In Barranquilla, Colombia, Edinson Flores has run a small, family-owned fast-food business for many years. But when his family became sick with Covid-19, he had to stop working and pay for medical care. When his family recovered, Flores still had customers and equipment, but he couldn’t afford the supplies he needed to get his business running again. He applied for a loan at a local bank but was denied because of his low credit score.
The situation was not unique: Small businesses like Flores’s make up the bulk of the economy in Latin America. Most operate in the informal economy and are not fully recognized by the government, making it difficult to get loans to grow or survive volatility.
That’s what Quipu Market is trying to solve. The company, founded by two MIT alumni, is using data from the informal economy to offer a series of small loans to entrepreneurs. Quipu has developed an online marketplace that helps entrepreneurs publish product catalogs, record transactions, and increase their sales. By digitizing business activity, Quipu is able to assess credit worthiness in a new way and provide loans at rates comparable to traditional banks.
“It’s all about using new data and networks to help entrepreneurs not only access financial products, but create wealth, because if you don’t create wealth, then the money is not ultimately improving the economy,” Quipu co-founder and CEO Mercedes Bidart MCP ’19 says.
For now, Quipu is the one providing the loans, which gradually increase as entrepreneurs demonstrate the ability to pay them back. By the end of this year, the company plans to open up its blockchain-based lending system to allow anyone to buy interest-bearing tokens with money that is then allocated to entrepreneurs using Quipu’s algorithms assessing credit worthiness.
“We see ourselves as a digital, decentralized bank,” says Bidart, who co-founded the company with Juan Constain MCP ’18 and Viviana Siless. “On top of the microloans, we want to add financial services and become a decentralized bank tailored for the informal economy.”
Quipu already has more than 10,000 users on its platform across Colombia, including Flores, who was able to access Quipu’s loans based on his strong customer base and not only get back up and running, but grow his business.
Finding a new path
Before coming to MIT, Bidart had worked for a think tank in her home country of Argentina to craft economic development policies. She also helped a grassroots organization that worked with families in informal settlements. But she began questioning if the grassroots work could scale, while also seeing that the top-down government approach was limited by a lack of data on the informal economy. She came to MIT to learn how to overcome those problems.
Bidart joined the Department of Urban Studies and Planning (DUSP)…
Read More: Building a decentralized bank for micro businesses in Latin America | MIT News
