Entrepreneurs attend Village Capital's first FinTech Mexico workshop in Mexico City, Mexico on April 6, 2016.
Rafa Jimenez went undercover in Tijuana’s poor neighborhoods for eight months, making his way through its tangled alleys to learn the ins and outs of tandas, informal money pools used by millions of unbanked Mexicans to raise cash.
The first-time entrepreneur was on a mission: he wanted to start a business bringing transparency and security to tandas by moving the age-old service online. Sixty percent of Mexicans – or 75 million people – have little or no access to low-cost credit and other financial services, forcing them to rely on tandas, or a costly alternative, loan sharks.
“I would like the emerging middle class to have access to low-cost financial services that are relevant to them,” says Jimenez, who co-founded
AhorroLibre in 2013 after seeing how vital tandas were. Right now, “they’re trapped in a no man’s land.”
Despite Jimenez’s decade of experience as a product launch consultant that took him around the world, he realized he needed key business training and guidance to get his startup off the ground. He is one of forty entrepreneurs who will get that – and possibly an infusion of capital – through a 3-month FinTech program offered by
Village Capital to support social innovators focused on improving the financial health of people and businesses worldwide.
AhorroLibre co-founders, CTO Robert Flores (L) and Rafa Jimenez (R) at the FinTech Mexico workshop.
“We see that there’s this great opportunity for entrepreneurial solutions to step in, and ease these populations into traditional financial services in ways they really didn’t think they could before,” says Dustin Shay, global manager for partnerships at Village Capital.
PayPal is expanding its
collaboration with Village Capital, contributing people, time and money to offer the FinTech program in three countries. The startups – about a dozen each in Mexico, the U.S. and India – will learn from industry leaders and investors, and collaborate with peers and experts. They’ll learn how to navigate obstacles from regulations and marketing to coding and payment processing.
At the end of each program, the entrepreneurs will select two among their group to each receive a $75,000 offer from Village Capital’s investment arm, VilCap Investments, and a regional impact investment firm.
The 2016 FinTech program rolls out in
Mexico in April, the
U.S. in early summer and India at the end of the year. Mentors, including experts from PayPal, will provide strategic counsel to the entrepreneurs for the full duration of the program.
PayPal Mexico's Rene Salazar (R) meets with an entrepreneur at the FinTech Mexico workshop.
“PayPal is one of the strongest partners we could have aligned with given its focus on innovation that really drives the entire financial services industry forward,” says Shay, adding that PayPal was “very focused on finding and engaging with individuals and small businesses – people who find it quite expensive to be poor.”
Peter Sanborn, director of global corporate development at PayPal, says the program is a strong fit with PayPal’s vision to democratize financial services by “helping develop solutions so that individuals and small businesses can learn to save money, invest, access credit and ultimately build wealth.” Village Capital, he adds, “does a great job of finding companies that are the next wave of thinking around solving some of these problems.”
A member of Village Capital’s FinTech program advisory board in the US, Sanborn expects the experience will help him have a broader view of the ecosystem and the innovative solutions that are emerging. “It gives us a real pulse of what’s happening on the ground,” he says.
Carolina Gómez, Deputy CEO of Mercado de Credito, is among a dozen startups participating in FinTech Mexico.
Globally, more than two billion people lack access to formal financial services and even more remain underserved. Creating access, says Douglas Pearce, Global Lead for
Financial Inclusion at the World Bank, “opens up opportunities in a way that perhaps no other single intervention does. Access to basic savings and payments services has direct poverty reduction impact.”
In Mexico, the unbanked and small businesses still lack access to credit. “By supporting these startups we can help with that,” says
Blas Caraballo, PayPal's Mexico country manager, who will be a mentor in the program.
That support starts with helping entrepreneurs identify their target market, then brainstorming tech solutions to financial access obstacles. In Mexico, experts say key challenges include: making credit scores reliable, knowing customers through accurate data, and reaching remote customers.
PayPal Mexico's Monica French (L) works with an entrepreneur at FinTech Mexico.
The startups are anxious to get that support and grow. For Jimenez, support means helping him figure out how to expand his service to millions of Mexicans.
Since he launched AhorroLibre, his business model has been to fine-tune the platform by working with large Tijuana employers to offer the online tandas to hundreds of workers as a free benefit.
But he has bigger plans: offering it to anyone in Mexico. And based on his earlier undercover research, as well as customer feedback, he is confident about the demand. “I get messages from workers all the time,” Jimenez says. “They’re always asking, ‘When can I invite my friends and family?’”
Jimenez’s passion for the work is fueled by that ability to help others while also building a business.
“I connected all these dots around tandas and realized how much impact this would have on the livelihoods of people if we could actually make it happen,” he says, adding, “I believe we can build tools for this emerging middle class for financial services that they understand, and give them those tools as inexpensively as possible.”