Yusef Jacobs, the 28-year-old Founder and Chief Executive at Graviti, aims to transform microfinance by allowing consumers to gain access to essential appliances. Jacobs believes that people who might not have a lot of funds will still pay for items they really need.
Jacobs has introduced Graviti, a Buy Now, Pay Later (BNPL) platform for essential home appliances for the unbanked consumers residing in Mexico.
Graviti gives low-income Mexico residents the chance to purchase solar hot water heaters, refrigerators, and washing machines even if they don’t have the funds for buying such items. People who need these basic appliances may be able to get access to credit so they can still afford to buy things they need.
In statements shared with CNBC, Jacobs explained that what they measure is whether this client really needs a particular product. And if they do, then they are going to pay for it eventually.
Graviti aims to place Internet-connected meters on the appliances in order to gather data about how the client may be using them — and also turn them off remotely if a user happens to skip or fall behind on their payments.
Jacobs notes that what existing microfinance platforms do is if a client gets behind on their payments, then they begin charging late payments. He also mentioned that in Mexico, they “go over 100 annual percent interest rates … which is crazy” and that just “over-indebts the customer and increases the debt.”
Instead of burdening borrowers with a lot of debt, Graviti chooses to gradually reduce the functionality if clients are not making payments.
Jacobs explained that if people get behind on their payments, by a few weeks, then what control meters allow them to do is to control the flow of hot water from the water heater, and perhaps limited to a particular amount of liters each day. He added that if clients keep getting behind on their payments, “maybe we should shut down the flow of water completely.”
This business idea appears to be working because Graviti has an overall default rate on its loans of just 1.21%, Jacobs revealed in an interview with CNBC.
Meanwhile, the default rate on credit cards in the US stands at 3.15% (in March 2021). This, according S&P Dow Jones Indices and Experian data published last month.
Jacobs, who is orginally from Mexico City and has been living there his entire life, established Graviti in late 2019 with solar hot water heaters.
He noted that they acquire the customer, and they carry out the underwriting of the credit, and they also approve the credit. After completing these steps, they “basically connect that customer and the credit with the distributor that holds the product and the distributor goes and installs the product.” Graviti pays the distributor for the product “upfront” and then they “do the payment collection of the credit from the customers,” Jacobs explained.
These flexible payment options may be quite useful for people who may not have access to banking and other financial services. World Bank data reveals that just 37% of Mexico residents have a bank account.
Graviti generates revenue by taking a commission from appliance distributors it does business with. These companies reportedly include Whirlpool, Acros, Daewoo, Mabe, among others. Graviti also earns its income from the interest rate its clients pay on their loans.
Jacobs has secured $3 million in total funding for his company, to date.
Most of the funds, or $2.5 million, that Graviti has acquired came via an investment round finalized last month.