Banking Innovation of the Month: Banco Pichincha’s digital microcredit

Digital Reinvention
19/09/2022 article

Qorus-Accenture’s Banking Innovation of the Month award for September goes to Banco Pichincha’s digital microcredit offering, the first of its kind in Ecuador, bridging the digital gap for the country’s micro-entrepreneurs.

When the pandemic-induced shift to digital swept the world’s financial systems, Ecuador had a long way to go to catch up. Until April 2021, it was estimated that only 32% of the adult population had access to financial services, and of those only 4.2% used digital banking tools. Micro-entrepreneurs, often lacking in both financial and digital know-how, faced enormous challenges in keeping their businesses afloat in the new digital-first environment. At the same time, securing small loans through traditional channels became more difficult under the constraints imposed by the pandemic. 

Banco Pichincha stepped into the gap, creating Ecuador’s first 100% digital microfinance product, with a robust automated process allowing qualified business owners to secure and self-manage small loans in a matter of minutes, dramatically streamlining the traditional model. The bank has also created financial and digital education/advice platforms especially targeting the micro-entrepreneur segment, helping them to acquire much-needed agility in the rapidly changing world.

The new microcredit product solves numerous pain points both for Banco Pichincha’s micro-entrepreneur clients and their internal clients, the credit executives. The old process for loan applications involved reams of red tape, with in-person visits and lengthy assessments, followed by internal validations, and finally visits to agencies by the client to complete the process. During the pandemic, application times grew even longer as in-person visits became more complicated, but at the same time micro-entrepreneurs faced the urgent need to transform their businesses and migrate to digital sales in order to survive.

Developed by a dedicated team over a five month period, the automated microcredit application process uses a robust analytical method to protect the bank against risk and clients against over-indebtedness.

Developed by a dedicated team over a five month period, the automated microcredit application process uses a robust analytical method to protect the bank against risk and clients against over-indebtedness. Guarantors, documents and on-site visits are no longer required, and the credit executive can complete the placement in just 5 to 10 minutes through telephone or face-to-face support, rather than several days of information gathering and assessment. 

Alongside the microcredit offering, Banco Pichincha seeks to promote digital and financial inclusion for Ecuador’s micro-entrepreneurs through differentiated offers of financial education courses, business school programs, talks, and savings campaigns to help them maintain healthy finances and complete the transition to digital. Indeed, in contrast to the early days of the pandemic, some 61% of Ecuador’s entrepreneurs now use digital tools. 

Early results from the microcredit initiative are promising. In the six months since it was launched, a total $140 million in small loans has been issued to more than 15,000 clients. Some 57% of disbursements have been made to women, who are traditionally at a disadvantage in the world of finance. The product has achieved a 4.5/5 client satisfaction level and product recommendation impact of 92%. The bank has saved a lot of time and resources as well – besides optimizing the time of credit executives, the digital mechanism has reduced the generated cost of loan placement by 90% and increased the productivity of the sales force up to four times.

Banco Pichincha’s efforts to meet the needs of micro-entrepreneurs and integrate them into the financial system are impressive, and we hope this Banking Innovation of the Month award will inspire further such initiatives.

Entry for the awards is open to all and free of charge. To be in with a chance of winning, organizations need to enter their innovative projects in the Qorus-Accenture Banking Innovation portal before midnight on 30 September 2022.

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