VentureKast: How First Circle supports small businesses in the Philippines

Podcast: Addressing the small business credit gap in Southeast Asia

“It’s this perfect combination of being able to build a large commercial enterprise for ourselves, knowing that every dollar of loans and every dollar of revenue that we make is a function of our clients winning,” says First Circle CEO Patrick Lynch. He sits down with our host Vikas Raj on the latest episode of VentureKast, the podcast about the most innovative and impactful financial inclusion startups in the world. They discuss the small business credit gap in Southeast Asia, and what First Circle is doing to solve it.

First Circle is the first digital lending platform for small businesses in Southeast Asia. As Patrick explains in the interview that there is a massive market opportunity to serve the “missing middle” — the small businesses in Southeast Asia that are untouched by the existing financial system. “In the Philippines for example, credit penetration is just 15 percent of where it needs to be,” Patrick says.

First Circle is bridging a credit gap that exists for small businesses in Southeast Asia where existing formal financial institutions are unable to profitably serve the segment. As Patrick explains, “the key challenge faced by the incumbent providers are the high fixed costs of service delivery.” He adds that “the businesses don’t have the type of traditional credit data that the incumbents would expect to see, and therefore the information that we deem to be very valuable and very predictive is incompatible with the existing credit policy.”

First Circle’s proprietary software leverages alternative data sources to make quick decisions on loan applicants’ creditworthiness and ultimately provide them credit. Its clients, predominantly small retailers and merchant that sell through e-commerce platforms in the Philippines, can apply for funding online, be approved, and receive funds in a matter of days. Efficient technology, varied data sources, and partnerships with e-commerce platforms and payment gateways allow First Circle to acquire new customers quickly and cost-effectively. Ultimately, financial inclusion is at the core of First Circle’s model and, as Patrick describes, there is a real opportunity to create wealth for small businesses by providing them “access to financial capital to be able to buy and sell more.”

Patrick Lynch of First Circle

First Circle and expanding access to credit for SMEs in the Philippines

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