LocationsBridging the Gap: Flexible Financing and Insurance for Small Shops
4 de Febrero de 2025
By: Lina Fernández (Head of Exploration Accelerator LAB Colombia)
Providing the context: Introducing Mr. Luis
Luis Francisco Serrano—affectionately known by the team as Mr. Luis throughout this journey—represents the transformative power of creating financing and insurance solutions tailored to the needs of small shopkeepers in Colombia. When we first met him, he shared a simple yet profound sentiment: "Every day, I am building a better future for my family." He spoke candidly about the challenges he has faced in accessing the financing needed to grow his business and meet his working capital requirements. His story is far from unique, for over 513,000 small shop owners (tenderos) across Colombia gaining access to productive financing remains a significant obstacle. Yet, stories like Mr. Luis’s highlight the immense potential for change when the right tools and support are made available.
Around 47% of them not formally registered, and nearly 20% of those who do seek credit doing so through informal markets. This reality leaves them without sufficiently flexible, affordable, and timely working capital solutions to sustain and grow their businesses. Insurance products are also scarce in this segment—only 11.6% of issued premiums in 2023 corresponded to micro, small, and medium-sized enterprises. Recognizing how critical these small shops are to the economy (they capture over 48% of the household basket market in large cities and can reach up to 62% in smaller towns), the United Nations Development Programme (UNDP) Colombia—through its Accelerator Lab and the Insurance and Risk Finance Facility (IRFF)—joined forces with Banca de las Oportunidades (national government) and FASECOLDA to launch the “Finantienda Segura” innovation challenge. This initiative is centered on designing comprehensive financing and insurance solutions for Colombia’s shop owners.
Harnessing Collective Intelligence: Launching an Innovation Challenge
The challenge aimed to answer one key question: “How can we facilitate access to working capital financing for small shops, in a timely, flexible manner that also includes insurance solutions?” To do so, we employed open innovation methodologies, design thinking, and an immersion process that began with socializing and understanding the needs and environment of the tenderos. This process involved on-site visits, interviews, and focus groups with shopkeepers to gain a deep understanding of their needs. Additionally, interviews were conducted with key stakeholders—including representatives from the financial sector, retailers, major supplier companies, and shopkeeper associations—to develop a comprehensive understanding of the problem.
The core of the process was a hackathon-style ideation phase where more than 17 solution teams— representing 42 organizations of insurers and reinsurers, fintech companies, banks, data providers, payment gateways, insurtech firms, academia, and cooperatives— delved into the problems faced by these micro-businesses. They relied on market data, statistical information, and direct input from the shop owners themselves, facilitated by immersive reality tools and specialized mentorships. Through iterative prototyping, the teams sought to create minimum viable products that satisfied crucial criteria like flexible repayment flows, relevant insurance coverage, and simple, accessible credit requirements.
During the ideation phase, the solutions teams had access to different mentors that brought their expertise, helping them resolve questions, make decisions, and gain new perspectives on the challenge. They provided rapid and efficient guidance on both technical and business aspects and assisted the teams in validating and refining their ideas, offering constant and constructive feedback and preparing them for their final pitch. The experts included representatives from the International Finance Corporation (IFC), the Bogotá Chamber of Commerce, Bancoldex, FASECOLDA, Microinsurance network and the Insurance and Risk Finance Facility.
The final pitch: Selecting the best ideas amongst strong competition
The teams presented their final pitches to a multidisciplinary jury, who faced the challenging task of selecting just two from a pool of excellent proposals, amidst strong competition. The was made up of high-profile insurance, business and financing experts, and Luis Francisco Serrano (Mr. Luis), representing the tenderos. The evaluation criteria included the desirability of the solution for small shopkeepers, the feasibility of the financial and insurance model, and the technical feasibility for implementing the project on a large scale. Additionally, the social impact of the proposals was taken into consideration, as well as their ability to promote formalization and sustainability for small businesses.
Two winning proposals emerged from this collaborative process. First place went to “Sencillo,” developed by Colmena Seguros, Entre Amigos, and Bemovil. It offers a revolving credit line with daily or weekly repayments, adjusted to each shop’s capacity. This product is paired with a theft and damage insurance, a financial education component (“Viva Seguro” by Fasecolda), and additional savings mechanisms targeting business growth. Second place went to “Veci Ágil,” spearheaded by Seguros Bolívar, Daviplata, and Fenalco, which provides a revolving loan disbursed directly to suppliers alongside a parametric SME insurance that shields shop owners from severe weather-related risks. Both initiatives demonstrated that, indeed, solutions can be tailored to the realities of small shops, provided they are rooted in a solid understanding of their day-to-day operations, cash flow fluctuations, and low tolerance for complex processes.
Findings insights and lessons learned
The findings were illuminating and offer practical insights into both the problem and its potential solutions. Self-exclusion from credit is prevalent among shop owners, often driven by distrust of financial institutions or previous negative experiences. Additionally, many still conduct business in cash, making it difficult for banks to develop clear credit profiles, and they frequently blend personal and business finances, increasing perceived risk. From the supply side, a general lack of specialized products for this type of microbusiness stems partly from gaps in information and the inability of traditional credit models to adapt to the irregular cash flow common among tenderos. Insurance adoption also remains low, due to limited awareness of both insurance providers and their product offerings, as well as limited contact with insurers.
Among the most valuable lessons was the importance of involving the end user—in this case, the tendero—throughout the design, validation, and testing stages. Close interaction with them, combined with the use of nontraditional data sources (for instance, purchase histories from suppliers, digital transaction records, and supply-chain data), allows for the refinement of credit and insurance conditions. Moreover, the collaboration with “unusual partners,” including trade associations, fintechs, and insurers, fostered a co-creation dynamic that would have been difficult to achieve through traditional collaboration. This environment set the stage for innovation not just in technology but in the way these products are conceptualized and marketed.
Lastly, the augmented development tool introduced by the Acceleration Lab gave participants a unique and immersive experience into the reality of small shopkeepers through augmented reality. This cutting-edge technology allowed participants to gain deep insights into the daily challenges, customer interactions, and operational needs faced by tenderos. By interacting with this augmented environment and visiting their shops, teams were able to better understand the nuanced experiences of small shopkeepers, fostering empathy and guiding them in the creation of solutions that directly address these specific pain points.
Looking ahead: Scaling up to drive financial inclusion
Regarding scale-up, the plan is to accompany the winning teams as they implement their prototypes in real-world market settings, collecting data on their effectiveness in improving shop owners’ financial resilience. The goal is for these solutions to be brought to market by 2025, with hopes that the experience and insights gained can be applied to replicate or scale up these models in other regions and contexts. This strategic “handover,” where developers, insurance and financial institutions, and the tenderos themselves adopt the solutions, aims to secure their long-term viability and reinforce the transformation of a segment that—despite its importance—often goes underserved.
In short, the experience of Finantienda Segura proved that open innovation, co-creation, and multi-sector partnerships can break down long-standing barriers to financial inclusion. By combining user-focused methodologies, the use of data, and the excitement of creative competition, the initiative yielded tangible proposals with significant potential for scale. The challenge now is to solidify these models and put them in the market so that more and more shop owners have access to timely, flexible financial and insurance products that meet their everyday realities. Doing so will not only strengthen their businesses and local economies but will also make a crucial contribution to advancing inclusive financial systems in Colombia (see video of this journey here!).