B Corp aims to give immigrants a boost with low-interest loans.
Online lender QuadFi said it is using artificial intelligence (AI) to provide credit to immigrants in Canada. The startup claims that its newly launched solution will allow any newcomer to North America to apply for a personal loan and be approved within minutes.
QuadFi claims its credit solution is borderless and doesn’t rely on FICO scores. FICO scores assess the credit risk score, which FICO claims is widely recognized as the industry standard for measuring credit risk.
“QuadFi fundamentally revolutionizes the way risk is viewed and assessed in the modern age,” claims Nikjoo.
However, traditional signing and scoring models use financial stories to create a lead score. This means that individuals with no financial history in Canada, such as newcomers and immigrants, may not receive a fair or overall result. “As a result, their access to fair and affordable financial products is extremely limited,” explained Mani Nikju, CEO and Co-Founder of QuadFi.
QuadFi identifies what it calls premium and super-prime customers through advanced modeling and alternative data, including academic achievement, income levels and open banking information. The FinTech startup uses a proprietary process to convert and integrate credit information from overseas to North American standards.
According to QuadFi, its solution is able to identify borrowers years before they have a full credit score.
To provide the loans, QuadFi secured a financing facility of up to $127 million CAD from CrayHill Capital Management in April. In total, the 20-person startup has raised $140 million in equity and debt. QuadFi announced in 2021 that it had received strategic investment from Ritu Banga — the wife of former Mastercard CEO and current executive chairman, Ajay Banga — and Bruce Simpson, CEO of the Stephen A. Schwarzman Foundation and former managing director of McKinsey Canada.
Nikjoo told BetaKit that when trying to secure a credit card or personal loan to start life in Canada, newcomers often face limited options due to a lack of an existing financial record in the country.
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“QuadFi fundamentally revolutionizes the way risk is viewed and assessed in the modern age,” claims Nikjoo.
QuadFi loans are capped at $50,000 and can be used for anything from paying off other high-interest debt to education, a down payment on a home, and more. Interest rates start at 5.99 percent, and QuadFi doesn’t charge any hidden fees. Nor is there a prepayment penalty. The current average personal loan rate in Canada is 7.05 percent for comparison.
QuadFi does not disclose the number of newcomers it has supported with loans to date, but Nikjoo said the FinTech looks forward to helping thousands of newcomers move to Canada over the next 12 months.
QuadFi has signed contracts with several credit agencies outside of Canada to access and translate foreign credit scores, signing deals with businesses in the United States, Mexico, Nigeria and the Philippines. The startup plans to close more deals with other countries in the coming months.
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The FinTech startup earns revenue by charging a “spread” on the cost of capital, along with a service fee from facility providers. The spread is the difference between the interest rate a bank pays to depositors and the interest rate it receives on loans to consumers. Nikjoo said QuadFi’s loan default rate is extremely low and below the firm’s target.
Nikjoo said that to his knowledge, there are no other startups in Canada serving immigrants with loans. “What we’re doing is a paradigm shift: we’re changing the focus of underwriting from historical data to a future-oriented approach,” he said. “There are currently some limited opportunities for newcomers and immigrants in the market; however, most of them are very expensive solutions from lender sharks and predators.”
Nikjoo noted that some government institutions also offer products to newcomers and immigrants, but said the amount is limited and said the process of obtaining funds can be difficult, long and cumbersome. “Unlike these mercenary and missionary groups, QuadFi is creating a new fair and affordable solution for newcomers through the use of technology.”
For example, the Canadian government offers loans to immigrants, but the most you can get is $10,000. The registered charity, Windmill Microlending, also provides loans to newcomers, but these exceed $15,000.
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BDC provides the most generous loan program, offering $25,000 to $50,000 for immigrants to help finance businesses.
QuadFi’s lending program comes at a time when a number of provinces have opened up immigration streams to attract talent to tech startups. As part of the Saskatchewan Nominated Immigrant Program (SINP), the Tech Talent Pathway was established in March to support Saskatchewan’s growing technology sector and alleviate labor shortages.
British Columbia, Alberta, Ontario and Quebec have similar programs.
QuadFi is a certified B corporation. “B” stands for “benefit for all”. To become a Certified B Corporation, signatories must demonstrate that they are purposeful and create benefits for the wider society. Certification is supported by an independent, rigorous and ongoing assessment process.
“As a certified B corporation, we are committed to using our engineering and technical expertise to provide positive social impact,” said Nikjoo. “Our company focuses on financial inclusion because its benefits are widespread and obvious. From a product perspective, we started with credit because that’s what a lot of newcomers really need.”
Main image by Tom Carnegie via Unsplash.
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