RapiCredit Receives $7 Million Injection to Meet Microcredit Demand

  RapiCredit

Colombian fintech firm, RapiCredit, has received a $7 million investment boost to meet the increasing demand for microcredits. The funds were acquired through a portfolio purchase by New York-based financial entity, Almavest, as part of RapiCredit’s accumulated debt.

RapiCredit’s Journey in Microcredit Sector

RapiCredit was founded in 2013 by Daniel Materón and Esteban Saldarriaga, at a time when “digital credits” and “fintechs” were not common in Colombia. The firm began operations on April 1, 2014, and since then, Materón has managed the company, which initially had its headquarters in a small office in Chapinero.

The fintech firm primarily targets individuals in socio-economic levels two and three, who have limited access to traditional banking services and whose monthly income averages 1.5 minimum wages.

Financing Challenges and Strategies

Obtaining necessary financing to expand their credit coverage was not a simple task, as the population they aim to serve is not considered prime and is often treated as a high-risk group. Despite this, RapiCredit has granted nearly half a billion pesos in microcredits this year, receiving a little more than half a billion in return. According to Materón, RapiCredit provides flexible payment methods, allowing clients to effectively settle their debt and avoid being reported to risk centers.

The interest rates on RapiCredit’s microcredits stand at 35% per annum. The company’s profitability, however, lies elsewhere. According to Materón, the company only becomes profitable with a new client after the third loan. The firm has a high rate of repeat customers, with eight out of ten clients taking a second loan, and these clients taking an average of 5.3 loans per year.

RapiCredit’s Expansion and Future Plans

Over nine years, RapiCredit has experienced exponential growth, beginning its first year with just 1,300 granted credits. This year, they have already granted 1.3 million loans and anticipate granting 2.7 million in 2024. The loans now total more than $200 million, with an average loan of more than $60.

RapiCredit grants a microcredit every 28 seconds, according to company figures. To grant this massive amount of credits, they do not prioritize information such as credit scores, allowing clients to quickly and easily obtain loans despite many of them not having favorable credit scores.

This easy access policy has opened up opportunities to serve the unbanked population, using an information system that understands customer payment behavior with the help of artificial intelligence. Their goal is to lend money to those who only have an identification card and a bank account. To achieve this, they analyze a client’s debt history and their ability to take on the debt they request.