13 Sep Viwala

Viwala

Interview with Carolina Lobo-Guerrero, Chief Financial Officer

Jen: How was “Fund” Created? 

Carolina:  In late 2018 Rodrigo Villar and Armando Laborde, founding partners of New Ventures realized the need for an investment vehicle that could help bridge the financing gap for missing middle entrepreneurs. With a grant from USAID, New Ventures partnered with Pro Mujer to design and operationalize an investment vehicle that included gender strategy communication, gender lens investing, monitoring, evaluation, and knowledge management. In 2019 Karla Gallardo was hired as VIWALA’s CEO to continue these efforts as an independent organization. VIWALA’s finance solutions were launched to catalyze both economic returns and support the empowerment of women and girls. VIWALA is committed to iterating and evolving its products to respond to the needs of missing middle SMEs.

Jen: How are your investment funds catalytic in a way that is different from other funds?

Carolina: VIWALA designs blended finance vehicles to deploy funding via revenue-based, pay-for-impact, and fixed payment loans giving “missing middle” SMEs the opportunity for sustainable economic growth and scaling positive impact on society and the planet. Technology and digital financial services represent an enormous opportunity to include populations that have been excluded from the traditional banking system, particularly women. VIWALA is committed to serving the“missing middle” via digital products that incorporate a gender, diversity, and inclusion lens. VIWALA’s impact thesis also focuses on financing entrepreneurs from vulnerable communities, who are often excluded from the financial system. Additionally, Viwala’s new products are offered to traditional organizations searching to generate impact through the inclusion of vulnerable communities in their workforce.

In the future, VIWALA hopes to include a complementary yet powerful component to its credit analysis, to reduce barriers for minorities that are often not part of the formal financial system, don’t have financial or credit history, etc. It aims to not only use data analytics to understand human behavior, the applicants’ values, reliability, and willingness to pay, beyond the traditional numerical analysis. This will be done through short psychometric tests formatted as a game for the loanee, which will be optimized over time through machine learning and AI for each target segment (for example women entrepreneurs vs. LGBTQIA+ entrepreneurs vs. Migrant entrepreneurs).

Jen: How do you describe the kind of non-financial returns the fund offers?

Carolina: VIWALA’s Solution aims to expand access to financing for all. Access to financing with competitive interest rates and financial terms that match the specific market creates an economic situation where the SMEs are able to grow while continuing to focus on their mission. VIWALA thus supports productive activities, decent job creation, entrepreneurship, creativity, and innovation, and encourages the formalization and growth of micro-, small- and medium-sized enterprises.

By targeting women-led and impact SMEs (53% of VIWALA’s portfolio), VIWALA intends to promote sustainable economic growth and better opportunities for those who usually face a financing gap.

Jen: Can you describe how you use integrated capital to do your work?

Carolina: VIWALA maintains a close relationship with New Ventures. As communication partners, NV has a network of more than 42 partners including Ashoka, the Stanford Social Review, and AMEXCAP. More so, the NV accelerator has supported over 500 social and environmental entrepreneurs in Latin America who are looking for alternative sources to finance their growth. Finally, NV leads the Mexico National Advisory Board of the GSG – an independent global steering group catalyzing impact investment and entrepreneurship supported by 23 countries and the EU.

VIWALA leverages philanthropic capital to mobilize private capital (angel investors and family offices) by a factor of 10x. These investments help VIWALA’s digital marketing strategy (which represents 50% of our commercial strategy), an effort to reach missing middle SMEs outside our partner network.

Jen: How do you address racial justice, income inequality, and/or gender justice through your products and services?

Empleada HUA, Viwala Testimonials, Mexico. 2022

Carolina: Providing financing opportunities to minoritized groups is the core of VIWALA’s operations. Gender lens investing emerged as part of efforts to address these trends and channel more resources to companies that are led by women and/or contribute to gender equality, whether through diverse founding and/or leadership teams, impact on the lives of women and girls, or diversity and inclusion measures that support women’s active involvement and growth within the workforce.

Additionally, VIWALA works towards SDG 8, decent work and economic growth by giving SMEs the opportunity for wealth accumulation and economic growth that will result in higher wages for employees, job security, and stability.

Jen: Can you share with us an example of an investment? 

Carolina: VIWALA expects to disburse USD $40 million by 2027. Since VIWALA was launched in 2019, 83 impact SMEs have received more than USD $3.6M in loans. VIWALA projects to keep its 150% growth in disbursement for 2023 for a total of $1.8M in new disbursements. VIWALA typical loans are ~ $50K for 36 months with competitive interest rates. VIWALA’s experience with developing pay-for-impact loans focused on inclusive practices positions us well to design and launch similar investment vehicles for diverse impact themes, including a product to be launched in 2023 aimed at inclusion practices for Opportunity Youth and young mothers. Additionally, VIWALA is looking to invest in technological advancements for its due collection process and alternative credit methodology.

Jen: What do you tell people who think your fund is risky?

Carolina: Impact SMEs in the missing middle are at risk of disappearing and/or stagnation if financing vehicles, such as VIWALA, do not receive investment. While Venture Capital and Impact Funds continue to focus their investment on high-growth disruptive technologies, smaller SMEs with traditional business models that don’t aspire to become unicorns but with high impact and the potential to drive systematic change will become less prominent or cease to exist.

VIWALA will measure success if the missing middle SMEs we fund: 1) endure economic turmoil while continuing to generate impact 2) repay their loan and return for follow-on investment, an indication of growth, and 3) gain access to financing from the traditional sector.

Investment Thesis/What is your rationale for your approach to investing?

VIWALA designs and develops innovative blended finance financial solutions, by unlocking alternative sources of capital, adapted to the needs of women-led, social, and environmental impact SMEs’ in the missing middle. VIWALA offers monthly boot camps, personalized coaching sessions, access to the Viwala Community of Women Entrepreneurs, and incentives to implement inclusion practices.

Geography:  VIWALA, currently operates in Mexico, disbursing loans across all 32 federal entities. With its new portfolio MAR + Invest, VIWALA will begin to operate in Belize, Honduras, and Guatemala in 2023.

Year Founded: 2019

# of Investments: 83

# of Investors:  7 (donors, funders, supporters, investors)

Funds Raised: $ 3,500,000 since inception

What’s on Carolina’s Mind?

Book: Winners Take It All

Song: La Bilirrubina (Arturo Sandoval and Juan Luis Guerra)

Podcast: The Knowledge Project/ The Huberman Lab