A credit bureau for emerging markets, with Burak Kilicoglu (CreditInfo)

From West Africa to East Africa to South Eastern Asia, the way the evolution goes is quite impressive. You start with a loan that's 4-5 euros, 6 euros, paid off twice, 3 times, and then, instead of getting a 5-year-old loan, I get a 10-year-old loan. I get a 20-year-old loan. That evolution is very quick in emerging markets. In a recent study, researchers at the University of Pennsylvania found that they could bring about significant genomic changes in populations of fruit flies, simply by adding different species of microbes to their food. Now they weren't doing this because they wanted to engineer a better fruit fly. I assume their webpage includes lots of fancy words like environmental heterogeneity, identified molecular polymorphism, and differential fitness of genotypes. So maybe they do, but it's much more likely that they experimented on fruit flies because they have such short generations. In the study, the changes were identified after just 5 generations. Still, in human terms, 5 generations would take 135 years to play out. It's the span from your great-grandparents to your children. With fruit flies on the other hand, Google tells me it's easy to breed more than 20 generations in a single year. This is a tangent, but it speaks to a concept I've previously appreciated, but maybe never quite articulated, that we can create more data simply by designing strategies with faster iterations. Welcome to How To Learn Money to Strangers with Brendan Lagrange. Burek, it is great to see you again. Welcome to the show. This is your first appearance on How To Learn Money to Strangers, but not the first time we've spoken about you. I spoke to Paul Randall about 30 episodes ago, and your name came up because I used to work for you. I was going to say in simpler times, but if I remember right, we were actually still going through a financial crisis then as well, but different times at least. So let's start by picking up there. What were you doing in your career before you joined Credit Info? Before joining Credit Info, I worked for about 15 years for Experience. I used to work within the Global Consultancy Group, so I was working with financial institutions. I was working with telecommunications organizations of different size basically across Emia, you know, all the way from the Nordics down to South Africa, from Portugal to Pakistan basically. It was a lot of fun. And before Experience, I spent a couple of years at Bank of America. I was managing the collections portfolio as well as customer management side of the business for the retail portfolio basically. And before Bank of America, again, I spent some time in the US with Discover Card responsible for the collection analytics. And prior to that one boy, it's difficult to remember. It's been such a long time. Then I was on the collection site for an organization called Trans-America actually doing Credit Limited Signments, doing periodical evaluation of SMEs as well as private label credit card business. You know, if I think particularly for Bank of America experience, there's a really big names in the finance space. But you left about two years ago now to join Credit Info, which I guess at the time would have still been a relatively small challenger credit bureau in an industry that is dominated by just a handful of big names. So maybe we could just a quick refresher on who Credit Info is. And maybe what you saw in the small upstart this challenger credit bureau that made you say, yeah, I'm going to take the leap. Absolutely. I mean, it's all a matter of perspective actually. Credit info, yes, in relation to the experience and the Trans-Unions and so on and so forth is not as large. However, Credit Info is a very quickly, very fast growing organization and their focus is very much on emerging markets. And that was the piece that was really attractive. You know, the over-encompassing idea is Credit Info's focus is on providing access to finance within the emerging countries. That was the main driver for me. You know, this this this call basically to work with countries to work in the parts of the world. Everything is so dynamic. Everything is so moving. You take an action and you see immediately the impact of that one. That's something, you know, you roll up your sleeves and you just basically get on with it. Let's talk about that and watch your teams doing in the two years you've been at Credit Info. So let me take a step back and talk a little bit about how Credit Info operates. You know, there's two distinct engagement styles. One is the ownership, you know, Credit Info owns and operates Credit Bureau's. The other one is a partnership. We basically implement systems. We provide the necessary expertise to run the Credit Bureau. In this partnership model, we operate in nine different countries and seven of those countries, you know, we work directly with central banks. So that's a very unique engagement model that we got. On the other side, on the ownership side, it is 24 different countries that we operate. That's the, you know, if you were to look at it from an operational perspective, the business model. Again, we interact with regulators, we interact with the governments and so on and so forth. But it's not just the governments. Not just the regulators. Credit Info works very closely with the institutions like the World Bank, IFC, so on and so forth. So these concepts are very, very critical to achieve providing access to finance and to do that one. Credit Info provides data. Credit Info provides solutions to make sense of the data, drive insight out of that data. Some of those solutions are in shape of software. Other solutions are in shape of analytics, you know, buildings, core cards. And we have the subject matter experts that provide the link, you know, how you take the data, how you modify and massage the data and how you derive insights out of that one. Yeah, and I think that's really interesting because it is clearly built with this developing market focus or this access to credit focus in mind, not just a business with, you know, income coming from its big markets and then has a few high growth markets on the side that it tries to serve. But it's actually built and structurally designed to serve these markets, something I don't think you would guess when you think of a Scandinavian company, you know, a recent saw you in Abijan. You really are all over the world as you say to find ways to serve them that work for them, not just that work for a head office. Yeah, absolutely. I mean, Abijan was actually a unique experience because we're talking about the West African and the economic and monetary union, you know, this is eight countries that have gotten together and are a part of that union. The participants were the central bank of the union as well as the Ministry of Finance from Ivory Coast. And then the users, the members of the credit bureau. So we got 273 subscribers, 133 banks and then in the vicinity of 94, 95 MFIs, Microfinance institutions and financial institutions basically in between. And then we have utilities and talcos that also provide data. But the evolution is quite important. So 2017 to 2022. So we're looking at a five year span. The number of unique companies that we have that is stored in the credit bureau. It's about a five times growth basically, you know, that is an incredible growth story. You got 16,000 in 2017. And then on the last number, I have this individual of 200 and 307,000. So that's magnificent growth. So imagine the dynamics in that meeting that we have. On one side, you know, you got members who have fantastic ideas. You got members who are facing unique challenges. How do you work with them to enable access to finance, the very concept that I have mentioned to you? And then face to face with them, then having the regulator, then having the Ministry of Finance, there's a problem, there's an answer. There's a discussion point, everybody participates. It was a fantastic event basically. And that's the excitement. That's the thrill that you get, you know, being with people that are so motivated, so engaged, so into their businesses. And it's just, you know, everything is bubbling with ideas. Can we do this? How about this? How about that type of thing? Is there a great transition to being part of that? Yeah. Well, I think too clear pillars of the strategy, they access to credit, but also access to credit in particular for SMEs. For you, why is this such an important pair of goals, this combination of access to credit, but in particular for SMEs? I mean, everybody talks about SMEs are the underpinnings of the economy, but it is more true for the emerging markets. The infrastructure that you see in developed markets does not 100% exist over there. The regulators, they have the advantage of, you know, looking at what's happening in the European Union, what is adaptable? What is not adaptable? You know, if you were to put all these together, particularly from an SME perspective, the fintechs basically and other organizations, they are enablers from many different angles. Because the infrastructure doesn't exist, they basically overcome that with technology, you know, the digital lending, for instance, particularly in Kenya, you know, in Tanzania. The Urethal can have small loans, but the way the evolution goes is quite impressive. You start with a loan that's for five euros, six euros, I apply for a loan, I get the loan, I paid off twice, three times, and then instead of getting a five euro loan, I get a 10 euro loan, I get a 20 euro loan, that evolution is very quick in emerging markets. And again, that is one other point that is particularly exciting for us being a part of that one. SMEs are struggling, yes, they're the underpinnings of the economy, but they're struggling. Why are they struggling? Well, the main driver, which is they don't have access to finance, you know, they can't get credit very easily. Then you take another step back and say that why don't they get credit? You know, the typo balance sheets that you got in the US, in the UK, so on and so forth, it doesn't exist. It doesn't exist because of the financial circumstances, it doesn't exist because of the infrastructure and so on and so forth. So what we're doing is we're trying to evaluate the situations and come up with solutions that are addressing those particular needs. And as we address those needs, then the wheels start turning. You know, we talk about big data and access to data, but you're right, that sort of scientists are always using sort of fruit flies for their experiments because you get so many generations so quickly you can see evolution happening, you can see changes happening. It's a similar that if you've got lots of short term loans, you can learn very quickly something you can't do, but we're maybe waiting a month at a time just to see if one payment is made. But maybe if we talk about practical tools, what does access to credit look like for SMEs? How are you enabling better access to the credit that they they so desperately need? Sometimes for SMEs, especially for micro SMEs, providing data about your self is very important because at the end of the day whoever grants credit is looking at your ability, your stability as an institution, as an organization. And that's the point that they need to get a crossbutt. This is not in a standard ice fashion, you know, for most of the SMEs. So the first point is data. How do you get data in a format that captures the basics? This could be trade information. This could be parts of, you know, revenue information, you know, whatever they have basically. And the creativity that I see in Africa is there are fintechs that capture that trade information coming from SMEs. The basic information about the revenues and cost and expenses and so on and so forth. So we partner with these organizations to take that data, standardize it, put in a format that could be used for regular assessment, periodical assessment of SMEs. That's where we come into play. So now comes to the step that you have mentioned. What do we do with the data? The first hurdle was data. The second hurdle is making sense of the data and communicate the ability to pay and stability messages to the landers. And that is done through the very scorecard that you have mentioned. You know, you can have a SMEs scorecard, but what we have seen is having a blended scorecard, which is here's the SMEs performance. Here's the individual, you know, the owners performance. If you were to take key information from that, if you were to put it into a predictive model, then we have seen an up the basically on using either this information or the other information in and of itself. So the combined information provides more data or more insight. I've worked a little bit with the two types of data, SMEs and consumer. And we've seen, oh yeah, the consumer data is predictive of the performance of the business, but I've not worked before where we've actually gone out and modeled them with that purpose in mind. It's more a case of are there some data lying around is it predictive? Let's try and use it. So it's great to hear that actions are being taken where the state was combined and then modeled not just making use of what's lying around. There's another concept. We're always thinking about, you know, in terms of the US, UK, as the references. If you think about Africa, not everybody lives in big cities. There's quite a large population that lives in rural areas. How do you reach to those individuals? How do you reach to microfinance institutions? The small tiny, tiny SMEs over there. One solution that we have designed again, working with, you know, IFC is coming up with a portal. So the individuals or the SMEs, the micro SMEs can go to the portal to ask for credit. And that portal eventually is working with, you know, different financial institutions who look at the applications and make their own decision. We basically provide the link, taking the individuals in different parts of the different parts of Africa or different parts of the country and put them in contact with financial institutions. But again, within that, there's many different layers that you need to be thinking about. It's not just providing the portal. You need to make the portal work. You need to really understand the needs of the market because it's not a single language. The portal also should not be addressing only the people who are literate. There's a lot of individuals who just cannot read and write. So we're thinking about, you know, how do we communicate these messages through pictures or through something that you put the mouse on it and it just talks basically. We're not there yet, but I just wanted to give you a flavor of, you know, how you really need to localize the solutions because otherwise the solution stays here. The market needs are over here and you're not connecting the two and the connecting the two pieces is critical to have it as a success. These are the types of things credit info does to support the SMEs and, you know, engage with them and solve the challenges that they're facing in a very, very pragmatic fashion. And we're not saying where the only was. We're more than happy to partner basically with different institutions. In terms of the impact of those that you've seen with SMEs, I mean, you've already spoken about the growth and the rapid speed of that in West African terms of bringing SMEs into the fold. We've spoken a little bit about East Africa, but I saw you recently in Spain, you're recently in Cambodia, you're all over the world. What impacts have you seen from these initiatives? We have been, you know, tracking the performance from an NPL perspective. But when we design the scorecards, when we start using the scorecards, over time, basically, we have seen a stabilization of that NPL performance. And that in turn direct the reflex into the landing processes. That is an indication that the landers are feeling more comfortable with the insight that they're getting and they're landing more and more. This is something that we have seen tangibly in Kenya. That reminds me of another engagement that we have this time. It's in Pakistan, Pakistani Bank and Association, basically, for individuals who are in financial needs, provide basic housing to them, allowing them to acquire a house. How do you do that assessment when there's not a lot of data? How do you, you know, go about the two foundational questions, basically, the ability and stability. We're engaging, you know, with our partners in Pakistan to find the solution for that one. Yeah, more great stories to hear of positive changes. International pressures that you react to aren't always just overcoming things like logistical problems or infrastructure gaps. Yeah, I see you doing a lot of work as a credit info with the situation in Ukraine right now working with MBKI to build an online chatbot to help Ukrainians fleeing that invasion to access and share their credit histories. I can give you a brief background on that one. Absolutely. You know, as we indicated, there's many Ukrainians who have left their country and the end of the day, in your country, you had a credit history. You are going to a different country and all of a sudden you start from zero. So what we designed is basically a quick access, you know, using one of the messenger tools and easy, verified, confirmed way of making sure that it is you who's asking for the information. Go ahead and get the information, tap into your credit history in Ukraine and I feed it back to the country that you're operating. And it turned out to be quite a popular way of, again, providing access to credit concept, enabling that particular concept. We're quite proud of having done that one. But again, the credit goes to the team, our Ukrainian team, who came up with that idea. The whole concept is you need to put yourself into the customers shoes and the solution needs to be relevant to the problems that you're facing and that was the success of the team basically. That's what they managed. These are the day-to-day challenges they're doing. We can't develop a solution that's going to take a long time. What is a quick win that we can have that will have a positive impact on individuals' lives? Like I said, in a short time frame, you can see the impact that you're creating. And this is something fantastic. It's really difficult to describe, basically. The value that brings to you from an emotional perspective, satisfaction perspective. Yeah, and I guess there's always something happening. I'm sure you're always being challenged to sort of come up with solutions in difficult circumstances. But obviously, the world is more volatile at the moment than it has been for a while. We're seeing interest rates again, sort of rising after being stable at historic lows for the past decade or so. But how is credit info reacting to this? How are you seeing these sort of the lenders and the borrowers in the countries you serve react to and adapt to the volatility, the inflationary pressures we're seeing in the world at the moment? We are basically in constant contact with the government entities, trying to get additional information because at the end of the day, it's all about information, basically. So if I can enrich the data to give a slightly different dimension on an individual or on an SME basically, that might be the one that would get the tick mark on the long processing perspective. We are engaging with revenue authorities in East African countries. We are in engagement with different entities from our the alternative data so to speak. We're talking to Talco's and gathering Talco information to come up with alternative ways of scoring. You know, the digitalization process is really enabling us to tap into alternative data sources that we can use in a tangible way, again, in decision-in process. We're also, again, working with the World Bank IFC to look into access to finance not only from SME's perspective, but youth from females, you know, is there equality over there? Over time is there, you know, development? Are we progressing in the right way? What are the things? What are the type of loans? One versus the other one? There is constant communication. There's constant benchmarks that has been exchanged with various entities. And we feel like we are in the middle of these changes and we're the ones providing these benchmarks, these insights, of course, with the guidance of different entities and with their feedback. But again, this is a very, very interesting, very engaging place to be. And the whole team is quite motivated about that one, you know, looking into these types of actions. Because whatever trends you observe, you share it with different organizations and they do something about that. Yeah, I can see why that's so motivating. And I think what's also really interesting to hear, here you describe there is the fact that you're right in the middle of shaping these, the lending ecosystems in the market you serve. And if I think back to some of the bureau projects I've been involved in where we've perhaps launched a new bureau in a country, it's been more reactive. It's been driven by something like the World Bank at the old ease of doing business, scorecard, and you'd get a point for having a credit bureau there. So maybe a government organization would see that and encourage the lending industry, the banking industry. And to get some bureaus involved and then the banks would get together and go through a process that establish a bureau and share the data between the big five or 10 banks, whatever it was in each country. And kind of go about their business as usual now with a little bit more security from data sharing. But the bureau was following the lending industry rather than kind of helping to shape it. Yeah, that's really a lot more motivating. You just reminded me of something right after the school I have a call with our CEO from Kenya. The topic is there has been an election in Kenya and there's a new president and one of the new presidents initiative for the first hundred days is to come up with a fund for the people who really and truly need credit. The the layer of the population that is in need of that little support basically financially. Our team, our local team in Kenya is basically going to be a part of that with talc organizations with fine landers and so on and so forth. But the team literally volunteered to be a part of that one and they are one of the driving groups of that initiative. That's what I just wanted to share with you. The whole team in all these different emerging markets, from West Africa to East Africa to Southeast Asia, they pretty much rolled up their sleeves and they're just basically getting engaged with their customers with the regulators to figure out how we can make a little bit tiny bit of a change. Yeah and I know from speaking to Paul last time that each of these teams they're putting out a lot of information on their own LinkedIn pages, their own social media pages. There's a lot of content coming out of credit info in terms of blog posts and thought pieces and just updates on the market. If people are listening and they want to track what credit info is doing, where is a good place for them to go and keep track of your team's work or I guess the product organizations work. First you mentioned LinkedIn, certainly you can go to credit info's LinkedIn page but more importantly there's credit info.com. Come and see us there. You can basically see different countries, regardless of your geographical location or if you want to focus on particular geographical location, you got all the contact information, you can get all the details. If you want to have an overview it is there. If you want to dive into details it is there but if you want to talk to an individual contact information is there as well. We're here to help. Great to hear. And Bergl before I let you go you obviously putting in lots of things and lots of places. Is there anything on the horizon that we can be keeping an eye out any developments that people should be going to credit info.com to see progress? Recently our team in Iceland has come up with a fantastic ESG solution. I think you should go to credit info.com and it is a fantastic way of doing that assessment in a very comprehensive way. Very pragmatic solution as I hint indicated. We're very proud of that one. And over time we will be rolling it out in different parts of the world. There's plans for that one. That really makes us proud leading on that aspect as well in addition to what we have been doing. Perfect. I'll put a link to that directly in the notes but certainly worth going to to look at. Borak it's been great chatting to you again. The pleasure having you on the show and really again great to hear the work that credit info is doing in terms of access to credit. In some of these markets I don't always get the focus that they deserve so yeah always makes me happy to hear these stories. Pleasure is my brand and big, big, good talking to you. And thank you all for listening. Please do look for and follow the show on your favorite podcast platform and share the updates widely on LinkedIn where lending nerds are found in our largest concentration. Plus send me a connection request while you're there. This show is written and recorded by myself Brendan LeGrange in Brighton England. Show Music is by I Am Wake and you can find show notes and written transcripts at www.artilandmoney2strangers.show or just www.htlmts.show and I'll see you again next Thursday.