CloQ

Micro-, small- and medium- enterprises (MSMEs) are the backbone of society. About 90% of these businesses are run by entrepreneurs, with the far majority being owned by a single family. However, most new businesses struggle to keep afloat.

According to the World Bank, around 1.7B people in the world do not have access to the formal financial system; in Brazil, where the company currently operates, ⅓ of the population is unbanked. According to a study, from Artemisia and ANDE, 80% of the low income population in Brazil does not have access to credit.

Financial exclusion inhibits business progress and the risk management of SMEs while enhancing other forms of socio-economic exclusion. When SMEs and marginalised entrepreneurs encounter financial hardships, they don't find support in the financial system. With an abundance of subpar and predatory options, such as loan sharks and payday loans, the entrepreneurs are exploited and enter into a cycle of indebtedness. The lack of access to quality credit restricts the massive economic and life changing potential SMEs and marginalised entrepreneurs can make towards an inclusive society.

CloQ is a project inspired by the microcredit from Yunus. His idea has made a tremendous impact in the world. Though, it has not been updated in its processes since the 70's. CloQ adds data science, our own behavioral credit score model, targeted UX and easy access to millions of users due to the widespread use of smartphones. CloQ can bridge millions of new clients to consume basic financial services such as insurance and credit that will help them sustain and grow stable businesses.

CloQ offers 3 basic tools for financial inclusion: access to nano-credit via an app to request and receive a nano-loan quickly in times of need, nudges on financial education to allow people to improve their own situation, and a CloQ behavioural credit score that can be used to bridge and facilitate the use of other financial services, outside CloQ’ scope. Apart from the basic service of access to credit, CloQ clients are also building a positive credit history in the process. 

With this new credit history CloQ can provide a new market for other financial institutions. SMEs were previously largely ignored by other parties offering financial services, as the acquisition cost, credit-evaluation cost and default / fraud risk were deemed too high compared to the potential benefits. However, CloQ, as a B2B2C platform, offers a cost-effective and data-driven way to access millions of new potential customers, complete with realised credit history and verified credit scoring. 

Our key users are low-income and underbanked entrepreneurs that cannot request a loan at a formal institution and would need small amounts of money to cope with financial hardships or small investments in their business. Most of the time our users cannot request loans at financial institutions because they don't have a bank account, proof of income or a (good)credit history. 

The solutions they use today are credit cards (charging 400% interest rate annually), payday loans or loan sharks (charging about 7000% interest rate annually). None of them are long term solutions nor are they helping the financial health of the client, as besides being an expensive source of capital, it does not provide any other value.

We as a social impact company want to support these entrepreneurs in two ways: (1) They are not used to saving. Thus, when there is a financial hardship they have nowhere to go. CloQ will be an option of capital to help them in the hard times. (2) They don’t have stable income or a good credit history, preventing them from accessing formal credit. CloQ will build a credit history for them to be used with other financial services providers.

Our users experience an easy and simple loan request process, all online, no need for a bank account, proof of income or credit history. We've created a new behavioural credit model that allows people with traditional low credit scores to become our clients. Our credit model is based on behaviour, not on bank statements. In this way it is more inclusive towards the low-income and the underbanked. 

While being bootstrapped, we were able to provide 5000+ nano-credit to economically vulnerable informal entrepreneurs. Around 75% of our users are women. They are informal MSME owners and work mainly in the beauty, agriculture and food sector. The credit was either used as working capital, or to make small investments into their business.

So far we have saved our clients over USD 500000 in interest rate charges that they would have incurred if they got the same loans from loan-sharks.

We at CloQ have a complementary background. Rafaela, the CEO, comes from a family of informal entrepreneurs that have built their own small business in order to support the family. They relied on loan sharks in order to have working capital or money to invest. They paid over 7000% interest on those loans. That was just impossible to have any real profit in the business with such costs.

Rafaela got out of poverty to become a specialist in international business development. Since the beginning of CloQ she knew she wanted to build something that would make a positive impact in the society. She is a UN youth leader, IMF and Cartier Women's Initiative fellow. She graduated Summa Cum Laude in Business at UFPE, Br, and obtained an MBA at VU Amsterdam, NL. 

Koen, the CDO, created a credit-scoring model based on non-financial data for a large international bank and has over 10 years of experience in algorithmic high-frequency trading and statistical arbitrage across financial markets globally. Koen has an MSc in Financial Econometrics, quantitative finance from the Erasmus University Rotterdam, NL. 

To close the team, Ferran,  the CTO, a full stack developer with strong experience in developing secure fintech apps. Ferran has a MSc in pattern recognition IT from UFG, BR. Ferran is passionate about helping others, and chose to work with us because of our impact in the lives of his community.

Our team is fully aware of the needs of the customers that for so long have been waiting for a better option for credit. Our users cannot believe it is so simple to get a loan, they are grateful, they pay us back. Most of our clients are blacklisted in the traditional credit bureaus. We know the credit bureaus cannot access the reality of this niche, and deem them as risky. Though we are unveiling this niche. CloQ can allow traditional microcredit providers to use our platform, allowing them to reach more people, get a better credit analysis, cut costs, be faster, bridge these people to banks or other financial institutions to consume services such as savings, insurance and all basic financial services that help to live a stable life.

In this pilot of our platform, we provided access to credit for over 2700 informal entrepreneurs all over Brazil. We also have a waiting list of over 30k people waiting to be able to use our services.

I have the luck to have been through financial hardships while growing up, to have lived in slums and see the hard work families put through in the hope of a better future. I say I have the luck because with this experience I know exactly what is the pain we are trying to solve. However, because of my background I do not have a powerful network that can help me reach the full potential CloQ has to offer. Financial inclusion is not an easy goal, nor a cheap one.

Solve was not in my sight at first, but after a couple of people (such as Diana Eggleston, and Cartier's fellows) started sending me the competition and telling me that CloQ is perfect for it, I checked it out. My main motivation to apply is to be seen and heard by the competition jury. This selected group of people is my one in a lifetime chance to acquire a powerful support for CloQ that can scale beyond any imaginable idea I ever had. We are fighting against global poverty. We can only aim that high when we have a strong support at our base. We want Solve to be this base.

Online app loan providers are spreading all over the globe. However, they are all focusing on holding the client in the vicious cycle of loans while exploiting them, with high interest rates and low advantage for the client to be loyal. 

CloQ is different from any other online loan provider offering services to the low-income. Besides a low interest-rate,  we do not aim to hold the client with us. We aim to build a credit history for the client that could be used to bridge clients with other financial institutions.We see CloQ as a first step into the stairs of financial health. CloQ clients notice and appreciate our efforts to offer the best, and for this reason they trust us and are loyal to us.

CloQ's Theory of Change goal is the diminishment of financial vulnerability, inclusion of the poor and the underbanked in the financial system and expansion of financial services that provide the underserved with facilities for savings, loans, insurance and other services.

We suggest that the degree of financial inclusion is determined by three dimensions: usage, barriers and access to the financial system.

• Credit 

  • How many loans given

  • How often

  • Default rate

  • How many unique clients

• ID 

  • How many people cannot use our services because they have no ID

• Proof of residency

  • How many people cannot use our services because they have no proof of residency

      - Easy to use

• Number of downloads

• Download to short sign up ratio

• Short sign up to long sign up ratio

• Customer service requests

• Internet

• Smartphone (do they have a smartphone to use our app?)

We also monitor the changes occurring with clients before, during and after the use of our services in order to pursue the social impact aimed. 

Our indicators being followed are:

• Live with parents

• Residency location / moves

• Educational level

• Income changes

• Employment changes

• Change in government benefits used by client

• Number of bank accounts created after using CloQ

• Decrease of negative notations in credit bureau

• Percentage of clients that are women

All this data above is being tracked through our app and access to public information. The client inserts this information in order to complete a sign up to allow the usage of services. The client is required to update the information as needed.

Our business model is B2B2C - We are a platform, bridging financial institutions that want to offer financial services and our end-client, which is the un(der)banked and financially underserved retail client. The financial institution makes money on the services provided, the end-client benefits from the financial service and CloQ selects and connects the end-clients, while making money by charging a fee for every client to the financial institution.