#StartupsLatam - PrestAmigo

TAREK EL SHERIFF
I think Colombia is a good market in my opinion. Let’s talk about the banking system and how that is very restricted and it doesn’t encourage entrepreneurs. It’s not good for them.

Ficha técnica de la entrevista

Fecha: Agosto 06 de 2012
Ciudad: Bogotá
Tipo entrevista: No estructurada
Subtipo: Focalizada - Convergente
Etapas: Origen, Startup y Consejos
Recopilación: Grabadora de audio
Video: Si
Autorizó divulgación: Si
Publicación: Transcripción
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01 •  Sobre tí

ANDRÉS FELIPE PEÑA: Thanks for attending this interview. We always want to know a bit about you, your origin, education.

TAREK EL SHERIFF: My family originally is from Egypt. I was born in New York and then I grow up in London. I went to high school there. Until I finish my degree in NYC I worked in London. My work has been in London and NYC. It has been exclusively in investing banking. So, there are two parts in this: first one was sales and execution part in London; second one was advisory in NYC with JP Morgan.

02 •  Sobre tí

A.F.P.: ¿What about this entrepreneurial vein?

T.E.S.: I think my family really have never walk this way. I mean: In Egypt we had a lot of land an many businesses. We were always doing around things. I always envisioned to have in control. I could never find happiness being an employee. You know, even banking is good and it is entrepreneurial. I think: for a job is one of the most entrepreneurial jobs. The environment is changing right now, maybe it’s not the same that was before but this is the time that I was there. From 2001 until 2009 I left. I always have in my mind to start something else just to control my life and to work different areas of your brain. I think, no matter job you have, you end up. No matter how big the company is. You do feel that you’re maybe not using a lot of skills.

03 •  Sobre tí

A.F.P.: And I think that entrepreneurship is a life-style. A 9am-5pm sometimes doesn’t allow you to develop those skills… I’d like to know how did you come to Colombia?

T.E.S.: When I was in Boston in my undergraduate I met my wife. She’s Colombian. We moved to NYC together. We get married and then go London. At that point I was deciding that I wanted to live, what I wanted to do. Some kind of entrepreneurial thing.

04 •  Sobre tí

A.F.P.: ¿When was that decision point?

T.E.S.: It was in 2008. I left banking in 2009 but one year before I started putting things together to what exactly I wanted to do. I mean, I knew what I wanted to do but didn’t know where to put the trigger.

05 •  Sobre tí

A.F.P.: I think you were kicked by the crisis in 2008, don’t you?

T.E.S.: Yeah. But I left before the environment completely changed. I worked in emerging markets which don’t were affected early on. I think there were affected later just by a ripple effect from the global economy. There was still a growth area at that point. Area I was in, was not affected early on anyway. It’s a bit similar to Colombia in that. That area just had a lot of natural growth to do, so It could overcome little speed bumps. Is in more mature markets, the economic crisis hits much harder.

06 •  Sobre tí

A.F.P.: Well, but apart from your Colombian wife, why did decide to come to Colombia?

T.E.S.: We decided which country we like the most. I really like Brazil. It’s a huge market, I have some friends there, I like the culture and I like the fact that I’m an Egyptian in Colombia [Laughter]. In Brazil doesn’t matter, It’s a multicultural place. Easy going, so relax. But then, just before we left, we found that my wife was pregnant and I made the decision. If you’re going to have your first baby but you do something new, maybe It’s too much pressure to be in a place by ourselves. We decided to come to Colombia for a couple of years and decide how it goes. You know, her family is here and it is easy to setup for us. We can get help for the babies from her mother, sister… That helped us a lot.

07 •  Sobre tí

A.F.P.: Is there some advantage for raising a digital business in Colombia?

T.E.S.: I think Colombia is a good market in my opinion. Let’s talk about the banking system and how that is very restricted and it doesn’t encourage entrepreneurs. It’s not good for them. Why is that? Banks are full of charges. For borrowing they are very high, even when inflation is low. So that, banks get bigger margins compared with more competitive markets. The random costs for just doing transactions are terrible. The paperwork, Cámara de Comercio every second, the tax system just doesn’t make sense at all. I mean, the fact that you’re liable of the peoples’ taxes just makes general transaction much more complicated here. Salary is very low and money is concentrated in very small areas.

08 •  Sobre tí

A.F.P.: Yes. There are few families in control…

T.E.S.: If we forget about the black money from drug and dirty politicians, just the people that have the big businesses, I can identify then with Egypt. You know, if you have family money, It is very rare that you get the people that still have the ambition that want to change like the Americans. So, if you born in this environment here, there’s very few people who are trying to road the boat or change things. I mean: those are the people who have the money to do something. If you’re a young guy wanting to do something, rising money here is very difficult because of the culture. Trust is one huge issue.

09 •  Sobre tí

A.F.P.: What do you say about this trust one we consider micro financial models?

T.E.S.: Well. I’m trusting myself in due on my analysis to judge you. I’m not asking you to give your word. You sign a contract, but the judgment is not based on the promise to pay or not. It’s based on my criteria. So, if look at the lending and how it goes here, you have to do all these paperwork, all this guarantors. If they don’t understand risking, they don’t know how evaluate it. They don't differentiate good or bad credit.

10 •  Sobre tí

A.F.P.: The entire financial system is not agile…

T.E.S.: People that are working there are content. So, there’s no hunger there. I mention you about the US. There, if you want the respect, no matter peoples’ background, everyone’s have the option for doing themselves. I think, if you’re there and you’re getting money from your dad or your mother, you don’t get the respect. It’s the same if you’re sitting home doing nothing. But here, it doesn’t matter. It’s more an emerging market phenomenal.

11 •  Sobre tí

A.F.P.: What does make Colombia different?

T.E.S.: It’s a very conservative culture. Risk taking here is different. In Egypt there are more lot hustlers. Here people are so safe as society. There’s not to many little groups. I mean, you can break people by generations: your generation, next generation. There are very similar characteristics. You know, I don’t see ambition. People saying, “I’m going to change it! I’m going to do it!”

12 •  Sobre tí

A.F.P.: Previously, I interviewed Lenddo in this blog. Why are you different? You both lend money…

T.E.S.: We are technology companies. Automated platforms can be used for different applications. Our first product is short term long which is up to $500.000 up to 30 days. So, the benefits with this for somebody are that, firstly that it’s flexible. How many days you want to borrow for? You can start in $10.000 and select exactly how much. So we fit in a very specific need for a person. The next part is just the fact that you can apply in four pages, 5 minutes. The decision will be made a couple of minutes later and the money could be in your account after approved surely the same business day or the next business day. That in the market doesn’t exist here. If something came up that I didn’t expected, It’s the best option.

13 •  Sobre tí

A.F.P.: It’s something like: “Feel free to spend this money like you want”…

T.E.S.: Yes. In reality, start asking why you want to borrow the money is really irrelevant. I mean, if you tell me that you’re going to use the money that PrestAmigo lends you to do this… Then you could use the money to do something else. It really doesn’t matter what will you use the money for. I'm not judging on you. You do whatever you want with it. It doesn't make you good credit or bad credit based on what you use the money for..

14 •  Sobre tí

A.F.P.: Do have the users to sign something for borrowing money?

T.E.S.: All the contracts have virtual signature.

15 •  Sobre tí

A.F.P.: How does the service work? Why $500.000?

T.E.S.: So when not giving people the full limit straightway we're giving them $350.000 as the max for new users and then after a couple of credits the build a credit worthiness. That gives you confidence in the applicant.

16 •  Sobre tí

A.F.P.: How does people pay?

T.E.S.: We’re looking for different ways to be more efficient and friendly. But right now, we have built a fashioned way deposit in the bank which still is what people seem to prefer. We're working on PagosOnLine and PSE system.

17 •  Sobre tí

A.F.P.: I was playing this morning with the website and I think the interest is… I’d not want to say expensive, but…

T.E.S.: Well. Our cost structure is interest which is 25% and charges. These charges are for the technology platform. This platform enables people to benefit for the convenience that I mention that you don't have to leave home or go anywhere. Everything gets sent to their account. From the customer’s perspective what they have to look at is that the amount of charges that they have to pay relative to the loan can't be converted into an annual interest because they're fixed. From the customer’s point of view is still a good deal for them because they have to discount going to the bank, waiting in line, do the credit check which bank charges for, getting all the paperwork… All our application process is completely free and It’s very fast. There’s no additional cost. You don’t have to pay for transportation neither when receiving the money. All these transport cost are taken by PrestAmigo.

18 •  Sobre tí

A.F.P.: So, there’s a strong argument if we consider the time wasted using banks…

T.E.S.: Look at the banking system here and what they charge for transport and receiving money. When you deposit cash into a bank which should be a free transaction, if you’re outside the city where the account is made, you pay over $10.000. Customers don’t see any of these costs and you’re taking account the time wasted, transport cost, paperwork, time wasted in the bank and signing. People think ours is a good deal because if you want to pay $20.000 I’m going to save you 4 hours at least.

19 •  Sobre tí

A.F.P.: I’d like to know a bit about the legal team. I'm worried about these kind of law-related problems on your platform…

T.E.S.: Well. The biggest thing is that we’re not supervised by Superintendencia Financiera because the money is all private. We’re not taking any money. There’s no deposits, no upfront cost. We have a small number of investors. That way we’re not supervised. And the first thing that I did before starting the business and before we had the model was to do the legal stuff.

20 •  Sobre tí

A.F.P.: Do you think that this can change in future? Regulations…

T.E.S.: Ideally, you have the hope that the government can see the benefit the consumers are getting, the use of technology which is step forward in Colombia. I think it helps people overall. There's no exploitation. There's lot of people out there I've heard that have this kind of business with upfront cost, application cost and they don't give the loan. And the people are getting upset because they make money just by rejecting people. In a business like ours everything is transparent. There's no hidden charges. No hidden costs. People can like it. You can say: "Too expensive?" - They say "No". You're making conscious decision. There's nothing surprises at the end. That's the transaction and we are both parts agreeing the terms and accepting we move forward and I can't see the harm in there.

21 •  Sobre tí

A.F.P.: What are the numbers in this platform? Users? Traffic? Loans?

T.E.S.: After legal decisions we started at the end of last year. I thing august, September. We started giving loans in the middle of march. At the time we were only using Facebook and Twitter. It was a economic testing peer. Want to look at systems working, everything was ok, customers were getting the money and operations are checked. We felt we were ready on June 7h for a PR launch for Colombia. Since then we had over 2.500 customer applications. Over 10.000 visits per month. We had a peak day for applications, over a 190. I mean, numbers are good, feedback is really good. If you look at Facebook, people look so surprised. People love that we deliver the money instantly. This is which people value, this kind of efficient service.

22 •  Sobre tí

A.F.P.: Which are your expectations at the end of this year?

T.E.S.: Well. It depends the kind of expectations. I think as a platform we’re looking to expand to different areas. So, we’re trying to work with a lot of different of retails in e-commerce people. Because this instant decision making that we’re are able to give people have lots of applications. If you’re an e-commerce and you’re making a purchase, we can be just another option for you. You know, debit card, credit card or us. Because we can give a decision instantly.

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