iNovaBank

Opportunity in a Brazilian slum is a distant dream. Working to fund the daily meals and preventing your children from falling for the drug world are all higher on the daily priority list. But the dream of a better future is always there.

Yet, opportunity is not only sought by those living in underprivileged realities. Investors are always looking for an opportunity to maximize profits, and business students are always on the search for a place to start their professional careers. So, why not unite them and allow investors to invest in a peer-to-peer platform, aimed at funding micro-entrepreneurs, while giving unbanked entrepreneurs access to credit, and giving students a chance to start their careers as real world consultants? To do so, iNovaBank was born as the first peer-to-peer microloan platform in the world, allowing investors, investees and students to grow together, transforming Brazil one loan at a time.

Fifty million people in Brazil do not have access to financial services. As you dive into the credit sector, the situation gets even worse. While access to credit can be a powerful driver of social change, in Brazil the poor have barely no access, while large companies and powerful businessmen are easily allowed access to affordable credit.  With iNovabank, we aim at reverting this situation, allowing the poor to access a simplified credit line, while receiving free consulting services to allow for personal and professional gains. By doing so, we tackle both the issues of inequality and unemployment, and also aim at resolving the problems of financial and entrepreneurial illiteracy.

            iNovaBank offers a complete solution: an attractive investment for investors and access to credit, entrepreneurial and financial education, as well as a complete banking solution for micro-entrepreneurs. Along with that, we also offer college students the opportunity to work on real life consultancy projects in his or her community with great social impact, while still in college - something extremely hard in Brazil, a country with a very small number of internship offers.

12 million people live in Brazilian slums, the favelas. For such a group, basic necessities such as sanitation and food become an everyday challenge. When necessities like those are so distant, privileges like having a bank account are extremely rare. When one’s reality is so hard, claiming change loses priority, since daily survival is a daily task. However, when one decides to look for a better future, and finds the power of entrepreneurship to transform lives, his or her dreams are often made impossible by the lack of investment, lack of knowledge or the excess of bureaucracy imposed by the Brazilian government. What we, at iNovaBank, are doing, is bringing knowledge and credit to the favelas, in a way that's accessible by anyone.

When microcredit emerged, it showed a strong correlation between credit and social impact. However, in 30 years much has changed and what worked then does not work now. When we look at Brazilian reality, microcredit programs have been in place for a while. Nonetheless, it takes over 11 loan cycles (a loan cycle has about 12 months) for any social change to be perceived.  When we took on the challenge of updating the microcredit model, we also took on the challenge of fighting the burdens of the Brazilian bureaucracy. We dove into the Brazilian slums, and spoke to hundreds of clients that were part of the national microcredit program operated by the Brazilian Development Bank (BNDES), and found out that the main reason it failed was due to the lack of a real consultancy. We took the results to heart, and made the consultancy portion of microloan the core of our business. We created not only a consultancy solution, but also an entrepreneurship e-learning platform to allow our customers to seek for professional development. In order to raise the funds to allow for the platform to function, we found the peer-to-peer model, adapting it to the Brazilian reality. As the investor enters our platform he or she is offered a 9% annual return investment. Finally, we added to our platform an e-banking solution, to allow our customers to gain access to a banking solution.

 Using a peer-to-peer system, we bring the money from the richest groups of the society to the poorest people in the favelas. Such people receive the money through a debit card and can start using to develop their own venture. After doing so, we provide a bi-monthly call with a consultor who can orient the person to achieve a higher level of financial knowledge. Moreover, we use the online platform as a tool to share videos that help on the financial education of invested people. Finally, we re-developed the concept of the branch. At the facility, along with daily networking experiences, we offer access to tools not previously available to our clients going from access to free internet to the use of modern computers. By bringing knowledge to the community, we are giving a chance to our clients to seek a better future, where knowledge and banking are not a dream, but a reality!

Our peer-to-peer model allows us to be innovative on the two sides of the operation and our decentralized operations allows us to be innovative on the reach of our project. For the investor, we found the irrelevant return on investment rates that traditional banks offer. Our return rates, while allowing us to be profitable, provide a return above the ones found in the market and a possibility for the investor create social impact that only a few other investments would offer. For the loan receiver, we simplify the bureaucracy that banks impose for the lower levels of the society. Traditional banks require endless documents, several pages of contracts, physical agencies and some type of collateral to deliver credit. We simplify such a bureaucracy with fewer requirements and no need of physical branches, just online forms. Using the in loco consultors, we also expand the reach of our project. The proximity established between the consultor and the loan receiver allows not only that the credit comes to people, but also that the consultor gives support and advice for the ventures established by our customers.

The main components of our technology seek to simplify processes and reduce bureaucracy. We have the online platform, which uses an API of a Bank to operationalize our work and a Debit Card linked to the same Bank, making it easier for us to deliver credit. Furthermore, hosted on our website, we have an online education platform, with several videos available on demand and easily shareable on social media such as Facebook and WhatsApp. 

Our online platform, along with the in loco and the remote consultors solve the problem of distance and lack of preparation entrepreneurs might have. For the fifty million people without a bank account in Brazil, we provide credit a website away, with no needs for physical branches or collateral. Additionally, even if internet is a challenge for the person, the in loco consultor is able to help on filling out forms and answering questions. After receiving credit, the main problem becomes how to use such a credit to multiply the income of an entrepreneurial venture. To allow such an evolvement, the in loco consultor is able to give advice and follow-up frequently with the entrepreneurs. Furthermore, the remote consultor is able to directly guide financial decisions and provide feedback on the improvements of the ventures. Adding to such a support, the online platform of videos on demand is also a strong tool by bringing simple lessons to improve the entrepreneurial knowledge of the loan receivers. Such lessons, while providing real life applications for theoretical frameworks with a simple language and several case analyses, will teach the entrepreneurs the path for a better and more productive life.

We have just finished the early development stage of our platform, as well as completed the partnerships needed to operate. With our whole business established as it is now, we are able to launch our project in a beta stage in August. Within the next six months, we plan to expand our staff as well as to amplify the reach of our platform and the number of communities served by our service. Because of that, we aim at achieving one hundred customers in the period considered. Due to the decentralized model we are establishing, we plan to escalate to around four hundred customers in one year.

Our model, although developed based on the Brazilian reality, considers successful experiences in different countries and periods of time. Because of that, we believe that such a model is replicable to other nations. In five years, therefore, we plan to be established internationally, impacting other countries just like we initially impacted Brazil’s reality. This expansion would allow our customer number to reach around ten thousand.

After launching, we will aim at establishing our consulting methodology, learning with the feedback from our customers to improve this part of our platform. Moreover, we also aim at improving the engagement on our online education platform, not only expanding the number of videos available, but also the number of views on such videos. Considering our goals on expanding the number of customers, we also aim at becoming the biggest credit provider in the three communities we will be working at by the end of the next year.

Within five years, we plan to be verifying the social and economic development of our customers and of our communities. This will include the development of researches to gather data on the income development, as well as other factors such as food security and health indicators. Since our consulting methodology will also push the development of family components such as child education and internet access, we also plan to evaluate those factors. Besides that, we aim at diversifying our product portfolio, using the same business model and methodology to bring all types of financial services to our clients. Such a goal implies the development of solutions to allow money transactions among people and credit cards to expand direct consume of goods that are relevant for the comfort of people. Finally, once we are well established on the Brazilian market, we plan to expand our services internationally, bringing the same dream of changing people’s lives to other countries in Latin America.

Our peer-to-peer model needs not only the loan receiver, but also the investor. The clear limitation, therefore, becomes the necessity for investors on the platform. Furthermore, we have Brazil’s legal system. Operating on the financial system claims for several requirements, not only bureaucratic ones, but also some related to financial gains, which are completely out of our scope at this point. For us to operate, therefore, we need an established partner, and the dependency on such a partner is a barrier. Adding to those, since we plan to use in loco and remote consultors, we will need to select and give preparation to such consultors.

Since our platform is fully established online, we have a technology limitation. We rely on a decent internet connection to operate. Since most of our clients are from poor areas, where internet access can be limited, the access to our platform might be a challenge. Furthermore, some clients can find it hard to use our website, even though we developed a long study to make the platform completely user-friendly, just because they are not used to go online. 

Expanding the number of investors will claim for marketing projects, creating brand awareness and bringing people to our platform. Furthermore, we are already creating connections with investment funds, expanding our portfolio of partners and, consequently, of potential investors. Overcoming the legal limitations will demand a heavy work with the Central Bank, seeking to fulfill legal requirements to conquer our independence from the financial partner and fully operate by ourselves. For the consultors, we will need to prepare guidebooks and remote lectures, teaching them how to approach our customers in an effective way.

The structural limitations related to technology will demand extended attention. Improving internet connection will demand not only partnerships with service providers to bring special offers to the communities we work at, but also that we push our customers to have better internet packages at home. The challenges of the investee using the platform itself can be solved through the in loco consultor and the word of mouth in the communities, with people helping each other on accessing credit. For the online education component of the platform, we plan not to limit our videos to the website itself, but to share those through different social medias and in different versions for distinct publics.

8 people

Our team is composed by people from different backgrounds, but with a similar dream: to change Brazil’s reality. One of our founders comes from one of the poorest Brazilian slums, and grew up around challenges of such an area. Poverty, insecurity and financial limitations were a common scenario around him, but he was able to overcome such a challenge through education. Another founder grew up in one of the richest cities of the country, but chose not an easy and comfortable path, but a challenging one to change others’ lives. Those two founders met at Babson College, the biggest entrepreneurship school of the world. At Babson, they were able to see how entrepreneurship could be the strongest tool on their dreams of changing Brazil’s reality and started the project with this mindset at the core. Soon they were able to gather other people to join the project. Namely, the technology part of the team. The people on this part of the group come from one of the poorest states of Brazil, but could change their realities through education. The opportunities they had opened their mind to creating chances for others just like they once had. Because the team has business knowledge, technology expertise, awareness of others’ realities and the dream of changing Brazil’s reality, we are the best-placed to deliver the solution we are presenting.

The Brazilian legislation does not allow financial transactions outside of the Sistema Financeiro Nacional, the Brazilian Financial System. Because of such a limitation, we partnered with the Topázio Bank. The Bank works only with the legal part of the operations, allowing our system to be freely put on practice. In addition to that, we have a partnership with SEBRAE, the Brazilian Support Service for Micro - Entrepreneurs. Along with SEBRAE, we organize events that instigate our entrepreneurs to learn more on the area, as well as bringing successful people to give lectures to such entrepreneurs. We also partner with the Jubilê das Mercês, an institution that aims at social change in Brazil. Along with such an institution, we develop events focused on entrepreneurship to a Brazilian slum. Besides preparing the facilities, we also bring speakers and create all materials that are used during the events.

We aim at investors seeking high investments to connect them to the poorest groups of the society. On the investor side, we provide an investment with annual returns at a high rate. Furthermore, the investor is connected to people from low incomes, adding an opportunity for social change on his or her investment. On the investee side, we use an online platform as a tool for requesting loans. Once the loan is accepted, the investee receives a Debit Card at home, being able to use it to fund their businesses. To repay the loan, a bill is sent to the entrepreneur, who can pay it in several places in the community itself. Our profit comes from the difference between the repayment and the return of the investment.

We use in loco consultors to work directly with micro-entrepreneurs in the slums. With such a proximity, they are able to guide the micro-entrepreneurs on their daily challenges, while also guiding on the expansion of their businesses. Besides the in loco consultor, we have a remote consultor, calling the investee bi-monthly and suggesting improvements for the businesses. Adding to the consulting characteristic, we provide an online education platform. Using the website, the investees can have access to a large portfolio of classes and lectures to guide the development of their entrepreneurial path. Furthermore, we use social medias such as WhatsApp to spread out simple videos for the entrepreneurs that do not have skills to follow the classes and lectures on the platform. 

Following our model, we make profit on the difference between the investee’s repayment and the return of the investor’s investment. Our investees do not demand high amounts of money, so the values of loans are very small. Moreover, since we do not seek profit only, but aim at changing people’s lives, we do not charge high margins, making our profit per investee relatively small compared to traditional banks. Complementing regular expenses that our project might have, we also invest a lot on the consulting and educational parts of our platform, reducing even more our margin peer investee. The only way to achieve financial sustainability, therefore, is by expanding the number of customers. Since the loans are of very small values and the margins are also small, we plan to achieve financial sustainability through the scalability of our project. Once we have more people on our platform, we will be able to reduce costs and multiply our gains.

Despite the fact that the funds are attractive to us, applying to SOLVE will connect us with relevant people since the early stage of the application. Receiving direct feedback on our solution from the SOLVE community will be important to see what we are missing, as well as to give examples of other ideas that worked in different countries. Furthermore, the possibility of connecting to SOLVE’s advisors will open another path for us. For instance, Katja Iversen from Women Deliver has a project with a view similar to ours and could be a relevant mentor advising and partnering with our project.