Cashalo rolls out interest-free ‘nano’ loans

Fintech start-up Cashalo seeks to usher in more people into the financial system by pilot-testing a “nano-lending” program which offers loans that can be as little as P200 at zero interest.

This program is seen to have the potential to exponentially grow Cashalo’s base of borrowers and thus help more people build financial identity in line with financial inclusion efforts.

In a speech during the first anniversary celebration of Cashalo last week, general manager Hamilton Angluben said the Cashalo app had already been downloaded into four million devices and had so far helped 1.5 million acquire financial identity.

Based on the original product pipeline, however, Angluben said Cashalo could not approve everyone who applied.

“But with this one, those whom we can’t approve, we will give them a very small loan starting at P200. With this product, we will approve anyone as long as we see that the data you submit is consistent. So about 80-90 percent of people who will apply and don’t qualify with the other products (can still access credit),” he said.

Under this program, the borrower only needs to submit one government-sanctioned ID. The loan will be disbursed not in cash but in the form of credit that can be used in accredited merchants and service providers. To date, Cashalo has tied up with convenience store operator Ministop to jump-start the program.

“Eventually, they will be able to buy from restaurants, services (providers) like salon, department stores, grocery, and drug stores, ” Angluben said.

In an interview after his speech, Angluben said this nano-lending or micropayment program could be very useful in paying for unbudgeted items like medicine. The credit limit can be increased later once the borrower is able to establish a good track record.

“Nanofinancing interest rate is zero percent. It’s here just to help everyone,” he said, noting that in the Philippines, only 10 percent of the population had credit history.

“We’re working with the credit bureau so when banks check on them, they will have some sort of credit history with us and that will give them more credibility, so eventually they can get bigger loans. We’re introducing people to the financial system,” he said.

Another new product recently launched by Cashalo was domestic air ticket financing, in partnership with budget carrier Cebu Pacific, which operated the largest e-commerce site in the country in terms of transaction value.

“If you don’t have a credit card—which only less than 2 percent of Filipinos have—you can buy a ticket and then pay later on installment. This is a first in the industry so now every Juan can fly,” Angluben said.