then leads us to think about data rights. So there's a lot that needs to be done, you know, in unpacking, what does the safe and secure online environment mean? And how do we create that?