Financial Inclusion
By Sebastián Guerrero
Digital Holding, an innovative business supporting SMEs in LatAm to increase access to finance; was looking to strengthen its business case to raise its Series-A round
The Opportunity
SMEs account for over 90% of LatAm firms, employing 63% of the workforce and contributing to 35% of the GDP1. Access to finance is key for SME growth, but only 56% of companies have access to the financial system in LatAm. Also, only 20% of SMEs survive their 3rd year, and entrepreneurs cite access to finance as the main reason for failing2.
Although banks are still the preferred option for LatAm SMEs, factoring has emerged as a potential solution to close the financing gap. Factoring has grown at an 11% CAGR in the last 5 years and reached the total US $150Bn (2019) volume in LatAm3. When a financial institution evaluates the risk of a factoring transaction, it assesses a third party’s creditworthiness that acquires the products/services of an SME, making it possible for SMEs that sell to big companies to receive financing, making factoring a viable alternative easily.
Despite the growth of factoring in countries such as Peru, Colombia, and Mexico, factoring still has room to grow, compared to the penetration factoring has in more developed economies4.
About the project
Digital Holding’s purpose is to improve access to alternative financing methods for SMEs’ through fast, simple, and digital factoring operations. The company is leading the digital lending transformation in favor of SMEs’ competitiveness and its financial inclusion. So far (2016-2020), it has financed +$40 MUSD, for +600 SMEs, and +9,000 invoices. Although its operations are concentrated in Peru, it plans to expand its operations to other countries in the next 4 years (Colombia and Mexico) with its new business lines.
How we helped
Digital Holding (DH) is looking to take advantage of a $150Bn USD exponentially growing market and partnered with AMPLO to BUILD a two-dimensional ambitious growth plan:
- Financial Product Strengthening: DH will expand its capacity to fund its new business lines, strengthen traditional and digital advertising and commercial activities, and improve technology developments, cloud services, and develop brands systems.
- Geographical Expansion: DH will continue growing by scaling its business into new markets and expanding its services for SMEs and is expected to start operating in the Colombian market by Q1 2021.
AMPLO is supporting DH in FUNDRAISING the capital needed to achieve its growth objectives from impact funds and venture capital.
Expected results
By 2025, DH expects to be operating with 100% digital and automated services in Colombia and Mexico. More specifically, by 2025, DH expects to:
- Have financed +$ 530M USD trough +260 K invoices
- Supported +6,500 SMEs by offering cheaper and convenient financing products
- CEPAL 2017. The world bank 2020.
- CAF (2014) – Challenges of SMEs in Latin America
- FCI : annual review 2020.
- FCI : annual review 2020.
Our Team
We work hand-in-hand with our clients to develop and IMPLEMENT solutions that create inclusive and sustainable solutions for complex social and environmental challenges
