LatAm's No. 1 crowdlending platform plans further forays

Latin America's biggest crowdlending platform is seeking a larger slice of the region's SME financing pie.

Chile's Cumplo, which recently expanded into Mexico and plans to make further forays, wants to be handling US$1bn in loans annually by the end of 2020.

Founded in 2012, the company focuses on SMEs which are growing and that operate in the business-to-business segment. Most loans awarded are invoice-backed.

"Our commitment is to be in four countries by 2020 and have US$1bn in loans through the platform that year," Cumplo CEO Gonzalo Kirberg (pictured) told BNamericas.

The company, which controls around 68% of the Latin American crowdlending market and was founded by entrepreneur and former Chilean government official Nicolás Shea, is currently analyzing which new countries to enter.

Cumplo handled US$128mn in loans in 2017 and expects to handle US$220mn-250mn this year. "We're doubling [loan volume] every single year, so we're on track," Kirberg said. "Growth rates are, like, 6-7% a month."

SMEs are key job generators in Latin America, and in Chile alone the SME lending market – just taking into account data from reporting entities – is worth US$23bn. "The actual market is bigger," he said. "We have less than a 1% stake, so actually you can still grow a lot."

Cumplo expects its Mexican business to outgrow its Chilean operation by the end of next year, citing economic woes as potential headwinds for its overall growth plans.

In Latin America, alternative finance markets grew 209% to US$342mn in 2016, according to a 2017 report based on a joint study conducted by the universities of Cambridge and Chicago.

Marketplace/P2P business lending remained the largest alternative finance market segment with US$189mn in 2016.

COST OF CREDIT

Cumplo focuses on the working capital loan segment. In Chile, the typical loan is for 60 days, for US$50,000, and provided by a pool of 12 investors.

Prospective borrowers are filtered by Cumplo before their details are posted publicly online so that prospective lenders can consider their request, with successful applicants often securing loans within hours.

Average interest rates are 13.7%, with total cost of credit for new borrowers coming in at around 25% before dropping to around 19% once the borrower has notched up six months on the platform.

Typical cost of credit with factoring firms is 30-50% a year, while for banks it is 15-25%.

The platform's NPL ratio, Kirberg said, is normally around 0.6%, compared with 3.5-4.0% in the SME segment of Chile's wider financial system.

"We are the best way to discriminate and analyze creditworthiness of SMEs," he said. "Our output is having SMEs that can get good credit, from good banks with good rates. Actually we don't say we have lost a customer, we say we have graduated the customer."

Meanwhile, the average rate of returns enjoyed by Cumplo investors is 10.7%.

Kirberg highlighted the gap in Chile between the single-digit returns people get in the traditional financial system and the interest rates charged by the likes of banks.

"When you see the big picture, you see, on one side, people putting their money in the financial systems at 2-3% and then that money is going back to these people through their companies at 30%. There's a huge gap. That's where we are," he said.

To spur economic growth in the region, providing loans at competitive rates is just as important as providing good education, Kirberg said. "Education plus capital makes growth. People need money to start new businesses, develop their new ideas."

REGULATIONS

Cumplo, through Chile's fintech chamber, is involved in talks with the government on planned new rules for the fintech sector.

Securities and insurance watchdog CMF – which is due to absorb banking regulator Sbif – and the finance ministry are considering whether to go down the regulations route or introduce a bill that is gradually built on to cover the various fintech segments. Sandboxes are also being discussed.

Kirberg said he was not against regulation but that he was concerned about the influence banks could have in the rulemaking process and barriers that could be erected for newcomers in areas such as capital requirements.

He added that officials should carefully balance risk management with measures to spur innovation.