The Rise of Fintech and Banking Disruption

Reverse innovation: ice-making and wealth creation in the Philippines

ice tubes

Jane Cooper, The Banker Magazine’s Technology and Transaction Banking editor, in her cover story last month New Consumers – innovating at the base of the pyramid, explored the concept of ‘reverse innovation’. The basic premise is that, with more than half the world’s population still unbanked, smaller financial innovators are seeking to meet their needs, in ways that still seem to escape the reach of more established banking providers.

The article struck a chord here at Mambu, as we see our customers innovating all over the world, in their local communities. Financial inclusion is not just about providing microloans for individuals. The opportunity that many of our customers are embracing is the chance to help local entrepreneurs that want to build and grow their businesses, beyond the ‘mom and pop’ style market stall or front room shop that is so prevalent in many parts of the world.

Wealth creation from the ground up, enabled by local financial innovation, is making the difference for many micro and small businesses, especially where those businesses are considered too large to be microcredit clients, but too small for commercial banks to be able to adequately serve.

One of our customers, Mega Mitch Credit, in the Philippines, shared a client success story with us which we thought really validated this approach to financial innovation. Jocelyn, an ice company proprietor in Mindanao in the Philippines, began her business with two small freezers, which she used to create ice tubes, to sell to local fishermen. Jocelyn could see the opportunity to develop her business, but she didn’t have the money to buy additional freezers so initially she borrowed from a non-registered lending organization, but the interest rates were so high, she could barely make the repayments. Then she was introduced to Mega Mitch Credit, who talked through her plans with her and set her up with a series of loans, whereby interest was only calculated on the outstanding amount and the total interest was not more than 3%, a huge difference to the more than 20% interest she had been required to pay previously.

Over time she saw that she could do more and that demand for her ice tubes was growing, so with help from Mega Mitch Credit, she bought additional deep freeze units, managing her repayments carefully, taking further loans, and expanding the business. Today Jocelyn has 39 freezers and her company has 14 staff, a great and ongoing success story.

That’s what financial inclusion is really all about – helping business owners take control of their destiny, empowering them to take the managed risk that goes alongside working capital, to extend wealth creation to their staff and their local community.

You can read Jane’s article in full here