Marianela: Andres, thank you for taking the time to speak with us about Creci’s risk decisioning initiatives. Can you give us an overview of your recent work with Creci?
Andres: Many are talking about sustainable development. At Creci we identified two aspects that are neglected:
- The first is that small businesses can play a key role in furthering sustainable development – in fact, the United Nations has called them “vital in achieving the Sustainable Development Goals” – but have no easy to use tools to report their impact. Instead, the conversation around sustainability centers around large companies, including those that have become adept at rebranding themselves as sustainable, such as tobacco and oil companies. At Creci, we have developed an online tool for small businesses to easily report their social impact so that we are better able to drive financing to these companies from impact investors. We currently have provided debt financing to a portfolio of small businesses working on natural resource conservation, employment in distressed areas, and infrastructure development.
- As we know, it is often difficult for banks because of their business models and the regulations they face, to offer smaller loan amounts to developing companies that are developing.
We started Creci to offer a financial solution to SMEs that are furthering a sustainable development goal.
Marianela: You just talked about social impact – How do you define it? Could you explain in more detail how these companies generate social impact?
Andres: We define social impact as those efforts that further one or more of the United Nations’ 17 Sustainable Development Goals (SDGs). Our online tool is based on recognized benchmarks from well-known organizations for measuring compliance with the SDGs. Our tool provides a series of questions and options that probe an SMEs’s knowledge of the SDGs and how their operations align with them, if at all. At the end of the exercise, the SME selects one or more key indicators that they will commit to providing statistics on. These can include how many gallons or liters of clean water a company treats or how many women or low-income people they employ. With these numbers in hand, our tool can generate an impact report for each company.
Some examples of the impact being further by our companies include employment initiatives for indigenous populations; the construction of aqueducts for clean water delivery, the treatment of water; and conservation of energy in office buildings and homes.
Marianela: What’s your background? Tell us a little bit more about yourself and how you ended up founding Creci.
Andres: I am originally from a poor area of Colombia. My family immigrated to the United States when I was a child in search of better opportunities. I studied economics and literature in undergrad and went on to get a graduate degree in law. I practiced law for a number of years then went on to work at a finance company, but I have always been passionate about economic development in distressed areas. Last year, I decided to leave my career to found Creci and pursue an MBA. I wanted to work with entrepreneurs who want to have an impact in their community. Of course, this has a personal angle, growing up I saw how my parents both worked and took on micro-entrepreneurial projects to support our family. I want to support those currently doing the same or something similar.
Marianela: It´s super interesting to hear that your personal goals are very aligned with Creci´s objectives and that´s why I would like to hear from you – What challenges or needs did you face in your industry that led you to look for a solution like ours?
Andres: Starting Creci, I knew that it would be necessary to establish a foundation that was scalable. This means having the proper internal processes, whether operational, technological or risk that are optimized to support growth. I have seen companies struggle during the growth stage because they didn’t implement the proper scalable processes.
We knew we needed processes that could analyze data and make decisions in real time, for thousands of applications across many decision points. We still see in the industry many companies handling these processes manually, and we did not want this for Creci. We want at the outset to implement those resources that will allow us to effectively grow and best position us for success. We have evaluated several technology solutions, and decided that Provenir provided a great tool to support our risk-decision processes.
Provenir allows us to implement our own design for certain processes whereas other tools did not allow us to do so or were otherwise oriented to large financial institutions. Provenir is adapted to the needs of small fintech and startups, making it more flexible both in terms of solutions and costs.
Marianela: What types of data is Creci using to determine credit approvals? Are you using any alternative data, like looking at cell phones, or social, anything like that?
Andres: We always take into account the following two aspects at minimum:
- Repayment capacity. This is for the most part a financial analysis of the company that relies on assessing a company’s financial, bank, or tax statements and the like and deriving key ratios, indicators, and decision points that we believe are most relevant for our analysis.
- Willingness to pay. This is where alternative data is more useful, since we are now trying to gauge how a client is likely to behave. In other words, this is more behavioral. Credit histories and scores help here, but we are also looking to implement ways to assess a company’s marketing, social media, and community footprint in order to determine a link, if any, between those activities and a company’s credit worthiness. Key to this is being able to feed the data we find to our databases in a way that allows us to work with Provenir to import our risk decisioning processes.
Marianela: I know the implementation is very recent and you are currently under some testing, but what results are you now seeing since implementing our product? What business processes does this solution enhance, and how much does it reduce the cost and time to complete these particular processes?
Andrés: It is providing a great solution for us, because it allows us to build around Provenir's risk decision platform. With Provenir, we can build rules without the need to code them ourselves.
Fully building your own risk decision platform requires a lot of backend technology work. Also, once written, code can be difficult to change. Provenir allows us to implement decision points without much of that work.
Marianela: How do you envision your pipeline/company growth in the upcoming months? How do you think Provenir can help to achieve these goals?
Andres: We hope to at the very least double our portfolio amount this year and thereafter continue growing at a brisk pace. Ideally, we will reach a point where we are assessing many thousands of applications in short periods and to do so, we need a platform that can make many decisions quickly. That requires a backend that can pull data from third parties, organize that data along with the information provided by our clients, and then make a number of decisions by applying a number of rules. This is where Provenir can help us.
Marianela: Lastly, we also want to hear about the trends you see in SME lending for the Latin America market. Tell us how those are driving your vision at Creci and what direction you took based on your evaluation of these trends.
Andres: Before the Covid-19 disruption, we saw that the fintech industry was rapidly growing throughout Latin America. Of course, this increased competition and disruption will stress a number of companies. I am interested to see how this impacts the industry.
Overall, I personally think about how to build a company that can weather ups and downs, which means having a good core foundation that is scalable, can operate leanly, and that makes risk-adjusted decisions in real time.