An app helps users borrow small amounts and leverage this to grow small businesses, avoid loan sharks, and build credit
Spotted: Financial exclusion – the inability to access financial products like bank loans or credit – is a major barrier to global business and growth. Yet all too often, young people and those on low incomes, who often need loans the most, find them impossible to access. Instead, they may turn to expensive payday lenders and dangerous loan sharks to solve financial problems. Both options are exploitative and help create a cycle of indebtedness that is difficult to escape.
A new app called CloQ takes a different approach. It offers access to nano-credit for low-income and unbanked borrowers and helps them to build a credit history that can be used as an entrance to the financial system. Users only need to download the app and complete an easy sign-up process, which includes taking a selfie and a photo of their ID. There are no sign-up fees, and all transactions can be conducted through a wallet on the app – allowing access for the unbanked.
Once signed up, users can begin to request nano-loans, to be repaid at low interest and in instalments over two to five months. Once the client finishes repaying the initial nano-loan, they can request increasingly higher amounts, based on their repayment record. While repaying the nano-loan, the client also receives information about personal finances.
CloQ’s main focus when interacting with clients is to create trust and loyalty. The company explains: “We build mutual trust by encouraging people to educate themselves, which allows them to take better financial decisions. By doing that, we aim to build a long-lasting relationship in which our clients improve their own lives and we can provide financial support in that process.”
Springwise has spotted other ways innovators are making financial services more accessible, including using alternative data to provide loans to the unbanked and a neobank aimed at serving the LatinX community in the US.
Written By: Lisa Magloff