Peruvian Fintech Lending Ecosystem: A massive opportunity for MSMEs

In Peru, there are more than 2 million companies, of which MSMEs (micro, small and medium-sized companies), represent around 99.0% of the total number of companies. However, only 6% of these access the regulated financial system. Likewise, only in 2020, 15% of enterprises stopped operating due to lack of financing sources.

Fintech in Peru.

In Peru, the Fintech ecosystem has been growing in line with the growth of the sector in Latin America, since from 2019 to 2020; the number of Fintech companies has increased from 130 to 151. Fintech companies in Peru are characterized by being young companies with less than 3 years of foundation and the vast majority have web platforms (74% of companies) or a mobile application (13% of companies). Other technologies used to a lesser extent are Blockchain, Open Banking and Artificial Intelligence. On the other hand, 51% of Fintech companies invoice less than 10,000 soles per month, while 24.3% invoice between 10 and 50,000 soles per month. (Peru Fintech Association, 2020).

Moreover, in 2019, a new record was set for the amount of capital invested into Peruvian startups since at least $11 million and most of the money went to Fintech (47%) and Edtech (37%) startups.

Regarding the categories of the Fintech sector, according to the study by Ernst and Young (2020), the main Fintech categories in Peru are payments and transfers, lending and exchange rates.

N ° Fintech in Peru by category.

Adapted from: Ernst and Young, 2020.

The absence of regulation still remains an obstacle in the growth of Fintech companies, since in Peru many of the technological proposals cannot be executed effectively due to the regulatory and legal barriers that may arise. Likewise, the lack of regulation generates uncertainty regarding the protection granted to investments, which generates little confidence in potential investors.

Lending Fintech in Peru.

The demand for this type of Fintech has been growing in recent years as people have been gaining greater proximity to the issue of digitization. There are even large companies that have joined or bought fintechs to support clients who are increasingly inclined to digitization. To date, it is the category with the highest number of fintechs, with 33 Fintechs.

Regarding the benefits of financing Fintech, these represent an opportunity for MSMEs, families in vulnerable situations, users in rural areas, older adults, and young people, among many others, to have more financing options, which make it possible to generate greater financial inclusion. In the case of SMEs, for example, there is a low proportion that access loans, and this financing gap leads them to extinguish or remain small, so financing Fintech represents a form of access to credit.