By Carolina Carrasco, Luis Alejandro Fernandez and Raquel Trigo
When migrants reach their destination, they face numerous challenges. Not only do they leave behind a personal life, but also a job, a business, or references about their financial, professional, and/or commercial reputation, among others, which are crucial for conducting transactions and gaining recognition and trust in the new host society. Financial inclusion is a pillar for the economic and social integration of migrant populations.
At IDB Lab, the innovation laboratory of the Inter-American Development Bank Group (IDB), and IDB Invest, the IDB Group's private sector arm, we seek to improve the access of underbanked populations, such as migrants, to loans and other financial services tailored to their needs. For this, we have once again bet on innovation, which, when put at the service of the most vulnerable populations, can provide access to essential products and services.
The financing approved in 2021 for Galgo, the Chilean fintech formerly known as Migrante, has successfully developed a model that provides productive financing to groups excluded from access to financial products and services, primarily those involved in the gig economy, linked to digital platforms. Galgo offers financial products and loans designed to meet their specific needs in purchasing vehicles and motorcycles, widely used as work tools to generate income with urban mobility services, home delivery, and logistics.
The innovative approach of this company lies in structuring financing as asset-backed loans, unlike other financial agents that offer consumer credit. This new approach allows Galgo to extend its services to vulnerable and low-income populations: 72% of its clients in Chile are migrants, and 43% earn less than US$ 700 per month. A recent report on the impact generated by Galgo highlights that 76% of its clients have accessed jobs and increased their income thanks to the services of the fintech.
The company's impact vision is behind the designing of a formula to contribute to the region's decarbonization goals by promoting electromobility, which has so far been hindered by high costs and a lack of charging infrastructure. In collaboration with COPEC, the Chilean petroleum company, Galgo is launching a plan to market electric motorcycles and establish a network of battery exchange stations.
Galgo's success in Chile, where it has a 25% market share, has strengthened its expansion into Peru, Mexico, and Colombia. Currently, the company is conducting a capital round aimed at expanding its loan portfolio in these countries, further strengthening its presence and impact in the region. The IDB Group is currently analyzing its participation in this new financing round, which would include technical assistance for the company to make a substantial leap in its electrification and decarbonization strategy.
The path towards greater financial inclusion that improves lives in Latin America is strengthened with this type of initiative supported by the IDB Group, which puts innovation at the service of vulnerable populations and the sustainable development of our region.