Obtaining credit is an almost impossible task for more than 1.3 billion adults without access to financial services worldwide. Financial ignorance—What is credit? How long does it take to get approved? Who will give it to me? How much do I have to pay?—is compounded by technical difficulties, and together they create a barrier that perpetuates the deprivation suffered by the most vulnerable communities. Not knowing that financial tools exist is one thing, but knowing about them and not being able to access them because you don't have the right equipment is another.

This premise was not unknown to Filiberto Castro and David Hernández when they decided to form Aviva in Mexico a little over two years ago. From the outset, they identified the fallacy that plagued many successful fintech startups: growing in web environments or through digital applications that were inaccessible to emerging communities.

They realized that they couldn't build an entirely digital business model, but they also didn't want to be a typical banking agency. They needed a hybrid model. This gave rise to the idea of building kiosks in areas with high foot traffic, equipped with a machine that interacts with a bot that guides the conversation with the user. They named this proposal "phygital," combining the words "physical" and "digital."

Supported by computer vision and language processing models, the conversation is converted into data for the credit assessment algorithm, and in just seven minutes, the person knows whether their application has been approved. More than 160,000 people have visited one of these kiosks in just 30 months. The growth has been largely due to word of mouth from users and neighbors, who feel that, beyond applying for a loan, they are having a conversation about their future.

"Generally, credit processes with banks and fintechs are based on credit bureau information. Many of our customers do not have any such information, as this is their first formal credit product. We rely on alternative data to evaluate our customers, a more ad hoc analysis for the reality of this market," says Filiberto Castro, Co-CEO and Founder of Aviva.

For Aviva's mission, the location of its units and interest rates are crucial. They do not want to be in large cities. Their focus is on places with a maximum of half a million inhabitants, but the vision is to reach communities of even twenty-five thousand, where the last mile of financial inclusion lies.

The average effective interest rate is 26%, with no origination fees, making the credit transparent to the customer. Loans are granted for a maximum of $1,000 and are paid in four monthly installments.

What is venture debt?

This is the first time that IDB Lab has carried out a venture debt operation with a company, a financial instrument that is still uncommon in Latin America.

Venture debt is a form of financing designed for innovative and fast-growing companies, combining features of traditional debt with elements of venture capital. Unlike direct investment in shares, it does not immediately dilute the founding partners' stake, but it can include future conversion options.

Luis Alejandro Fernández, co-leader of the project, explains: "We structured the transaction through a convertible debt tailored to the needs of the rapidly growing company. The financing does not directly dilute the entrepreneurs' stake, but includes a debt component and a conversion option whereby IDB Lab could transform its financing or debt into company shares in future investment rounds."

Fernández also noted that, during the structuring of the operation, they developed indicators and a results matrix that allows them to measure and monitor the positive impact this initiative is having. Some indicators include portfolio growth and quality, the number of active customers in low-income segments, and the number of people without a previous credit history who are accessing their first formal financing through the company. With sustained growth, Aviva is expected to have 150 kiosks by the end of the year.

In a segment where many people work up to 15 hours a day and have up to three different jobs, Aviva offers a fair, ideal, and innovative product with feasible alternatives in an environment where the black market offers entrepreneurs loans with interest rates of up to 500%.

This financing combines impact, scalability, and technology, while also demonstrating how IDB Lab is constantly evolving to offer entrepreneurs a wider range of services and value propositions.