Focused on offering low-value loans, the free and short term online platform RapiCredit started to operate in Colombia during 2013. Now, 500,000 loans after, the fintech wants to raise the limit of its credits, as well as expand into other Latin American countries.
Backed by a strategy of partnerships with banks and investment firms, RapiCredit wants to reach Peru, Ecuador, and other countries of the region as early as before the end of 2020. “Currently, we have expectations with international funds that are looking for a company to invest and we also have approached banks in the region to start structuring RapiCredit development initiatives in other Latin American countries, since the population of the region is very similar,” said Daniel Materón, CEO of the fintech, to Colombian media outlet La Republica.
To support RappiCredit’s expansion, the fintech would need about $25 million of funding – something that, according to the executive, would boost financial inclusion in the region, especially among mid to low classes. According to Materón, the fintech helps to reduce entry into the illegal credit market, known as the ‘drop by drop’, and allows people to organize their method and payment time considering their income. “To those people who use the economy of ‘drop by drop’, we are pushing them into the formalization of the financial world.” At least 70% of RappiCredit users who agreed to a credit benefit later managed to enter the traditional financial system to opt for other services thanks to the positive record they obtained with the low-amount loan.
“The loans seek to cover needs linked to the acquisition of goods and services for this population that, due to their capabilities and income, aren’t able to make savings for it. We achieve that the individual, through adequate indebtedness, can fulfill his obligation without dirtying his credit history, with a term of 69 days,” said the CEO of the platform.
For now, the fintech offers a credit line for a minimum amount of $110,000 COP (about 33 US dollars) to a maximum of $750,000 COP (220 US dollars), but as of April, wants to raise this limit to $2,000,000 COP (690 US dollars). The payment conditions depend on each client’s capacity, and RappiCredit sets an interest rate at an effective annual rate of 25% and calculates it daily, depending on the term the consumer chooses to pay the loan, as long as it is less than 30 days.