The way we work is going through one of the most profound evolutions in decades, but it’s not the changes themselves that impress me most, it’s the speed at which they are happening. In 2020, companies reacted and adapted to the challenges of COVID-19 up to 20 times faster than they would have in a pre-pandemic world. Years of innovation are happening at once. In Brazil, where the share of e-commerce in retail grew from 7 percent to 12 percent (more than it grew in the previous 10 years!), the need for MSMEs to digitize their businesses is vital. From restaurants switching to delivery platforms to small entrepreneurs selling their products through Mercado Libre to tech startups doing cross-border operations, companies are embracing the new reality.

Just as the traditional financial sector was trying to catch up with fintechs, COVID-19 arrived and accelerated digital transformation at a rate we had not seen before. Unable to respond as fast as they needed to, banks lagged once again, and a new breed of financial service providers became necessary. Dinie was born out of this moment and has become one of the first Brazilian embedded MSME lenders. Partnering with platforms of all sizes — ranging from small e-commerce sites to prominent players like Dlocal, the latest Latin American company to go public, or the leading delivery platform iFood —Dinie seamlessly provides lending products to help companies meet their short-term capital needs in the same digital environments where they already do business.

Like our recently added portfolio companies Henry, which provides financing through an Income Sharing Agreement (“ISA”) scheme to its students, and Lami, which offers bespoke insurance through businesses customers know and trust, Dinie’s approach is emblematic of how embedded finance is a more scalable, secure, and cost-effective way of lending. In one of the most active startup markets in the world, Dinie is:

Helping reduce the affordable financing gap for MSMEs

Despite Brazil’s position as a regional hub of fintech innovation, in-market financial services providers have yet to effectively serve MSMEs with the short-term, affordable products they need. Dinie’s flexible, revolving credit lines allow customers to get the capital they need on-demand without having to complete a new loan application every time they experience cashflow challenges. These MSMEs can use extra working capital in numerous ways to help them grow, including marketing, expense payments, and inventory purchasing. Additionally, by partnering with platforms to offer credit, Dinie can locate the MSMEs on the platforms they are already active on and provide products in a contextualized way.

Leveraging data to efficiently underwrite and collect loans

By embedding within partner platforms, Dinie can leverage MSMEs’ data throughout its entire process, from underwriting to repayments. With these insights into its MSME clients’ cashflows and repayment behaviors, Dinie can monitor and adjust credit lines as needed to avoid customers becoming over-indebted. Over time, this data will allow Dinie to evolve and expand its product suite, give partner platforms insights into how to serve their end customers better, and ultimately drive loyalty.

Proving that embedded finance is a better way of lending

Dinie’s embedded finance solution and B2B2C acquisition strategy give the company several advantages over direct lenders. For underwriting, Dinie uses MSME customer data from its platform partners to pre-approve clients and assign limits. Once MSMEs accept their pre-approved credit — offered to them within the platform interface — Dinie collects external data via its API to complete customer KYC and onboarding. Regarding collections, Dinie sits directly in the payment flow between the platforms and their customers and automatically deducts repayments from MSME cashflows. These innovations, which the company developed over the last year, are resulting in a more scalable and responsible way of lending.

Empowering startups to thrive while helping their clients

For platforms in their early stages, helping their MSME customers with credit both provides a new revenue source and boosts their core business. Lending could be the ultimate economy of scale for companies with high startup costs, initially negative unit economics, and massive scale requirements to reach profitability. But developing an in-house lending business requires unique capabilities, access to capital, and years of data to build robust underwriting models. Embedded lenders like Dinie split the infrastructure costs across multiple partners, driving down unit costs with scale and providing access to these unique capabilities from day one.

Accion Venture Lab is proud to join Dinie in its mission to help Brazilian MSMEs not only to survive, but to thrive during this challenging and pivotal moment in history. As impact investors, we work hard to promote financial inclusion. We’re excited to support a company that serves its clients in their own environment, understanding their needs and developing unique products to fulfill them.

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