Em Conversa looks to uncover the secrets in Latin America (LatAm) that have caused the fintech market to boom, from being worth less than $50million in 2016, to $2.1billion in 2022.
In late July 2023, Licify, the LatAm procurement and financial software startup for the construction industry, announced it received $3.4million in its seed funding round. Slow payments are massively impacting the construction industry in the US, costing businesses $20billion in 2022. LatAm is no different. Bridging the world of construction with fintech, Licify introduces accessible and inclusive digital solutions that connects builders and suppliers.
This construction sector is often forgotten about in regard to digital development. Fernando Olloqui, co-founder and CEO of Licify sat down with The Fintech Times. He explained how Licify is looking to change this in Colombia first, but soon, in countries across LatAm.
Can you tell me more about the company and your role within it?
“I am Fernando Olloqui, co-founder and CEO of Licify. Licify’s mission is to transform the construction supply chain by leveraging cutting-edge technology to provide accessible and inclusive digital solutions that connect builders and suppliers and empower individuals and businesses. Our company offers a range of innovative products and services that streamline procurement planning, bidding, billing, and payment conciliation, enhancing efficiency and driving economic growth.
“In the past two years, we’ve connected over 17,000 clients in Colombia and facilitated over $2billion in business between builders and its supply chain in the last two years.”
What are some credit trends we’re seeing in Colombia?
“In general, we see the same trends we see in other developing countries. A wide range of people and businesses are unbanked or underbanked. This is particularly evident in the construction industry, where you have a considerable asymmetry between demand and supply. On one side, you have robust corporations that develop and build large projects.
“They have access to large banks and relationships with top capital markets organisations. Conversely, you have a fragmented universe of SMEs that sell to these large developers. They are unsophisticated but are essential to the industry.
“Part of what happens is these companies leverage construction projects as they have to start jobs without down payments or with subpar down payments, just because of how the construction payments waterfall works in projects.
“These large financial institutions don’t understand how their businesses work, so banks and other prominent players don’t pay any attention to them. Then, they have to look for alternatives to get the necessary working capital – illegal loans, or selling assets such as cars and houses. This is where we come in to bridge this $250billion financing gap in the region.”
What is Licify doing to improve the business credit sector in Colombia and LatAm?
“We are making significant strides in enhancing the construction finance sector in Colombia and Mexico. Our clear mission is to empower and connect the construction industry in the region by providing cutting-edge technology and inclusive financial services.
“Understanding the challenges that micro and small businesses in the construction sector face, Licify has taken a multifaceted approach to address these issues and catalyse growth in the industry. One of the key challenges in underwriting such businesses is their complex cashflow cycles. This can be difficult to assess using traditional credit evaluation methods. Additionally, the lack of digitisation in these businesses further hampers their ability to access credit and financial services effectively.
“To overcome these challenges, Licify has developed a verticalised software solution tailored specifically for the construction industry. Our unique software streamlines the operations of SMEs within the sector and captures critical data relevant to assessing their creditworthiness. This specialised data allows Licify to gain insights into these businesses’ intricate cash flow dynamics, enabling more accurate underwriting decisions.
“By offering this technology-driven solution, Licify facilitates the entire process for small businesses in the construction industry. From helping them find new business opportunities to closing deals, the platform becomes a valuable tool for business development. However, the innovation continues beyond there. Licify also recognises the importance of timely payments for the sustainability of these businesses.
“As a result, we actively work to accelerate the payment process, enabling SMEs to receive their payments faster and maintain a healthier cash flow.
“The impact of Licify’s efforts is noteworthy. With a successful track record of over $2million dollars in Colombia, the company has demonstrated the effectiveness of its approach. Now, with plans to expand into Mexico, our startup is poised to extend its transformative impact on the construction industry across Latin America.”
How does the Colombian business credit sector compare to that of the rest of the world?
“Colombia is unique because the construction banking capital markets are concentrated in three to five key banking players. There are few alternatives, as fintechs need to understand the industry. Our space is ripe for disruption.”
What unique challenges are associated with the region/country in the business credit space?
“Credit rates are high, and traditional players are too big and make too much money. The system is highly inefficient, so developing products that help without cannibalizing the net income of those companies we intend to sell is complex. We also need to figure out how to automatize the underwriting process and give out money instantly versus the weeks traditional players take.”
Plans for the future
“Nail Mexico, build a $10million book in 2024 and transform our enterprise software into a fully equipped data solution. Post series A we will expand our financial services portfolio and take on Brazil and the rest of LatAm.”
“Licify is revolutionising the business credit sector in Colombia and Mexico by leveraging its verticalised software solution and unique data insights. Through this approach, we empower micro and small businesses in the construction industry, overcoming challenges related to complex cash flow cycles and digitization gaps. Licify’s focus on holistic support – from business development to faster payments – positions us as a key player in driving growth and innovation within the industry.”