Ricardo Godinez
CEO
Enso Fintech
/
Startup Contributor

Building a Better Home Means Building a Better Future

By Ricardo Godinez | Thu, 03/03/2022 - 11:00

It’s a common picture today: individuals sitting in their home offices, Zooming into business calls with their colleagues, who are also at home, likely wearing pajama pants below their collared shirt or blouse.

Sounds nice, right? Many of you reading this can likely relate. It’s also quite possible that once the pandemic hit and your working life went remote, you rushed out, handed over your credit card and brought home a nice new working setup. Or maybe you went to your bank and arranged a loan to do a little renovation and optimize your space. At the very least, you had those options.

In Mexico, if you can relate to any of that, you are among the lucky ones. The fact is that a great portion of the Mexican population does not have the ability to improve their living situation because they have no or little access to banking products and services, from credit cards to loans.

The numbers tell the tale: Around 42 million Mexicans, or about 33 percent of the country’s population, are unbanked, meaning they have neither a checking account nor a savings account at a bank. For comparison, just 5.4 percent of Americans are unbanked. No bank account often means no access to loans, preventing many individual Mexicans and small businesses from investing in their future.

When it comes to its unbanked population, the World Bank says Mexico is not only underperforming the rest of Latin America and the Caribbean, it is also below other OECD countries with similar economic development. The World Bank points out that only 37 percent of adults (identified as the population over 15 years old) have bank accounts. By comparison, 54 percent of Latin Americans have a bank account. The figures for Mexico’s economic peers like Kenya and India are even starker: 82 percent and 80 percent of those populations, respectively, are banked, according to the Economist. It gets even worse for Mexico when considering digital payments, with only 32 percent having made or received such payments.

On the business side, the numbers are equally disheartening. According to the World Bank: “In 2019, credit to the private nonfinancial sector was just 42 percent of GDP, far below the 143 percent average for emerging markets worldwide. MSMEs (micro, small and medium enterprises) provide 70 percent of the employment, but only around 11 percent use bank credit.” Behind the figures, the bank says, are affordability and access issues. In other words, the fees traditional banks charge is beyond the ability of much of the population to pay.

So they go without.

But they don’t have too.

Fintechs like Enso, are racing to fill the gap created by traditional banks and empower people, even those in the unbanked and informal economic sectors, to achieve a level of access to financial solutions that will improve their lives.

Our goal is similar to the concept of the Singularity University, where exponential technology is viewed as the gateway to giving “anyone, anywhere” the ability to have a positive impact. We want to provide technology that can rapidly improve a person’s standard of living.

For us, that means focusing on a niche area of the economy: construction and home improvement, which we believe provides the path to improving people’s lives and those of their families. It is a segment where simple financial solutions can have a real impact. Shelter and safety, after all, are basic needs. Unfortunately, many in Mexico have not had the ability to improve either. We hope to help change that.

But our solution is not just for individuals. Not only do people need ways to finance their home improvements but the material and hardware stores that provide the supplies need working capital and ways of financing their inventory. The country’s internet penetration and the widespread use of cellphones — about 70 percent of Mexicans have a mobile phone, the second-highest share in Latin America, according to a GSMA report — should provide these MSMEs with an opportunity to access money. That access needs to be easy and fast so they can seize every sale they can. Because of the different variations within construction, including materials, tools, electricity and piping, along with the variety of customers, end users and contractors, the needs are different so the fintech solution has to be flexible.

That flexibility will give small businesses choices. The fact is they shouldn't need to go to a bank to receive the funding required to improve their business, which would also provide an obvious economic benefit to the wider community. With the combination of fintech and the tools, such as cellphones and the internet, these companies are already using, they can have access to the funds they need.

We rely as well on the third-party big brands that provide materials, tools and construction products and which play a big role in supplying the more than 100,000 hardware stores in Mexico. These companies have built trust and have already contributed to the development of this market. The challenge for these traditionally nondigital companies is bringing it down to B2C with technological advances. While they have the incentive to integrate digital and technological solutions, the process is slow because traditional companies like these do not have a digital DNA or mindset. The first step is to change that culture within the company. Alliances with fintechs like Enso can quickly solve that issue for them, resulting in better opportunities for many. These alliances will be key to the goal of improving the wellbeing of Mexico’s households.

Educating people and businesses on the benefits will be another opportunity area for fintechs. No one wants a new product or service they don’t understand and providing them with the necessary knowledge to make the right choices, at both the B2B and B2C level, will require a physical presence, not only to educate but also to create trust.

Enso is looking to be an enabler in that regard as well. We want to help people and SMEs to improve their relationship with money by providing a new generation of agile and simple financial solutions. We believe that through technology, we can accelerate the access to financial opportunities in Mexico. We are building a digital financial ecosystem that will be so simple, it will multiply the number of people we impact.

To that end, the company has developed a fully owned digital payment infrastructure offering B2C and B2B financial services. Our company’s baseline strategy is to bridge the unbanked formal and informal economies. We have the opportunity to focus on the positive impact we can have in Mexico, including more employment.

At Enso, we understand firsthand the positive impact small businesses have in terms of job creation and economic security. We have also witnessed our families seeking capital to grow their businesses in good times and tough times.

Too often, small businesses can't invest, and therefore grow, because it's very hard to access capital. Enso aims to change that by enabling third party financial institutions to provide loans to those who need them most to deliver positive results for their businesses and for Mexico.  

Photo by:   Ricardo Godinez