Crowdfunding and social lending platforms or businesses
Crowdfunding and social lending platforms or businesses
Business Model Description
Crowdfunding platforms and social lending services, where investors contribute small amounts of money to fund loans for vulnerable populations and provide support, offering business and financial training programs, business advisory, and access to contact networks.
Expected Impact
Having a universally accessible financial system that offers services and products tailored to the needs of the population.
How is this information gathered?
Investment opportunities with potential to contribute to sustainable development are based on country-level SDG Investor Maps.
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Country & Regions
- Macroregion Centro
- Macroregion Selva
Sector Classification
Financials
Development need
- In 2022, 47% of the population over 18 years old did not have accounts in the financial system, 14% had mobile accounts, and 29% received government payments through a bank account (2).
- Between 2014 and 2020, Peru experienced one of the largest declines in financial inclusion (5), and in 2021, it ranked seventh out of eight countries in the financial inclusion index (6).
Policy priority
- National Financial Inclusion Policy, aimed at improving access to and usage of financial services in rural and low-income areas of Peru.
- Multisectoral Strategic Plan of the National Financial Inclusion Policy, outlines the action lines and medium-term objectives for the country's economic and social development, with a focus on financial inclusion.
Gender inequalities and marginalization issues
In 2021, 86% of commercial bank placements were made in Lima, and 49.5% of women were able to participate in the financial system, which is 0.5% lower than men's access at 50.0% (1). By socioeconomic level, from the third quintile of the poorest, the financial gender gap becomes more pronounced in favor of men (7).
Investment opportunities introduction
The government aims to build more trust in the financial system. Peru has various social programs that promote financial inclusion, such as Juntos, Contigo, and Pensión 65, which involve cash transfers. Additionally, the FAE-Mype was established, which is a state fund designed to secure working capital loans for small and medium-sized enterprises (Mypes). These loans are channeled through the financial system and credit unions (COOPAC), further promoting financial inclusion and supporting businesses."
Key bottlenecks introduction
The confidence of Latin American citizens in the financial system has shown a significant increase compared to 2021, rising from 29% to 36%. However, Peru is among the countries where this confidence remains relatively low in comparison to other nations in the region.
Corporate and Retail Banking
Development need
High transaction costs for accessing credit in rural areas (8). Limited outreach of service points, especially in rural areas, where the time and cost of travel to the nearest service points hinder the use of financial services. Lack of adaptation of financial products and services to the real needs of the demand (22).
Policy priority
- National Policy on Financial Inclusion, which establishes objectives in three dimensions that encompass financial inclusion, access, usage, and quality.
- Multisectoral Strategic Plan for the Financial Inclusion Policy, which sets out medium-term action lines and objectives for the economic and social development of the country, with a focus on financial inclusion.
Gender inequalities and marginalization issues
40% of urban adults and 23% in rural areas have an adequate level of financial knowledge. In terms of appropriate financial behavior, rural adults reach a lower percentage (40%) compared to their urban counterparts (45%). Access to the financial system is available in 100% of the districts in Lima, while this percentage drops by half in the districts of the Loreto and Amazonas regions.
Investment opportunities
Peru has a National Financial Education Plan aimed at fostering greater confidence in the Peruvian financial system.
International organizations such as CAF, IDB, IFC, among others, have been implementing various financial inclusion programs in Peru.
Key bottlenecks introduction
The three main reasons for not having a bank account are insufficient funds (58%), the high cost of financial services (52%), and lack of trust in financial institutions (29%) (25). In 2016, only 31% of the population claimed to be familiar with Internet-based services, and 26% with mobile services, compared to 5% in rural areas (25).
Pipeline Opportunity
Crowdfunding and social lending platforms or businesses
Crowdfunding platforms and social lending services, where investors contribute small amounts of money to fund loans for vulnerable populations and provide support, offering business and financial training programs, business advisory, and access to contact networks.
Business Case
Market Size and Environment
USD 50 million - USD 100 million
10% - 15%
Between January and September 2022, microloans amounted to US$19,417,318.6 (9). From interviews conducted, it was specified that the interest rate for these loans varies between 9% to 15%, and in some cases, it can go up to 30%.
At the end of 2021, the total placements in the microfinance sector reached US$13,636.70 million, with a 14.3% variation compared to the previous year's closing. This growth was partly due to participation in economic recovery programs (11).
Indicative Return
10% - 15%
From the interviews conducted, it was mentioned that investors expect an average return of 11%.
Investment Timeframe
Short Term (0–5 years)
From the interviews conducted, it was mentioned that the investment period in microfinance entities is approximately 3 years.
Microwd Spain, the main investor in Microwd Peru, reports that the investment period (in the form of loans) is 3 years with interest rates ranging from 11.49% to 43.56%. (12)
Ticket Size
< USD 500,000
Market Risks & Scale Obstacles
Market - High Level of Competition
Market - Highly Regulated
Impact Case
Sustainable Development Need
Around 2.5 billion people do not use formal financial services, and 75% of the poor do not have a bank account (17).
47% of the rural population uses offices to access financial services (19).
In the formal financial system, the average Annual Effective Interest Rate (TCEA) is 30% for microenterprises and 40% for consumer loans (23).
Gender & Marginalisation
A 25.0% of the population over 18 years old uses the informal savings system (through a savings group, saving by keeping money with family or acquaintances, saving by keeping money at home, lending money, or receiving loans) (21).
A rural resident takes, on average, two hours to reach the nearest point of care, incurring significant time and transportation expenses. As a result, 15% of the population without an account cites distance as the main reason (20).
For informal loans, the Annual Effective Interest Rate (TECEA) can range from 80% to 1000% (23).
Expected Development Outcome
Universalization of access to the formal financial system for the population living in rural areas.
Decentralization of financial institutions to reach clients in rural areas.
Democratizing the conditions for accessing credit in rural areas.
Gender & Marginalisation
Creating conditions for equitable access to loans in rural areas based on the needs of the population.
Primary SDGs addressed
8.3.1 Proportion of informal employment in total employment, by sector and sex
In 2021, 55.0% of women were able to participate in accessing credit, which is 4.5 percentage points higher than men's access at 50.5%. In the series of years from 2015 to 2021, the female population engaged in employment surpasses that of men (7).
The goal is to increase the percentage of the population with an account in the financial system from 38% in 2018 to 75% by 2030. Additionally, the percentage of the adult population with some credit in the financial system, categorized as "Normal" or "Potential problem," is expected to increase from 28% to 43% during the same period (22).
10.5.1 Financial Soundness Indicators
In Peru, the gender gap in the financial system significantly reduced after 2017, as the ownership of accounts for women increased by nearly 60% (18).
The goal is to increase the percentage of districts with the presence of the financial system from 82% in 2018 to 100% by 2030 (22).
1.1.1 Proportion of the population living below the international poverty line by sex, age, employment status and geographic location (urban/rural)
1.2.1 Proportion of population living below the national poverty line, by sex and age
During the pandemic, the most vulnerable population had to stand in long queues to access the subsidies provided by the state, risking exposure to contagions and other security-related issues.
In 2021, extreme poverty affected 12.1% of the rural population, which was a decrease of 1.6 percentage points compared to 2020. However, when compared to 2019, it increased by 2.3 percentage points. In the urban area, this condition affected 2.1% of the population, which was a decrease of 0.8 percentage points compared to 2020. Nonetheless, it remained 1.1 percentage points higher than in 2019. (24)
Information not available as August 2023
Secondary SDGs addressed
Directly impacted stakeholders
People
Gender inequality and/or marginalization
Indirectly impacted stakeholders
Planet
Public sector
Outcome Risks
Interest rate risk: If interest rates are too high, clients may struggle to repay their loans, which can lead to defaults and affect the microfinance institution's reputation.
Concentration risk: If the loan portfolio is highly concentrated in a single sector or geographic area, it can be exposed to greater risks if that sector or area experiences an economic crisis.
Gender inequality and/or marginalization risk: Women and marginalized individuals may face discrimination in accessing credit due to cultural and gender biases, perpetuating gender inequality and marginalization.
Impact Risks
Risk of a negative impact on the community: If these entities provide loans for activities that have a negative impact on the community or at very high interest rates.
Risk of over-indebtedness of microfinance institutions that affects their financial sustainability and their ability to continue providing loans.
Risk of excessive indebtedness: If microfinance customers take loans they cannot afford to repay, they can fall into a debt spiral that affects their quality of life.
Risk of discrimination and financial abuse due to a lack of financial education and adequate regulation in the financial industry.
Impact Classification
What
A positive and significant outcome due to improved financial education and access to the financial system.
Risk
Increasing the lack of trust in the Peruvian financial system.
Impact Thesis
Having a universally accessible financial system that offers services and products tailored to the needs of the population.
Enabling Environment
Policy Environment
National Financial Education Plan is a public policy tool whose primary objective is to promote access and responsible use of comprehensive financial services that are reliable, efficient, innovative, and tailored to the needs of various population segments.
Multisectoral Strategic Plan for the National Inclusion Policy aims to build greater trust among all population segments and provide a sufficient and suitable range of financial services that meet the population's needs.
The National Financial Inclusion Policy recognizes the presence of a population with limited access to and usage of quality financial services and aims to enhance the economic well-being of the population by facilitating their inclusion and the benefits that it brings.
Financial Environment
Financial incentives: The Credit Support Program for Small and Micro Enterprises, under the responsibility of the Social Development Cooperation Fund (FONCODES), channels resources through financial institutions to provide loans to SMEs.
Fiscal incentives: If investments are made through savings and credit cooperatives in Peru, these entities are exempt from income tax (IR) and the Financial Transaction Tax (ITF). Furthermore, members of savings and credit cooperatives in Peru can deduct their contributions to the cooperative from their income tax.
Other incentives: Social impact is a significant aspect of this model, as it focuses on social and community-oriented initiatives. This means that investors may be contributing to projects and activities that have a positive impact on their communities.
Regulatory Environment
Law No. 31168 aims to strengthen, through affirmative actions, the empowerment, equal opportunities, and comprehensive development of rural and indigenous women, enhancing their economic, cultural, and social autonomy through training and productive financing.
Law No. 26702, General Law of the Financial System and the Insurance System, and the Organization of the Superintendency of Banking and Insurance, which regulates the financial system in general.
Supreme Decree No. 074-90-TR, which declares the national necessity and public utility of promoting and protecting Cooperativism as an effective system to contribute to economic development, strengthen democracy, and achieve social justice.
Marketplace Participants
Private Sector
There are various cooperatives and investors focused on this sector, such as MajInvest, Inclusiva, among others.
Government
The government is providing loans to small entrepreneurs through the financial system, such as the FAE Mype, or through programs administered by COFIDE.
Multilaterals
The World Bank, UNDP, IFC, IDB, and other international organizations have been developing programs related to financial inclusion in Peru.
Target Locations
Macroregion Centro
Macroregion Selva
References
- (1) INEI (2022), Encuesta Nacional de Hogares
- (2) COMEX (2022), Perú Avanza en inclusión financiera.
- (3) Exposición de Motivos de la Política de Inclusión Financiera
- (4) MEF (2021), Plan Estratégico Multisectorial de la Política Nacional de Inclusión Financiera
- (5) BID (2021), Repensando el Microscopio global para la inclusión financiera: Reporte de hallazgos claves 2021 "6) Credicorp (2022), Índice de Inclusión Financiera de Credicorp "
- (7) INEI (2022), Perú brechas de género
- (8) Agraria (2022), 5 problemas que enfrentan los agricultores para acceder al sistema financiero
- (9) SBS, Serie de Estadísticas Históricas, consulta 03.03.23 "10) PERÚ: REPORTE DE INDICADORES DE INCLUSIÓN FINANCIERA DE LOS SISTEMAS FINANCIERO, DE SEGUROS Y DE PENSIONES"
- (11) CREDINKA (2022), Memoria Anual 2021.
- (12) Microwd (2022), Informe de Auditoría Cuentas anuales 2021.
- (13) INEI, (2015) Encuesta Nacional Agropecuaria – ENA
- (14) INEI (2017), Perú perfil sociodemográfico "15) COMEX (2021), Las micro y pequeñas empresas en el Perú Resultados en 2021"
- (16) INEI (2022), Perú: Comportamiento de los indicadores de mercado laboral a nivel nacional
- (17) Banco Mundial (2022), La inclusión financiera es un elemento facilitador clave para reducir la pobreza y promover la prosperidad.
- (18) Banco Mundial (2021), The Global Findex Database
- (19) SBS (2017), Encuesta nacional de demanda de servicios financieros y nivel de cultura financiera en Perú
- (20) Revista gana más (2020), Créditos informales: ¿Qué son y cuáles son sus riesgos?
- (21) INEI (2018), Perú: Evolución de los indicadores de empleo e ingresos por departamento, 2007-2017
- (22) MEF (2021), Política de Inclusión Financiera.
- (23) El Peruano (2020), Riesgos de los créditos informales
- (24) INEI (2022), Informe Técnico: Evolución de la Pobreza Monetaria 2010-2021
- (25) INEI (2022), Brechas de la inclusión financiera digital en Perú, en un contexto de crisis económica y sanitaria por el COVID-19,