Lending in Latam. How are Fintechs changing the landscape of lending in Latam?
Lending Fintech refers to online platforms that facilitate the obtaining of financial resources for both individuals and companies and this new financing alternative has made it possible for many enterprises to obtain the necessary capital to continue working. In relation to this one of the regions with the greatest acceptance and use of this category is Latin America.
According to Vodanovic Legal (2019), the region has annual growth rates of 60.5% on average in the main markets of the Fintech sector, which shows that the Fintech sector has grown rapidly in recent years. Also, as of 2019, more than 1000 Fintechs could be found in Latin America, with the predominant Fintech categories being Payments and Remittances and Lending.
Fintech in Latin-American
| Category | N° Fintech | % participation |
| Payments and remittances | 285 | 24.4% |
| Lending | 208 | 17.8% |
| Enterprise Finance management | 181 | 15.5% |
| Personal Finance management | 90 | 7.7% |
| Crowdfunding | 89 | 7.6% |
| Enterprises technologies | 71 | 6.1% |
| Trading of financial assets and capital markets | 61 | 5.2% |
| Wealth management | 55 | 4.7% |
| Insurtech | 53 | 4.5% |
| Credit score, identity and fraud | 47 | 4.0% |
| Neo Banks | 26 | 2.2% |
Adapted from Vodanovic legal (2019)
Among the countries with the greatest advance in the Fintech sector in Latin America we have Brazil first, followed by Mexico, Argentina and Colombia respectively; with Mexico being the first country with a Fintech law that regulates the sector in its entirety.
Likewise, it is highlighted that in 3 of the 4 countries with the greatest progress in the Fintech sector, the Lending category is considered as the main Fintech category. These countries are: Mexico (Finnovista, 2020); Argentina (Argentina Fintech Chamber) and Colombia (EY, 2020).
In the case of Argentina for example, the lending category occupies 25% of the Fintech sector and according to the Argentinian Fintech Chamber these respond in an agile and efficient way to the needs of a large percentage of the population that does not have access to traditional credit because they do not have the credit history required by traditional banking institutions
In relation to this, It is important to mention that Fintech companies in Latin America are characterized by having an approach aimed at achieving financial inclusion, since approximately 40% of Fintech companies in Latin America seek to serve unbanked or underbanked people or SMEs (Vodanovic Legal, 2019). In the specific case of SMEs, loan-focused Fintech companies have been gaining popularity in recent years due to the opportunity they provide for new ventures to continue to exist. This has meant that the Fintech loans have raised more than 1.95 billion dollars by 2020 just in Latin-American (La República Colombia, 2020).
In this sense, it is observed that Lending Fintech companies are emerging as an alternative so that in Latin American countries, in which it is difficult for some SMEs to access financing, SMEs can access financing and collaborate with the development of the economy of the country
