MoneyFellows, an Egyptian ROSCA (Rotating Savings and Credit Association) fintech has raised $31 million in a series B round led by CommerzVentures, Middle East Venture Partners (MEVP), and Arzan Venture Capital.
The round sends the 4-year firm’s total fundraising to $37 million and it expects to top this up in the coming months.
Participants in the round include:
- Partech
- Sawari Ventures
- Commerz Ventures
- Middle East Venture Partners (MEVP)
- Invenfin
- Arzan Venture Capital
- National Investment Company (NIC)
- 4DX Ventures
- P1Ventures
MoneyFellows is digitizing Rotating Savings and Credit Associations (ROSCA) which are popular in many African countries. In ROSCA, participants create a group where each member in the group contributes an agreed-upon amount of money (usually monthly) and the total is given to one person on a rotating basis.
For instance, if 10 people agree to contribute $10 monthly, each month, one of them gets the total contributed amount ($100), and when a contribution cycle is over, they start all over. The practice has different names such as:
- Chama in Kenya
- Esusu or Ajo in Nigeria
- Gameya in Egypt, and
- Kameti or chit fund in India
MoneyFellows calls them Circles and since they require trust, usually it is families and close friends who join up to form an association, limiting the participants. MoneyFellows is addressing this by assessing the creditworthiness of participants letting them form more diverse associations on its smartphone application.
Participants are allocated slots in a circle depending on whether they want to borrow, save, or plan.
According to CEO, Ahmed Wadi, the participants are charged fees based on the slots they pick.
So if you are a slot number one, you’re a pure borrower, so we charge a fee. If you’re a slot number two, we charge you slightly less.
Our Fees depend on the circle duration and slot you choose. For example, fees start at 6% on the first slot in the 5 months circle and decrease gradually until it reaches zero fees; the same concept applies to the 7 & 10 months circles.
He added that the company puts aside reserves for each Circle launched insulating participants in case some default on their monthly contributions even though participants sign legal contracts.
Contributions start from as low as 500 EGP ($21) per month and up to 20,000 EGP ($840) per month and users can choose between 3 different durations – 5 Months, 7 Months, and 10 Months.
Benefits of the digitized process include:
- Ability to join multiple circles at the same time
- Not bound by social circle or geographical location
- Private – Nobody knows when you are getting your payout
- Secured – Everyone signs a legally binding contract
- Various Pay-in and Payout methods including traditional and digital banking
MoneyFellows has over 4.5. million registered users on its platform; however, only 7% are monthly active users. According to the CEO, the sector is a $700 billion opportunity.
The fintech, which also partners with businesses to sell on its platform, plans to add more offerings including:
- Buy Now Pay Later (BNPL)
- Pension, and
- Cards
It also wants to expand on the continent.
_________________________
Follow us on Twitter for latest posts and updates
Join and interact with our Telegram community
_________________________
_________________________
