Whether it’s offering bill payments, airtime recharge, funds transfer or remittance services to customers, mobile money agents play a pivotal role in providing access to financial services for Africa’s unbanked and underbanked populations.
“They’ve become socially relevant within their community because they are now the go-to person for all financial services needs that people in their local communities have,” Titilola Shogaolu, head of financial inclusion at Nigeria’s Interswitch, recently said.
But paying regular monthly bills like rent or making sure suppliers, contractors and employees are paid on time can be a challenge for these small business owners, as periods of high expenses don’t always coincide with periods of high revenue — not to mention dealing with unexpected business costs they might not have planned for.
This makes access to reliable and affordable finance key to scale their business activities, but these merchants rarely meet the standard requirements to apply and be approved for traditional bank loans. For those who turn to friends and family, that financial support is not always a guarantee.
Read more: ‘eLevy’ Causes Mobile Money Concerns in Ghana
Against that backdrop, Nigeria-based FinTech Moni is trying to fill that funding gap with a community-based lending solution built around personal referrals, combining grassroots finance with digital solutions for mobile money agents across the region.
Related: The Changing Face of Mobile Money in Ghana
“[Entrepreneurs] form a group, they form a station, and they’re accountable to each other,” Femi Iromini, CEO of Moni, told PYMNTS in an interview. “Based on that, we are transitioning beyond mobile money agents […] to be able to cater to small businesses, while leveraging traditional trust and the community-based model to provide working capital for them.”
To date, the firm — which leverages the concepts of social trust and group responsibility — has disbursed over $10 million to African merchants and is consistently achieving a 99% repayment rate, Iromini said.
Tackling Fraud Risk
Despite the low default rate and huge business potential, it hasn’t all been smooth sailing. As Moni has grown, like any lender, it has encountered people looking to defraud the business.
“The more you’re working, the more the bad guys are working as well,” Ironimi said, “So we’ve had experiences with fraud.”
But he takes these challenges as part of the business, pointing to the need to constantly develop the product and keep sight of lending and borrowing networks as they evolve.
He added that know your customer (KYC) processes are not enough to identify criminals, and it’s important to track people giving referrals and how different customers are connected. In fact, when people do default, it often happens in clusters or chains, meaning because A invited B, if A defaults, the chances are that B will too, Iromini explained.
At the end of the day, Moni’s business model proves that many of the practices observed in traditional bank loan issuance can be applied in community lending. The principles remain the same — KYC, anticipate defaults, and calculate risk using the information available. All that differs is the scale, he said.
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