Contxto – Mexican fintech Konfío has announced that it will be launching a new product line for SMEs (small, medium-sized enterprises) in the country.
It is all part of the long term vision that the loaning company has in store for itself. After years on focusing on seed-level credit centered primarily around micro-enterprises, Konfío is hoping to latch its growth onto its successful customers’ own expansion. Back in the day, that is 2017, Konfío only offered up to MX$500,000 (US$26,700)
Related article: Mexican fintech Konfío closes US$100 million Series D led by SoftBank to boost support for SMEs
Now, the new line of loans will range from MX$2 million to MX$6 million (US$106,000 to US$320,000). This money will be aimed specifically at rapidly expanding small businesses and establishing medium-sized companies. The idea is for this quick liquidity to give them that oomph they need to keep up their rates of expansion at a crucial stage of their growth.
The Mexican fintech’s recent press release put it simply:
“2020 will be a year of expansion and diversification for Konfío.”
Playing with fire
But is it really all so simple? Konfío’s automated system of quick, easy, and expanding lines of credit does stand in stark contrast with a loan starved economy like Mexico’s.
Compared to 2018, the close of 2019 saw a decrease in loans to SMEs by 1.2 percent.
And yet, credit can be an essential tool or a lethal enemy.
Konfío so far has a rather good track record. But this recent expansion compared to its previous modus operandi is a completely different kettle of fish.
In a country like Mexico, two million is a big deal. Consider that, according to Konfío’s own numbers, a Mexican medium-sized enterprise is making between MX$1.5 and MX$3 million annually. The minimum loan is often more than a year’s worth of work, and this time you probably won’t be able to ask your friends and family to spot the bill for you.
Indeed, a “home equity loan” is a nice way of saying the bottom line is that, if you can’t pay, you lose your house.
Therefore, let’s hope that Konfío’s software really does gauge creditworthiness truly. Or else soon you’ll have a bunch of medium and small companies weighed down with 20 percent interest over long periods of time or worse—something that Konfío, being the beneficiary of this cash, might have a vested interest in seeing happen.
But, I am getting a bit dark. Mexican—and Latam—businesses are in desperate need of serious lines of credit. Let’s hope Konfío can give it to them. And hey, at least the startup has got the Queen of the Netherlands’ endorsement on its side.
-AG
