CoMu (Confianza Mutua)

Almost 40% of MSMEs in developing countries cannot achieve their financial needs totaling $2.1 trillion every year (World Bank, 2017). MSMEs might need access to financial services to acquire capital to invest, to have a better management of their profits, saving money, or to increase their sales by adopting digital payments. In Colombia 62% of MSME are either self employed or small businesses with 2 to 5 employees (ILO, Small Matters, 2022). Moreover, 85% of the households are part of the informal economy in rural and semi-rural areas (DANE, 2023), one main driver to prevent MSMEs from accessing financial services. At the other side of the equation, Financial Institutions (FIs) have insufficient market information to offer accurate products and services at a low risk.

A business assessment tool developed through a digital journey to improve MSMEs business case. The assessment tool rates MSMEs capacity to access financial products and services. Those companies that do not meet the requirements, will continue the journey to receive accurate advice, support and further steps to access financial services financial liability. For its sustainability, CoMu offers accurate data to inform FIs demand of products and services in rural and semi-rural areas.

CoMu will lead MSMEs ready to obtain financial services to products that meet their growth stage. Meanwhile, companies that are not ready yet will follow a personalized digital journey to improve their business case, in order to have access to financial products. This personalized journey is a support stage defined specifically to every MSME profile. CoMu is going to support MSMEs through our products based on the initial assessment.   

CoMu aims to integrate three of our products, RedNodus, Luka and ConHector, which are serving specific needs from MSMEs separately and offered as silo solutions. RedNodus offers curated information on products and services such as digital payments, digital wallets or affordable loans. Luka offers training for community leaders to earn an extra income working as banking agents and local points to facilitate access to financial and non-financial products in semi-rural areas. And finally, ConHector is a chatbot that offers support and advice to MSMEs  to improve their productivity in order to grow.

The assessment and the digital journey uses our web software products, chatbot and machine learning technologies to absorb MSMEs interactions. It also uses structured and unstructured data to produce an accurate, engaging and upgradable journey. MSMEs will gain access to CoMu through digital campaigns and empowered community leaders in semi-rural areas.

MSMEs in Colombia are the final beneficiaries of CoMu. A majority of female owners are usually leading a family business, and may have 1 to 4 employees in charge. Their businesses come from a wide variety of industries such as retail shops, manufacturing products or services. Their businesses are located in small cities with less than 100.000 inhabitants, but big enough to have financial services and connectivity at their disposal. However, they may have information and knowledge barriers to access those services.

Even though MSMEs are willing to thrive, their high efforts may turn into outcomes with mixed results. Their strong business experience of several years, lacks training in some technical skills, therefore trial-error attempts imply for them investing large amounts of time gaining small bits of progress. Having few managerial skills leads them to make decisions by beliefs or intuition, which ends up in adapting to not expected results. Furthermore, unplanning processes may result in only setting short term goals. All the above added to their informality status, contributes to a number of poor working conditions. Though they may have financial capabilities, those might be insufficient to access capital or find pathways to increase their productivity.

CoMu will support MSMEs business with a digital journey to continue their productivity spiral to grow. Our experience with micro business owners taught us that practical simple solutions with short term wins help to engage business owners in digital programs. The journey has first an assessment to show MSMEs the shorter way to access affordable credit among other financial products, or improve their business in order to gain access to financial services. The process of improvement uses the assessment to offer free accessible products and services in the market to strengthen their business. These gaps might be around client service, how to gain extra income or control of their finances among others. At the end of the journey the owner of the company has a better business case to present to FIs and a healthier business to face a long term relationship with financial services.

The team is formed by product managers Laura, Oscar and Jonathan in constant interaction with MSMEs. They are looking to have access and to adopt financial products and services. During the product development we run several workshops to iterate and improve the solution with the final user in the field. Then, to develop the product we work with a team that is also in contact with the final user. Ronald Morales the Data Leader, Ulises Salas, the Tech Lider, Angelica Cardozo the experience leader and finally with the business and financial team Natalia Cañón and Carlos Llinas.

It is key to know the user's pain/gains not only in a qualitative way but in a quantitative way. For that reason, Ronald's role is crucial for profiling the users better and understanding their needs  based on the data analysis. Also, given that we need to make iterations based on what we learn from users' interaction, we need expertise in the tech area provided by Ulises. Angelica Cardozo is in charge of the content adaptations to keep the users engaged, ensuring the understanding of the messages and empowering them to make informed decisions. For that reason, Angélica is the person that can provide all her experience in content creation for low-income people. In order to ensure sustainability beyond the MIT challenge, the project needs to establish partnerships and a business model that allows us to provide financing and sustainability; for that reason, the role of Carlos and Natalia is vital.

Our product is a prototype since it is formed by three solutions that are already developed and already serve end users but that work in silos. Thus we still have to integrate our solutions to give one holistic service that will bring together MSME and Financial Institutions. RedNodus has achieved almost 20.000 users in one year with 250 products and services carefully curated to serve MSMEs in the base of the pyramid. ConHector gave advice to 28.000 users through 370,000 interactions in 7 Latin American countries. And Luka raised banking agent transactions by 20% during its pilot with 10 banking agents in rural areas in Colombia.

As mentioned in the previous questions, our point solution serve the following users:

RedNodus: 20,000 users

Conhector: 28,000 users

Luka: 10 banking agents

Our objective is to serve MSMEs helping them build the best possible business case to access traditional financial services from FIs. However, we are also looking into capturing data with transparency, consent and habeas personal data protection to develop a sustainable business model offering qualified leads to FIs. Therefore, our first reason to apply is to access MIT people who can help us with guidance on the development of the data model that will underpin the business assessment tool  

A second reason to apply is to connect RedNodus, Luka and ConHector,  which are serving MSMEs separately today, to build a stronger, more holistic solution. Our solutions can offer digital products, ways to gain extra income, and support to business owners in semi-rural areas through their mobile phones. CoMu is looking to develop a business assessment tool to build users profiles and give them the best journey in order to gain access to financial services or to improve their business case in case they have been denied access to financial services .

Unlike other solutions we have identified in the market, we tackle the challenge by not only doing a business assessment or credit profile of MSME to sell leads to FIs but to strengthen these small companies to increase the access to traditional financial services to MSME. Hence we try to solve the same problem by helping both sides of the equation: Not only the FIs but also the small businesses

CoMu´s primary  impact goal is to support a reliable relationship between MSMEs and FIs. This is possible through a mission driven model in which MSMEs interactive data and machine learning will help them to grow.  Both stakeholders, MSMEs and FIs, are relevant players to tackle development goals in countries with emerging markets, such as Colombia and other Latin American countries (LAC). However, they have misinformation or lack of information about how each other operates. This might lead to lack of reliability and disengagement from MSMEs. Meanwhile the requirements of information from FI to provide services to MSME further hampers the incentives from business owners to reach out to FIs. For this reason, CoMu will provide a sustainable solution to connect MSMEs to the Financial Ecosystem in order to support them in their journey to grow.

Our goal in one year is to integrate our solutions through the CoMu business assessment tool and the personalized digital journey to connect MSMEs with the FIs ecosystem and close our first sale. In order to achieve this goal our first step is to develop the MSMEs business assessment tool. This tool will develop users profiles that match with financial and non financial product and service to enhance MSMEs businesses. After going down this journey, MSMEs will gain access to financial products and resources to further develop their  managerial capabilities. Moreover, this experience would help them to invest in hiring workers to improve their productivity.  Improvements in productivity in several businesses could also result in improving the whole micro entrepreneurial ecosystem. In three years, we expect to expand and scale this model to different emerging markets most probably Peru and Mexico

Our progress will be based on a set of KPIs, we will describe the three most relevant here as follows. The number of MSMEs that get access to financial services from digital payments, digital wallets or affordable accessible loans. The percentage of MSMEs that goes through the digital journey after the assessment and uses financial and non financial products and services to improve their business. And revenues from connecting FIs with potential MSME clients

CoMu is committed to support MSMEs to enhance their business, improving their business case in order to have access and to adopt financial products and services. The first input to achieve this objective is the business assessment tool to assess and help MSMEs to have access to FIs products. The tool will also provide information, training  and advice to those MSMEs that need to improve their business case. This tool has three main components: A “first experience” support from community leaders that will be trained through Luka to give access to the assessment and the digital journey to MSMEs. After that RedNodus, will provide information about financial and non-financial products and services curated to MSMEs. Finally ConHector will guide MSMEs journey through CoMu set of tools giving advice and support.

For this stage, as was mentioned before in this application, the main activity to get the project to the field is the design of the business assessment tool that will be applied to MSMEs. This assessment will be applied progressively as MSMEs walk through the digital tools journey and the information provided by the field experience. To design this assessment we will use qualitative and quantitative information to sample profiles that will be improved through MSMEs interactions with a machine learning algorithm.

The main output that we will expect to achieve is a percentage of MSMEs that gain access to financial products and services in their first attempt and a higher percentage of MSMEs that walk through the digital journey obtaining capabilities, services and products to improve their business. Finally, the first long term outcome is to enhance reliability between MSMEs and FIs in emerging markets using transparent authorized data at a global scale.

Our Business Assessment Tool will be a software that uses machine learning to develop an algorithm able to apply structure, non structure data and user interaction data. This will allow us to build more accurate profiles to match with existing offers of financial and no financial products and services.

Breaking it down in stages, CoMu will be able to make queries to offer personalized experiences based on users' interactions with products and services. These interactions will be nurturing the data tool that makes possible the match between MSMEs profiles, financial and non-financial products and services, and the maturity of MSMEs business case. Adjustments to the model will be done through KPIs monitoring process as well as retrieving information to build an algorithm able to follow successful interactions leading to MSMEs successful profiles to achieve their goals. The solution will be trained through a machine learning process able to trace successful profiles based on their interactions with products and services and complementary sets of MSMEs information.

CoMu works with MSMEs interactions and qualitative and quantitative data. Data technology and algorithms may not be neutral and may be reinforcing biases ending up in vulnerable population exclusion. This is why applying strictly and respectfully our Gender Equality Code to data, contents and field implementations, gives us the certainty of leaving no one behind. Moreover, Human Centered Design techniques applied along with the final user give us permanent feedback from local contexts to avoid standard answers to specific problems. Finally, since improving the quality of lives of the most vulnerable communities is the main objective of Fundación Capital, all of our activities will ensure to reach underrepresented populations as we have done in all our projects so far.

We are providing a business assessment tool where our customers which are financial institutions match with our beneficiaries, micro entrepreneurs with a low risk profile of default on financial services. Based on our financial model we expect to charge our customers $20 dollars per qualified lead that they want to reach out to offer their services. This should lead us under a conservative scenario to be financially sustainable in the third year operations where we expect to breakeven. Our efforts however will be towards achieving break even in two years

For our customers the main impact is expanding their customer base into the MSME sector in small cities and which they currently don’t have access to nor do they have the tools and data to analyze

On the other hand, to our beneficiaries we are providing them with 1) information on services to strengthen their small business on marketing, accounting, sourcing, finance, compliance and sales 2) a comparison tool that based on their business profile advises them on services catered to their needs. We are offering the service for free to our beneficiaries. However we do expect to explore new revenue streams based on the type of services that microentrepreneurs value the most.

For our beneficiaries the main impact is strengthening their business to help them access traditional financial services which they have been excluded from.

We plan to charge $20 for each qualified lead from the business assessment tool to FI to offer their services. Our conservative financial forecast shows that we will breakeven in three years. However we are aiming to a more aggressive scenario where we breakeven in two years. In the meantime we will be financing the development through social impact projects of our solutions in silos

Currently we have been able to fund our point solutions through grants and projects: We received $2 million from Mastercard Center for Inclusive Growth for three years to provide information on digital solutions for small entrepreneurs in Colombia, Peru and Mexico to support the digitization of their business and increase their productivity. The French Agency for Development (AFD) gave us $450,000 Euros for three years to provide information on financial services for Venezuelan migrants to bolster their financial inclusion. Finally DIV USAID gave us $250,000 to further develop the technological solution to start testing in the field the training module for banking agents in rural zones.

Strive Mexico gave us $2.3 million for three years to provide information on financial services for small entrepreneurs to support the digitization of their businesses. However, all of these grants have been to offer our solutions in silos to very specific use cases based on a specific end user to meet specific requirements demanded by our grantors and not to integrate and create our new solution CoMu.