A vast majority — 85% — of micro through medium size enterprises in emerging markets suffer from a lack of access to to credit, according to the International Finance Corporation and McKinsey. When an African female entrepreneur can’t borrow money, she must rely on her own limited savings to invest in her business, which limits her prospects.
Some would think this is an insurmountable problem, but not Kate Woska, an entrepreneurial bank analyst who wanted to do good.
Woska researched the market to understand what was working and what wasn’t. She learned about the players in the sector. She learned about the marketplace trends that were impacting the sector, including use of mobile. In developing regions, the adoption rates of mobile are growing faster than access to TV or electricity.
She identified the problem and what financial services the market would pay for. Woska discovered that financial institutions didn’t have adequate:
- risk transference to ensure reimbursement if a borrower failed to pay back a loan
- data on underserved communities that shows who was a good risk and who wasn’t
- operational efficiency in remote rural areas, which resulted in high interest rates
- methods to connect with people seeking loans to start or grow their businesses who are a good credit risk
It wasn’t a lack of capital that was holding growth back. It was underutilization of capital. Banks were afraid to make loans to people who didn’t have the same demographic profile as people who had previously paid back loans. The same Catch-22 that women face in the U.S. when looking for equity funding, trips up women in Africa when they are looking for a loan. With the exception of financial institutions that are chartered to lend to underserved communities, financial institutions in Africa for the most lend to male property owners over the age 35. The bias wasn’t just based on gender, but also on ethnicity, religion, health, age, etc.
To address those inadequacies, Woska founded Atikus Insurance, which provides credit insurance and tools to to enable and incentivize lenders to approve a greater number of loans at more equitable rates. In addition to sharing the risk if a borrower doesn’t repay, Atikus aggregates and shares data from a range of financial institutions to help them determine the characteristics of a good risk in underserved markets.
As part of its data gathering, Atikus also assesses financial literacy and business development programs so financial institutions use the education borrowers have received to find the best candidates. It’s built a database of people looking to borrow money to start or grow their companies so a financial institution can filter borrowers by the criteria it deems a good credit risk.
Atikus then connects lenders with borrowers individually or en masse via SMS (Short Message Service: cellular phone text messaging). Atikus uses a mobile interface that is easy to use, cost efficient, and reflects the way business is conducted in this market.
Modeled on one of her favorite literary character, Atticus Finch in To Kill a Mockingbird, Woska’s company is dedicated to fairness, justice, and a rigorous set a principles that it applies to everyone.
Woska will pilot Atikus in Rwanda sometime in 2015. Helping her develop the mobile platform is Infusion, which creates digital experiences and emerging technology solutions for major banks and insurance companies around the world. It also works with companies that will transform these industries in the future.
As she prepares to launch her social enterprise, Woska is building a buzz around the company and raising money. Atikus was named one of CNBC’s Hottest Start-ups of 2014. Woska closed its first phase of a seed financing from friends, families and angels in 2014. She is currently working on closing the second phase of seed funding. In addition, she is building interest among venture capitalists and insurance companies who are likely to invest in later institutional rounds of funding.
To me, Woska is another example of why investing in women pays off: They don’t just help themselves, they help others.
Join me in fixing both sides — women entrepreneurs and investors — of the underfunding of women entrepreneurs equation: THE VENTURE CROWD: Everything Ventured, Everything Gained.