Tokyo Financial Award:
Taking Microfinance to New Frontiers Using AI Algorithms

In the mid-1970s in Bangladesh, Muhammad Yunus was teaching economics when it came to his attention that near his university were dozens of craftspeople shackled to poverty by usurious money lenders. Struck by an emptiness at delivering lectures on economic theories while around him real people struggled, he felt compelled to act. Paying off the loans of 42 craftspeople-sole traders for the total princely sum of 27 dollars, he made a genuine impact and microfinance was born.

Bee Informatica is carrying the torch forward, utilizing AI algorithms in order to facilitate small business loans to new underserved demographics.

Co-founder Inada Fumiko became set on the idea of social businesses and working in developing countries while a university student in Tokyo. During stints in the finance sector, including at the Bank of Japan and Rakuten Securities, Inc., Inada says she "almost forgot this dream." Her memory was jogged in 2006 when Yunus and the Grameen Bank were awarded the Nobel Peace Prize for their work to "create economic and social development from below."

Sparked by this reminder, she began doing work for a Tokyo NGO involved in microfinancing in southeast Asia. "Then, I decided myself to quit my job, change my life and career drastically." Following a master's degree in local economic development at the London School of Economics, she began working with BRAC, a major microfinance institution and NGO in Bangladesh.

Challenging Paths and New Destinations

After the disruption wrought by the terrorist attack in the Bangladeshi capital, Dhaka, in 2016, she found herself working alongside people from the worlds of tech, social businesses and startups. During this period, she met her co-founder M Manjur Mahmud, a "really techie guy," and realized they had similar ideas around "expansion of digital microfinance all over Asia."

In 2019, they launched the company together in Kuala Lumpur. "The reason we chose Malaysia is because it is a very good environment for a digital business as internet penetration is about 99 percent, and smartphone penetration around 90 percent. And a lot of young people among the population of approximately 33 million. It's not so big, but it's not so small."

One of the challenges that Bee Informatica seeks to solve is that many people in emerging economies do not have credit scores.

"It's different from a developed country like Japan; almost everybody in Japan has a credit score because people usually have a credit card, even from when they were students."

Targeting small business owners, often one-person operations or "micro entrepreneurs," the company's loans start from 10,000 ringgit, around 2,150 dollars.  In lieu of a traditional credit score, the solution came in the form a psychometric test developed by a local startup and adapted by Bee Informatica.

The company uses 48 questions that analyze three areas of personality and behavior to predict the probability the loan will be repaid: entrepreneurship, financial literacy and compliance (tendency to follow financial rules).

More Data Means Better Insights

Fresh data fed into the algorithm improves its forecasting accuracy, but with the company having made fewer than 100 loans in Malaysia, its real-world cases are limited. As part of its efforts to gather more data, Bee Informatica Ltd. was established in Tokyo in 2020. It is collaborating with Japanese financial institutions, including ORIX Bank, to acquire thousands more data points. "We are targeting a minimum of 5,000 cases, but 10,000 is ideal as a level of statistical certainty."

Once it reaches the point where the company is confident enough in the algorithm, the aim is to commercialize it by providing it to financial institutions and even beyond that sector. One area they are looking at is the algorithm being used to assess the suitability of tenants for rental properties. 

Like many startups, it is currently generating minimal income and still relying on subsidies and funds from investors, adding impetus for the search for new revenue streams.

Operating under such financial restraints, the company welcomed both the cash and the opportunities from the Tokyo Financial Award. 

"You know the prize money of 3 million yen, it's not so small. We really appreciate it. And the networking at the award ceremony...it was quite interesting and quite beneficial for us too."

Winning also led to renewed interest from the media and venture capitalist.

As for the Tokyo landscape for startups, Inada believes the ecosystem is improving with the emergence of hubs such as CIC Tokyo. 

In terms of longer-term goals, in addition to commercializing their algorithm and starting to offer small loans in Japan, the company would like to expand microfinance operations into other parts of Asia and even into Africa.