Using Mobile Phones to Build Credit in the Developing World
July 24, 2020
Purpose, Inc., episode 1.3: Josh Gosliner of Juvo
Key takeaway: “You have a responsibility to the people that you’re trying to help to actually create a sustainable business model.”
In this episode of the “Purpose, Inc.” podcast, Michael Young talks to Josh Gosliner, senior director of market strategy at Juvo, a venture-backed startup in San Francisco. Juvo’s innovative business model helps rectify a major financial challenge for people in Latin America and Southeast Asia: As Michael says, “Many organizations talk about economic empowerment and financial literacy, but it’s difficult to create real economic change without a viable credit infrastructure for individuals.”
“Approximately four billion people worldwide don’t have credit histories, and are thus locked out of the formal economy,” Josh clarifies. What credit is available comes at a high cost, threatening to catch individuals up in debt traps.
However, what 83% of adults in developing countries do have: mobile phones.
Building Credit Through Mobile Phones
Many people around the world prepay for mobile service, topping up their account as often as several times a week. Juvo offers microloans in the form of prepaid air time: Customers first qualify for loans worth a few days’ airtime. The more reliably they repay those loans, the bigger the amounts they can borrow. Juvo then collects that positive credit history data—in some areas, it can also prove employment with location data—and provides it to banks who can offer individuals more significant loans or credit.
“Being able to get more of a ‘prime-type loan,’ as we refer to it in the U.S., means you can get a better rate, you can get better terms, you can put yourself in a position where you’re moving up the ladder,” Josh says. Juvo’s data-privacy practices prevent it from sharing financial information with any bank that requests it, he clarifies.
The novel coronavirus pandemic, which requires physical distancing, has spurred adoption of Juvo’s technology, since it isn’t always safe to go to a physical store to buy airtime. Use of mobile money accounts have surged, too, especially as governments have used these services to distribute funds to people affected by the pandemic. Mobile banking and credit may become even more essential in the coming years, when small businesses in developing and rural areas will need liquidity to recover.
Better Than Nonprofits?
The takeaway that Josh shares for others interested in addressing problems in the developing world: Purpose-driven businesses like Juvo can be even more effective, and scalable, than nonprofits.
“If you have a nonprofit, you’re essentially starting at a certain amount of money that you have to disperse and you deplete that over time,” he concludes. “The difference with having a sustainable business model is that we can continuously bring money into this so we can continuously expand its reach.”