InSight: Mobile accounting and financial inclusion in emerging markets

$100,000 | India | Stage 1

The problem: Micro, small, and medium-sized enterprises (MSMEs) cannot secure the growth capital they need to expand into formal employment-generating firms. An estimated 70% of the 365 million to 445 million MSMEs in emerging markets are un-served or underserved by financial institutions. Because most of these businesses do not have the financial tracking systems that lenders use to assess their creditworthiness, it is too risky or too costly for lenders to consider their applications. 

The solution: Award-winning social enterprise InVenture is piloting an SMS-based tool that will both allow small business owners to track financial data quickly and easily, and facilitate lenders’ assessments of their creditworthiness and management of their loan repayment.

Cost-effectiveness:  Current data suggests that the financing gap for Micro, Small and Medium-Sized Enterprises (MSMEs) is between $1.4 trillion to $1.7 trillion in developing countries. The data generation and financial tracking services that InVenture will provide are designed to both help owners better manage their businesses and help the financial industry better serve MSMEs.

If small businesses are to be engines of an economy, they need access to growth capital. On the flipside, if financial institutions are to lend to small businesses, they need information about potential borrowers, but not at too burdensome a cost.

There are as many as 311 million small businesses who cannot secure the financial assistance they need to expand, in part because they lack the financial literacy and simple accounting tools and other resources needed to apply for traditional capital. Having outgrown small, high-interest micro-loans, they are in need of the next tier of financing: expansion capital in the form of individual loans. Current data suggests that the financing gap for Micro, Small and Medium-Sized Enterprises (MSMEs) is between $1.4 trillion to $1.7 trillion in developing countries.  Potential lenders of expansion capital, however, are dissuaded from offering the service by the high cost of evaluating and monitoring these loans relative to the loan size. 

InVenture, an award-winning social enterprise, is developing a two-pronged solution to this information problem:

1. With its partners, InVenture has developed a text-based financial tracking tool called InSight. It can receive and process data from managers of small businesses, to assist with daily accounting, budgeting, and tracking loan balances, and works on any mobile device that sends and receives text messages. 
2. The data from InSight can be shared with financing organizations to help them evaluate the creditworthiness of loan applicants, and monitor performance of existing borrowers in their portfolio. InSight is designed for licensing to MFIs, NGOs and other social enterprises as a flexible data collection tool. The data will eventually be provided to rating agencies and government organizations to create a standardized credit scoring system for business owners seeking new financing at competitive rates.

With support from DIV, InVenture will pilot the InSight tool in India, where it aims to serve 10 financial institutions  and reach 500,000 individuals by 2014. InVenture will evaluate the tool’s ability to increase financial literacy among users, as well as measure micro-business growth and savings rates. 

India’s 145 microfinance institutions, with 31.7 million active borrowers, is a market that is projected to grow by 10% per year. As a first mover in the business of outfitting lenders to easily monitor small loan performance and help small businesses track their financial performance, InVenture plans to scale rapidly. Within five years, InVenture aims to help 10 million people who currently rely on the informal financial sector obtain credit scores.

To learn more

• Check out graphics that explain the InSight tool
• Meet the InVenture team
• Read InVenture Founder Shivani Siroya in The Huffington Post