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Egyptian fintech Money Fellows has raised $31 million as its first close of Series B investment. The round, which the startup expects to raise in the coming months, was led by CommerzVentures, Middle East Venture Partners (MEVP), and Arzan Venture Capital.
Other participating investors include Partech, Sawari Ventures, Invenfin, National Investment Company (NIC), 4DX Ventures and P1Ventures. Money Fellows has raised a total of $37 million since its inception.
The premise of Money Fellows is the digitization of the money circle, or what is commonly known as the Rotating Savings and Credit Association (ROSCA). ROSCA is a system in which groups of people agree to donate money for a specific period of time, thereby saving and borrowing.
Money Fellows CEO Ahmed Wadi said ROSCA is a $700 billion global opportunity, highly sought-after in over 90 emerging and developing markets, including Nigeria’s Essu or ajo and India’s Kameti or chit. It has several names such as Fund, Egyptian Gameya, etc. But it wasn’t in these countries that Wadi first tested his Money Fellows, but in Germany, where he lived at the time. There, Waddy had no credit history, so he found it difficult to access financial services. He thought that replicating the Gameya system in European countries could provide people like him with an alternative financial system. But adoption didn’t matter either there or in his next destination, the United Kingdom.
“Germany didn’t have this culture. At some point it felt like it made sense to go to the UK, where there are Asian, African and Arab communities who traditionally use this model.” “But we found that people didn’t need it because they had a sophisticated financial system.”
Meanwhile, Egypt has a working ROSCA system, and Wadi, a native of Egypt, chose ROSCA for his third attempt in 2017. He launched the platform a year after him.
Here’s how ROSCA works: Suppose 10 people get together and agree to pay him $1,000 a month for 10 months. At the end of each month, members receive $10,000 and continue rotating until everyone receives their payment. This system works best with close ties of friends and family as it can be dangerous when strangers are involved. This limits offline ROSCA in that it But with Money Fellows, people have a broader pool of participants around Egypt to form and join her ROSCA group through the app, each going through a credit evaluation process. Similar players around the world include Pakistani fintech Oraan and UK-based StepLadder.
Money Fellows classify users as Borrowers, Savers or Planners depending on where they are in the ROSCA cycle and when they receive their payments. Users who choose an early spot will be charged her one-time service fee of about 6%. The percentage tapers off and turns into incentivized interest paid to users at the end of the cycle.
“People who want to borrow can find slots on our platform. For number 2, the fee will be slightly lower, and the longer you wait for ROSCA to end, the ROSCA will incentivize users with one of the most attractive savings incentives in the country.”
Fintech businesses that lend in some form will have to deal with defaults. Money Fellows is no exception. Its conscious design has taken such cases into consideration and has adjusted provisioning and reservation requirements to ensure that customers continue to be paid even if other participants fail to meet their goals. creating. According to the chief executive, Money Fellows will set a reserve fund each time a new her ROSCA is initiated and will cover any default on those funds according to the provisioning schedule.
“The good thing about ROSCA and consumer finance is that not everyone has the same credit exposure. I paid $500 for , so I only have to pay back $5,000.” “That’s why we are more conservative. We know we’re going to risk more or less, so we restrict ourselves to certain slots, which is another benefit, using Rosco as a financial engine to default rather than the typical consumer and microfinance model. is a way to control the
Image credit: money fellow
Fintech also includes B2B play, partnering with various merchants in Egypt to sell their products within the app and get discounts for their customers. Fintechs generate fees from the markup of these products in addition to charging fees in ROSCA. The company plans to offer more financial services such as post-purchase payments, annuities and cards.
Money Fellows are over 4.5. 1 million registered users on its platform. However, he is only 7% of monthly active users. The average paid ticket per user is about 23,000 EGPU ($1,100). “He is one of the favorite financial apps for Egyptians,” the company claims to have grown eightfold year-over-year.
Waddy said Money Fellows’ plans to accelerate growth by diversifying its portfolio of services, expanding its product offerings across B2C and B2B segments, and expanding geographically across Africa and Asia. is. “To be honest, this model has not yet been cracked globally. The CEO said, “This has been a big focus of ours over the past few years. Now is the time to grow. A big part is to grow aggressively or scale much faster than ever and hopefully try and replicate this in other markets.”
CommerzVentures Venture Partner Hangwi Muambadzi said of the investment:Great to see this new digital ROSCA driven model [Money Fellows] Emerging from Africa, creating a trusted model for delivering financial solutions and setting new standards for solving global opportunities using localized solutions. “
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