Alternative Lending in Mexico

alternative finance Mexico

Albeit a bit late, Latin America has finally joined the global fintech revolution and Mexico is right at the forefront. Mexico has the largest fintech ecosystem in Latin America ahead of Brazil (230 startups) as per a recent report published by IDB and Finnovista in the second quarter of 2017. Alternative lending saw 41 startups and […]

alternative finance Mexico

Albeit a bit late, Latin America has finally joined the global fintech revolution and Mexico is right at the forefront. Mexico has the largest fintech ecosystem in Latin America ahead of Brazil (230 startups) as per a recent report published by IDB and Finnovista in the second quarter of 2017. Alternative lending saw 41 startups and accounted for 17% of the total.

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Mexico was the largest player in the Latin American market with a volume of $114 million in 2016. The marketplace/ p2p lending model saw a 6x growth with over $40 million in 2016 lending.

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Alternative Lending Regulation in Mexico

The fintech lending industry enjoyed little to no regulatory oversight in Mexico, but path-breaking growth made it necessary to have safeguards for the burgeoning market. Hence, in the beginning of December 2017, the Senate passed a bill called “The Law to Regulate Financial Technology”, and in the beginning of 2018, it will be presented in the lower House. If passed, the bill will help enhance financial stability and bring a clear and concise legal framework to alternative lending. It will also help improve credit access to millions of Mexicans.

Opportunity for Alternative Lenders

The majority of people in Mexico use Socaps (savings and loan cooperative societies) since they live in rural areas where there are no banks. As per Condusef data, only 800 municipalities out of 2,492 have bank branches. More alarmingly, Mexico had just 1.5 bank branches per 10,000 adults compared to 4.7 in Brazil in 2016, according to the National Report on Financial Inclusion. Furthermore, only 39% above the age of 15 have bank accounts as per data from the World Bank. These numbers clearly suggest Mexicans are underserved when it comes to banking activities, which presents a huge window of opportunity to the fintech lending sector.

Leading Fintech Lenders

  • Kueski – Kueski was founded in 2012 by Adalberto Flores and Leonardo de la Cerda. Its headquarters is in Guadalajara, Jalisco, Mexico. Kueski is the online lender for the middle class of Mexico and Latin America. The company uses big data and advanced analytics to approve and deliver loans in a matter of minutes. The company has become the fastest growing platform of its kind in the region and has raised almost $39 million. It offers loan ranging from $1,000-$2,000 and term ranges from 1-30 days.
  • Konfio – Launched in 2013 by David Arana and Francisco Padilla, Konfio is headquartered in Mexico City. It has raised $18 million from the Accion Frontier Inclusion Fund managed by Quona Capital, QED Investors, Kaszek Ventures, and Jaguar Ventures to strengthen the platform’s operations, grow its user base, and adopt corporate practices. Konfio is an online Mexican lending platform that helps financially underserved micro-enterprises in Latin America to obtain convenient and affordable loans through a proprietary algorithm. It offers loans ranging from MXN $10,000 to $350,000 for terms ranging from 4-36 months.
  • MiMoni – MiMoni was founded in 2008 and is headquartered in Mexico City. It has raised over $15 million in various rounds of funding. MiMoni analyzes submitted loan requests and approves them enabling its users to get access to benefits provided by the platform. Members are able to ask for loans whenever they need and after when they have settled their previous loans. It allows its users to make biweekly payments based on the amounts they have received as loans. It offers three loan amounts–$4000, $5,000 and $6,000–at an annual fixed rate of 401%.
  • Kubo.Financiero was founded in 2012 by Allan Seidman, Tomas Hernandez, and Vicente Fenoll. Since its inception, it has raised over $11 million in various rounds of funding. Kubo.financiero is a Mexican P2P lending platform regulated by local authorities including The Bank of México, CNBV (equivalent to the SEC in the US) and CONDUSEF. After five years, it is now one of Mexico’s leading P2P lending platforms with over 10,000 loans providing for a total of MXP$254m (USD$14m) and around 1,000 investors funding 60%-80% of the total loan value over the last 18 months. It issues loans ranging from ~US$200 to $25,000 with payments being made weekly, bi-weekly, or monthly over 16-36 months. All borrowers have a minimum score of 620 with the Buro de Crédito (equivalent to FICO).
  • Yotepresto – Started in 2014 by Luis Chavez, Yotepresto has raised $1.2 million in various rounds of funding. It is the fastest growing Mexican-based marketplace lending platform connecting individual and institutional investors to near-prime borrowers applying for a personal loan. It has more than 130,000 registered users and has originated $75 million in loans so far. It offers loans ranging from MXN $10,000-$300,000 with terms ranging from 6-36 months with rates starting from as low as 5.9%.

Apart from these leading players, there are a few more alternative lending platforms, such as Aspiria, El Buen Socio, Credilikeme, Doopla, Finv, and Cohete. These lenders are trying to break into the untouched Mexican market.

Conclusion

With new legislation set to roll out, and leading international players like Startupbootcamp FinTech using Mexico as the launching pad to establish their foothold in the Latin American market, it is easy to conclude that Mexico is set to be the fintech hub of the LATAM region. Considering many social and economic factors support the fintech-lending ecosystem, there is no doubt VCs and investors likewise will be lining up to fund and support altermatove lending startups in the region.

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Written by Heena Dhir.