Leveraging big data, Mercado Libre offers loans in Brazil and Mexico

By Sheky Espejo

MEXICO CITY (Reuters) – Argentine online marketplace Mercado Libre Inc plans to provide working-capital loans to entrepreneurs in Brazil and Mexico this year, expanding on a program the company launched in its homeland last month.

Sellers using Mercado Libre and its Mercado Pago payment platform will be eligible for loans equivalent to as much as two months of their monthly sales, Ignacio Caride, head of company’s Mexico operation, told Reuters in an interview.

Developments in big-data analysis are helping Mercado Libre leverage information collected about its clients and their transactions in Latin America over 18 years.

“We know what they sell, how they’ve grown their sales in recent years, how they treat their customers, how they resolve conflicts,” Caride said. “No bank has that kind of granularity.”

Because the firm is using its own money, Caride said it did not need government authorization to issue the loans. He declined to say how much interest Mercado Libre would charge.

Meaning “Free Market” in Spanish, Mercado Libre is Latin America’s top online retailer and posted net revenues of $274 million in the first quarter, a jump of some 74 percent compared with the same period in 2016.

Low-income families and small businesses in Latin America often have poor or no credit histories and struggle to win approval for bank loans.

Sellers will not be required to sign documents or submit financial documents to receive “Mercado Credito” loans from Mercado Libre, Caride said.

Mercado Libre itself approves the loans to clients with proven cashflow and significant sales, information it gathers from an algorithm the firm developed using big data.

The firm rolled out similar lending in Argentina last month.

Brazil and Mexico accounted for about 60 percent of Mercado Libre’s revenues last year.

Driven by its robust sales and profit growth, Mercado Libre’s stock has surged 77 percent so far in 2017 and recently hit record highs.

“We believe Mercado Credito could make Mercado Libre 100 times larger than it is today,” Caride said.

Mercado Libre plans to invest over $100 million in Mexico this year and end 2017 with 40 million regular users in Mexico and at least 1 million sellers, Caride said.

(Reporting by Sheky Espejo; Writing by Noel Randewich; Editing by Lisa Shumaker)