How Fintech Can Promote Sustainability, Impact at Mexican SMEs

At this point, it is no secret that the planet has an agenda to meet to ensure a sustainable future for all. It is about a civilizational transformation in which, increasingly, topics such as sustainability and impact have permeated collective discussions and, of course, business talks. Studies, such as KPMG's “Expect the Unexpected,” reveal how population growth, the exploitation of natural resources and climate change point to growth that is not sustainable.

In this pendulum movement, there is a more or less general consensus that the vision of the future of business must reside in a latent need for the creation of models in which environmental, social and corporate governance (ESG) criteria play a central role in strategies, operations and prospects. In other words, acting now is not an option for organizations but, rather, a substantial imperative that must encompass everything.

SMEs and Corporate Responsibility

ESG principles were incorporated into the agenda of global markets in 2004. Back then, UN General Secretary Kofi Annan, called on the largest financial firms in the world to contemplate these criteria in its corporate responsibility. Since then, fortunately, more and more organizations are heeding the call.

One of the main signatories of these practices has been Larry Fink, CEO of BlackRock. On Jan. 18, 2022, the leader of the largest US investment fund in the world published his traditional annual public letter addressed to CEOs, in which he reaffirmed the idea of ​​stakeholder capitalism, saying that, as never before, it is essential to have a coherent strategy and a long-term vision, with a solid construction of deep links between leaders, collaborators and clients. The letter emphasized the need for sustainable business policies as a way to have sustainable and scalable firms that shape a future that is as promising as it is affordable.

However — and although the importance of being a company aligned with the issues of impact and sustainability is very clear today — there are relevant nuances that must be considered, especially since the business ecosystem, in the abstract, configures an immense universe with verticals anchored in all kinds of sectors and industries. The segment of small and medium-sized enterprises (SMEs) in Mexico acquires a major role, since from the outset it is the backbone of the economy, providing the majority of jobs and slices of the national GDP pie.

State-of-the-Art Financial Technology

Within this vital segment for the country, especially since the health emergency, ventures increasingly require growth opportunities that, in turn, cover the needs for impact and sustainability. This is where financial technology, driven by data, algorithms and artificial intelligence, is positioned as one of the most promising vanguards within the SME ecosystem. But how? A good starting point is joint strategies between B2B players and their stakeholders, where issues such as corporate governance, diversity and inclusion, and ethical and responsible products and processes are the spearhead of the fintech pillar.

At Konfío, we carried out the "Sustainability and Impact Report" in 2020, with which we sought to reflect important efforts to positively impact communities in the country, trusting in the potential of people and their companies to build prosperity together, with sustained growth in sales and productivity. A sample button in this regard is that according to the study results, the possibility of providing access to financial services to sectors that are usually less served by traditional financial institutions is essential.

In that sense, we found that 24 percent of clients trusted the platform as their first capital loan for their company. Reinforcing this idea, we add that of all the loans granted in 2021, 54 percent were destined for micro-enterprises, while 38 percent for small and 8 percent for medium-sized companies. Another noteworthy aspect in our desire to promote an open and accessible environment for all companies in Mexico is the result of the evaluation carried out by FUNDES, a consulting firm specializing in SMEs, where after evaluating the credit algorithm we use, it was found that the gender variable has no influence at the time of authorizing or rejecting a loan.

In conclusion, there are many reasons to address the sustainability agenda and measure the impact. There are organizations that do it to comply with some regulation or by internal and external pressures; however, there are others who, like us, do so out of clear conviction. In this way, Konfío's impact mission is built to encourage Mexican SMEs to be more productive, motivated by the internal strength of our talent, to solve great challenges and to make a positive difference. That is why Light Rock decided to inject capital into the company to contribute to the great impact that it generates. The way to build a different future has begun in a challenging present; however, we already have an excellent compass.

I invite you to learn more about the environmental, social and corporate governance criteria, as well as the details of our complete report in this link