Microbanking: Bringing credit to underrepresented communities by enhancing local financial practices with AI

Abstract

This paper focuses on how small business owners’ local financial practices in underrepresented communities can support economic independence, growth, and resilience for these businesses and, at the same time, for the community to which they belong. We propose here a model based on microbanking, that is, the transformation of small business owners into managers of very small banks which provide microcredit to their communities. The idea is based on findings and learn-ings from a past project with Brazil’s largest micro-credit institution. Our proposal looks, in particular, into how AI technology can ethically mine the knowledge some people in those communities (e.g., small shop owners) have about the financial life and status of other members and leverage it to enable micro-loans to the whole community, supporting at the same time the small-business owners on credit and cash flow provisions.