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Part of the problem with getting more people involved in the formal economy is not just a lack of financial inclusion, but a lack of understanding how credit ratings work.
For small business owners and so-called micro-entrepreneurs to get credit many of them need to apply for it. But when they do many discover they don’t have a credit record or don’t have the right kinds of data to be able to apply.
Consumer credit company Experian wants to change that and has launched an innovative app to address this in South Africa where the small business sector is seen to have huge growth potential.
Called GeleZAR, the app’s name is a clever paly on the word geleza, which means “to learn” or “study” and the South African currency the Rand, which has the symbol ZAR.
“There’s obviously a huge need to educate people about financial understanding, what a credit score is and how to get data,” says Charles Butterworth, Managing Director, Experian UK & Ireland and EMEA.
GeleZAR is an app designed for cheaper smartphones running Android Go to teach financial education and credit scoring to people, especially micro-entrepreneurs, so they can get a better understanding of credit score and then improve theirs.
“With their permission, micro-entrepreneurs will be able to build an alternative credit score using hundreds of mobile data points through the GeleZAR app, to determine creditworthiness,” says Simon Rudman, head of finance at Experian SA.
“We take micro-entrepreneurs and consumers on a financial literacy journey. We help those who haven’t been able to, to access the formal economy and be credit visible. And then aim to help them build a credit score and at the interest rate they deserve,” he adds.
“With this app launch we are working to reach people who are virtually invisible in the credit world. There are millions of ‘thin file’ people and MSMEs in sub-Saharan Africa – those with limited or no information on a traditional credit bureau – who find themselves excluded from mainstream finance. They often face more difficulty – or higher costs – when applying for financial products or services.”
Simon adds: “We believe that introducing new and more appropriate data sources is the key. There are many forms of alternative data that could help build a financial footprint and positively impact the lives of many.”
The opportunity for growth by the micro, small and medium enterprise (MSME) sector to contribute to the economy and create jobs “is one of South Africa’s biggest development opportunities,” according to The Unseen Sector reportby the World Bank and International Finance Corporation.
“Small enterprises employ between 50 and 60% of South Africa’s work force and contribute around 34% of GDP,” the November 2018 reportfound. “However, the small business sector has been relatively stagnant over the last decade, and only 14% of the country’s small businesses are formalized, capping their job creation and economic contribution potential.”
Experian is hoping GeleZAR can change that.
May 31, 2019 at 04:49PM
Forbes – Entrepreneurs