10.0 million (USD)

Product Line	IFC Investment (million USD)
Risk Management
Guarantee
Loan
Equity	10.0

* These investment figures are indicative

Stakeholder Effects: Improved quality and affordability of personal loans. Brazil has one of the the highest credit card penetration rates in emerging markets, with 26 percent of adults having taken a loan from a financial institution or used a credit card according to the latest Global Findex survey. Average rates for credit cards (300 percent p.a.) and personal loans (110 percent p.a.) are amongst the highest in the world due to limits in credit data infrastructure and competition. Through advanced analytics enabling increasingly accurate risk-based pricing, and a lean business model, Geru is able to compete with rates offered by the more competitive banks to their own account holders, offering interest rates on personal unsecured loans lower than the market average by an estimated 16-28%, without requiring any collateral deposits. With this investment, Geru will seek to grow its customer base by leveraging technology and alternative data to further improve their credit risk underwriting, tailoring terms and expanding product offerings to consumers. Geru loans are not earmarked for a specific use or investment, approximately 50 percent of Geru borrowers to date, states taking a loan for refinancing purposes by lowering the rates or improving product terms. Of these, a significant share are refinancing credit card debt, one of the most expensive and widespread sources of debt in the market. 2.5 Through a carefully-designed, user friendly online platform, Geru allows consumers to verify eligibility and simulate loan terms tailored to their profile with transparent disclosures. This allows platform users to compare terms with those offered by their bank, and apply for a loan in less than ten minutes. While approval is less likely for applicants flagged in the credit bureau that are typically rejected by main financial institutions, through this project Geru will invest in further developing its algorythms to better discern a customer's previous default history, as well to take advantage of the new data opportunities provided by the emergence of a positive registry and open banking regulation. Competitiveness The Project will support one of the two fintech firms approved to become SCDs in Brazil, which has a business model that enables granular price differenciation for its borrowers leading to reduced costs. With the pricing being its competitive edge, Geru provides quotes of interest rates through its on-line platform, which will add a competitive pressure to other lenders, creating downward pressure on costs in the overall sector. As a leading Fintech innovator in personal finance, this way, Geru will foster competitiveness in the market by contributing to a market structure change, as it operates in a much more conducive environment. If successful, the new SCDs will grow and generate competitive pressure to the overall sector, resulting in an increased competitiveness and consequently lower borrowing costs across the market.

As an experienced investor in financial services and financial technology in Brazil and across emerging markets, IFC is uniquely positioned to support Geru in adapting to, and taking advantage of upcoming regulatory changes such as the proposed open banking and data reforms. Geru is, with its capacity to provide a differentiated, tailored credit risk assessment to its borrowers, uniquely positioned to provide more granular data into the newly created platforms for them to effectively function. IFC Fintech specialists and FIG country specialists will deliver this additionality through regular engagements with management and by leveraging expertise within the institution.

The proposed project consists of an equity investment of up to US$ 10mln in Geru, a Fintech company, to support MF in Brazil through unsecured consumer loans. The Environmental and Social (E&S) risks and impacts inherent to the proposed investment are low.  Consequently, this investment has been categorized as FI-3 in accordance with IFC’s Sustainability Framework. Geru has adequate E&S capacity and satisfactory performance according to the portfolio proposed for this project. There are no E&S requirements inherent to the lending process since the project only supports individuals, but Geru will be required to notify IFC in case of any change in its portfolio business or the nature of its operation. Geru will apply 2012’s Performance Standard 2 – Labor and Working Conditions to its own operations and enhance human resource procedures.