Whereas most African digital lenders depend upon working capital to gas progress, MoneyFellows has quietly achieved what few others have: lend billions of Egyptian kilos with virtually no debt or steadiness sheet publicity.
Now, after elevating $13 million in a pre-Collection C spherical led by Casablanca-based Al Mada Ventures and DPI’s Nclude Fund, the Cairo-based fintech says it’s able to shift from regular progress to regional growth.
The spherical, which additionally drew participation from Partech Africa and CommerzVentures, brings the corporate’s whole funding to simply over $60 million.
Founder and CEO Ahmed Wadi notes that, not like fintechs burning via money to scale, the startup has stored operations lean whereas digitizing one of many world’s oldest monetary techniques: the rotating financial savings and credit score affiliation (ROSCA).
“We now have managed to crack this mannequin and attain profitability,” mentioned Wadi. “Doing this whereas lending out billions with out counting on working capital in any respect is sort of disruptive in itself.”
ROSCAs are casual financial savings teams the place a hard and fast variety of members contribute often to a shared pool, which pays out to 1 member per cycle. Frequent throughout rising markets, they go by totally different names: esusu or ajo in Nigeria, kameti or chit fund in India, and gam’eya in Egypt.
Right here’s the way it works: Say ten individuals every contribute $1,000 a month. Each month, one individual receives the complete $10,000. The cycle repeats till everybody will get a payout. Whereas these teams work greatest inside trusted circles, their offline nature limits entry and scalability.
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MoneyFellows, launched in 2016, digitizes this mannequin by opening entry to a broader pool of customers throughout the nation. By way of its app, anybody can type or be part of ROSCA teams or “circles.” Comparable fashions exist globally with Pakistan’s Oraan and the U.Ok.’s StepLadder.
Slightly than act as a lender, MoneyFellows matches savers (often final in line) and debtors (sometimes first in line) utilizing behavioural knowledge, credit score scores, and revenue tiers.
This strategy permits it to scale with out lending from its steadiness sheet; the corporate solely steps in when a ROSCA group has an unfilled slot, in line with Wadi.
“If we run circles of 10 individuals every and solely discover 9 members for some, we step in to fund the lacking one,” explains Wadi, who examined the ROSCA mannequin in Germany and the U.Ok. earlier than launching in Egypt. “As a substitute of canceling the group, we finance one slot, which prompts and monetizes the remaining 9.”
In a typical lending enterprise, an organization has to borrow cash from banks or different monetary establishments to lend it out, more often than not incurring curiosity prices and default danger.
Nevertheless, in MoneyFellows’ case, the danger and funding are unfold throughout its customers, conserving the proportion of unfilled Rosca slots beneath 10%. Compared, purchase now, pay later (BNPL) suppliers and digital lenders usually have full working capital publicity on their mortgage books.
“As we speak, solely 7-8% of slots in energetic Roscas require us to step in with working capital,” Wadi notes.
Such publicity could also be low in share phrases, however as MoneyFellows scales, it provides up. Therefore why the corporate, which raised this funding as a bridge to a a lot bigger Collection C spherical deliberate for subsequent 12 months, can be in superior discussions with native banks to safe working capital in its bid to develop its “circles” a lot sooner.
Working profitably and increasing outdoors Egypt
MoneyFellows says it has reached profitability in Egypt, putting it amongst a small group of African fintech startups working within the black.
Since launching in 2018, the platform has grown to over 8.5 million customers, up from 4.5 million at its final funding milestone. The common payout per person has almost doubled previously two and a half years, from 23,000 EGP ($453) to 45,000 EGP ($906), with robust adoption amongst higher-income segments.
“This mannequin is of course viral,” Wadi mentioned of the startup’s progress. “In case you digitize the expertise for 2 members of an offline ROSCA, they usually deliver the opposite eight with them. That type of natural progress is difficult to beat.” Aggressive borrowing charges, he provides, have additionally helped speed up adoption.
Earlier this 12 months, MoneyFellows launched a card product that enables customers to obtain payouts, repay instalments, and spend throughout a service provider community.
The eight-year-old fintech additionally plans to introduce funding, payroll, insurance coverage and remittance merchandise down the road, strikes that put MoneyFellows in competitors with different Egyptian digital banks like Fortunate, Khazna, and Telda.
Its subsequent check might be replicating its success past Egypt, an ambition Wadi first voiced in 2022. He admits that growth took longer than anticipated as a result of mannequin’s complexity, which the corporate selected to refine earlier than going regional.
Digitizing ROSCAs isn’t as easy as launching a financial savings or mortgage product. In keeping with him, the method includes constructing suggestion engines to match customers to the appropriate slots, balancing 1000’s of circles in actual time, and minimizing default and dropout danger, all whereas sustaining person belief.
“Cracking the mannequin took longer than we thought,” Wadi remarked. “Nevertheless it was definitely worth the time. Most makes an attempt to scale Roscas digitally, even by banks and telcos globally, have failed as a result of they underestimated how advanced the underlying conduct is.”
After almost a decade refining its mannequin in one among Africa’s largest fintech markets, partnering with over 350 native and regional entities and facilitating greater than $50 million in investments, MoneyFellows plans to launch in Morocco by year-end, having secured key partnerships and regulatory approvals.
Morocco presents acquainted floor: a big unbanked inhabitants, a powerful casual financial savings tradition (recognized domestically as daret), and a regulator-friendly surroundings. MoneyFellows can be betting that occasions just like the 2030 FIFA World Cup will speed up digital adoption within the nation.
The corporate can be eyeing different African and South Asian markets with related dynamics. Nevertheless, coming into extra various markets will check the mannequin’s adaptability in areas the place casual finance is much less culturally related or formal banking is extra entrenched.
“ROSCA’s (Rotating Financial savings and Credit score Affiliation) are very outdated monetary preparations, with roots going again lots of, if not 1000’s of years,” mentioned Omar Laalej, Managing Director at Al Mada Ventures. “AMV was impressed by the modernized model of this enterprise that Cash Fellows was in a position to construct, positively impacting 1000’s of households in Egypt.”
