While the entrepreneurship and fintech scene has grown in Colombia in recent years, most adults there still don’t have a bank account. The lack of affordable, high-quality financial services has left many Colombians — especially those working in the informal sector — without a safety net for challenging times or a way to strengthen their financial health and seize new opportunities. The COVID-19 pandemic further exposed the vulnerabilities of Colombia’s financially underserved. Many people have lost their livelihoods and during lockdowns and economic struggles, and don’t have the financial services they need to stay resilient through challenging times.
Twenty-five-year-old Nicolas Cairasco Parra was born and raised in Bogotá, Colombia. He’s a self-employed civil engineer who works as an independent contractor in both the public and private sectors in Bogotá. The COVID-19 pandemic disrupted nearly all industries in Colombia, and public infrastructure was no exception. “The pandemic has modified not all, but a significant part of my income. In the last year, my main challenge has been to generate an innovation in the services I was offering as a civil engineer,” said Nicolas. Before the pandemic, he made multiple in-person field visits while designing infrastructure projects, plus frequent one-on-one meetings with his clients throughout his contracts. “But clearly having to go virtual has brought a lot of challenges for continuing to offer civil engineering services virtually,” he says.
As an independent contractor, Nicolas doesn’t have the financial security that permanent employees enjoy. With some uncertainty in his career — and unexpected changes to his income because of the pandemic — Nicolas needed a solution to help build his financial health and gain some peace of mind. He started working with R5, an Accion Venture Lab portfolio company, in December 2020. R5 aims to make financial stability attainable for lower-income Colombians through innovative financial products and services offered through a digital platform.
Because traditional banks and financial providers often overlook low-income Colombians, R5 has focused on finding new ways to provide responsible funding and affordable financial products. Through asset-backed loans and online insurance products, they’re allowing people to leverage cars and motorcycles as collateral so they can extend affordable loans to customers who might otherwise turn to costly credit cards or informal lenders to make ends meet.
Nicolas had difficulty finding providers that would extend loan products to independent contractors like him, saying, “Financial institutions restrict many products [because] I work as an independent professional. Usually, financial institutions classify one as higher risk, but R5 had an alternative. Having this [product] in the middle of the pandemic was great,” says Nicolas. “The majority of companies offer a product where they make you a loan with a vehicle pledge, but the vehicle is consigned. The car is parked in a parking lot under their disposition and surveillance. The vehicle is locked. But with R5, it has been a very good experience because finally, my vehicle is at my entire disposal in Colombia.” R5 also offers vehicle insurance through a seamless digital process that uses a unique machine learning risk model to offer low-income clients better coverage at a lower price.
Nicolas hopes that accessible financial services can pave the way for other young Colombians to seize new opportunities, like starting their own businesses and finding employment. “I hope that this pandemic allows for innovation and finding new alternatives that will give room to new investments. For example, creating a business requires starting capital and there’s nothing better than being able to count on loans that have accessible rates. This also gives you security and inner peace, allowing you to perform better.” With their accessible and affordable loan and insurance products, R5 is helping build more Colombians get what they need to improve their financial health, secure safety nets, and build better futures.