Yolita Tocas Lopez, livestock farmer and Los Andes customer in Peru — Yolita Tocas Lopez has run a livestock business near Cajamarca, Peru, for more than ten years, using loans from Los Andes for working capital and purchasing livestock.

Transforming rural microfinance in Peru through digitization

Why we invested in Los Andes, a rural microfinance bank supporting Peru’s most vulnerable populations through financial inclusion

AUTHORS

Adelina Dasso

With a long coastal belt along the Pacific Ocean, lined with the Andes mountains and the desert in the west and rainforest in the east of the country, Peru is one of the world’s most biodiverse countries — and highly susceptible to climate change impacts. With a population of more than 30 million people, approximately 25 percent of Peru’s working population is employed in the agriculture sector, growing crops like rice, potatoes, and plantains for consumption and export, and over 60 percent of the country’s economically active population is employed by micro, small, and medium enterprises (MSMEs).

More than 2.2 million MSMEs fuel the engine of Peru’s economic growth by contributing 21 percent of the country’s gross domestic product. Yet, they face challenges related to a lack of technology and financial investment. The formal MSME financing gap in Peru is estimated at $8 billion, with the gap in the informal sector estimated to be five times larger than that. Women and women-owned enterprises face further constraints, such as limited credit history, lack of collateral, and lower financial literacy, that restrict their access to formal finance.

Los Andes, a rural microfinance institution operating in Peru for over 26 years, is working toward financial inclusion of the most vulnerable populations in rural Peru by connecting them with the digital economy. With more than 100 branches and 10,000 third-party agents, it serves more than 227,000 savers and 85,000 borrowers. Los Andes offers microfinance services for agriculture to enhance access to more responsible financial products for underserved customers in Peru, aiming to help alleviate poverty.

Accion Digital Transformation has invested $10 million to help Los Andes accelerate its digital transformation journey and connect micro and small entrepreneurs to the formal economy by increasing access to digital financial tools.

We are excited to invest in Los Andes as they seek to:

Expand rural microfinance in Peru: The World Bank’s Global Findex Report estimates that 56 percent of the population in Peru owns an account with a financial institution, yet only 22 percent have borrowed money using a financial institution or a mobile money account. Credit and deposit penetration are low in rural areas, reflected in a loan and deposit penetration of below 25 percent and 21 percent, respectively, for each of the five major regions outside the capital. Leveraging innovative technology to better meet the needs of microentrepreneurs so they can sustain their businesses and support their families, is a key focus of Accion Digital Transformation. Los Andes offers diversified products tailored to the needs of its rural customers, including loans to facilitate access to drinkable water, sanitation, and improved living conditions. Through this investment, Accion will facilitate cross-learning opportunities, adjusted to the local context, among our global portfolio to expand rural microfinance products and services in Peru.
Center women-owned small businesses: According to a report, 12 percent of women business owners in Peru discontinue their businesses due to a lack of access to finance. Los Andes is committed to having women as a focus internally through its workforce and board, as well as externally through its clients. With a women-led board, Los Andes aims to provide a wide range of responsible financial services to women-owned microenterprises in rural areas of Peru. Through CandeLab, its innovation Lab, Los Andes has developed an ecosystem for women entrepreneurs called Lara de Los Andes, a platform that offers women access to marketplace, education, and networking opportunities. Through investment support, Los Andes aims to grow this platform and offer embedded financial services such as credit for women customers.
Leverage digital transformation to better serve MSMEs: In Peru, per the Global Findex Report, nearly 87 percent of the population owns a mobile phone. Yet only 49 percent have made or received a digital payment, and less than 12 percent have made a utility payment using a mobile phone. Los Andes has been striving to bring the benefits of digital banking services — such as digital payments and accessing credit — to small business owners in rural Peru for the past seven years. This investment will catalyze the implementation of the digital transformation roadmap to transform the institution and offer digital financial products and services that can support its clients in adopting digital banking channels.

We’re proud to partner with Los Andes to help support their ambition of connecting micro and small entrepreneurs to the formal economy by increasing access to digital tools. Accion Digital Transformation invests in financial institutions, like Los Andes, by providing growth capital and hands-on strategic support to help them better meet the needs of small businesses that are currently excluded from the financial system. By working to increase the use of digital tools by Los Andes’ customers, we can reach underserved women in rural Peru with tailored products that can strengthen their businesses and improve their lives.