In this time of uncertainty, it is more critical than ever to support small businesses and microentrepreneurs as they strive to exist within this new, socially distanced reality. In Chile, where COVID-19 infections have recently soared, nearly 30 percent of the population works in the informal sector, with no access to social protection and little savings to draw from if their businesses are closed. These challenges underscore the importance of financial health.

In partnership with Metlife Foundation, Accion has supported the fintech RedCapital to develop financial health resources for microentrepreneurs over the last two years. Founded in 2014, RedCapital is the first crowdfunding platform with a sole focus on small and medium enterprises (SMEs) in Chile. On this platform, individual investors lend money to SMEs. Accion’s support has enabled RedCapital to offer services through their platform to benefit microenterprises too. Serving this new segment meant that RedCapital needed to revisit their end-to-end customer experience — product, processes, credit scoring, etc.

More than 40 percent of RedCapital’s client base within the microentrepreneur segment is under 35, with businesses that have been in operation for only a few years. As these young business owners strive to create stability, their financial health is critical. In interviews with Red Capital customers, we learned that many microentrepreneurs are unsure about their monthly revenues. Many told us that they know how much they make in income but do not keep an accurate record of their costs. They said that they would like to have more control over their finances, but they need help.

Manuela Iribarren, an entrepreneur and client of RedCapital, has faced many challenges in managing her pickle business, By Maria, which opened in 2012. When she and her brother had the idea to start a pickle company, she had never made a spreadsheet, let alone run her own company. Learning business and financial management skills helped her organize her business’s finances for both busy and slow seasons.

We carefully adapted RedCapital’s platform from the original to meet microentrepreneurs’ needs and goals. To ensure that these microbusinesses were able to maximize their use of both the platform and any credit products they might take up, RedCapital sought to build their customers’ financial capabilities in four distinct areas: (1) help them to organize their finances, (2) control costs, (3) plan for their future, and (4) manage debt.

For each of these four categories, the Accion and RedCapital team developed relevant, actionable, and easy-to-digest advice for busy microentrepreneurs, structured as a series of blogs. The blogs were published weekly on the RedCapital website as part of a comprehensive customer engagement campaign. In a blog titled “Managing your Debt,” clients learn to calculate how much of their earnings they should save to pay off their debt. They also learn to identify whether they can reasonably manage to take on credit based on their income level.

Blogs accessible to RedCapital customers: “Manage your Debt,” “Plan Your Future,” “Control your Costs,” “Organize your Finances” (top left to bottom right)

To ensure that microentrepreneurs take action after reading the blogs, each post contains a gamified, simple activity that demonstrates the financial capability explained in the post. These calls to action use behavioral design principles to encourage customers to engage with the concepts and, over time, build their financial health. For example, in one of the activities, users are asked to develop a concrete plan for managing their current debt. As they complete these activities, users unlock membership benefits, such as higher loan amounts. To assess the impact of the blogs and corresponding exercises, the team used various indicators to measure the perception of financial well-being for those who engaged with the content, compared to a control group. Data gathered through this study showed that RedCapital clients who completed the calls to action said that they felt better able to manage their businesses and debt.

Calls to action available in the “Manage your Debt” blog: Calculate the percentage of Debt, Credit Financing, Credit Rules (from left to right)

RedCapital piloted this newly designed lending product for microentrepreneurs in October 2019. To date, 715 microentrepreneurs have registered their business on RedCapital’s redesigned portal. This product’s initial results signify an interest in personalized digital financial resources that let microentrepreneurs learn about financial health and access appropriate credit, which can help them weather crises and plan better for the future.

For RedCapital, it’s all in the name. Red means network in Spanish, thus signaling that when individuals choose to engage with RedCapital, they become more than a client, but a member of a network. In reaction to this campaign, one client shared, “Everything that is education and help is welcome — it helps me not to make the financial mistakes that I [have made in the past].” As Accion continues to support RedCapital in the rollout of this adapted platform, we will also be further assisting the microentrepreneur community, as they navigate challenges imposed during these uncertain times.

This product is a part of our Building Financial Capabilities and Strengthening Institutions through Customer-Centered Innovations project, supported by MetLife Foundation.

Megan Skaggs also contributed to this article.

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