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Connecting India to Bharat through P2P lending

Posted on by MSC

This blog is about a start-up in the Financial Inclusion Lab accelerator program, which receives support from some of the largest philanthropic organizations across the world – Bill & Melinda Gates Foundation, J.P. Morgan, Michael & Susan Dell Foundation, MetLife Foundation, and Omidyar Network.

People shopping in the market

For small borrowers like Indumathi, this problem is insurmountable. A typical bank finds it costly to assess a small borrower and difficult to underwrite them as they have limited or no credit history. Start-ups like RupeeCircle look at these opportunities and wish to capitalize upon them. RupeeCircle is a digital marketplace that connects these kinds of underserved, credit-worthy borrowers with investors. 

The company claims that a typical nationalized bank rejects more than 70% of the loan applications it receives due to the high costs of underwriting. On the other hand, the loans from microfinance institutions are of low value, usually require a group, and do not always meet a borrower’s requirements. Faced with such barriers, many people are forced to borrow from the informal sector at exorbitant interest rates, which increases their financial burden and impedes their growth. Often, they are caught in a vicious cycle as they are forced to take one loan to repay another.

The pitch: New age underwriting

RupeeCircle came into being when Ajit, an engineering graduate from IIT Bombay, noticed this vicious cycle, having spent several years with major banks doing risk and data analytics. His friend Abhishek, who is an Engineer with CFA and MBA degrees, realized that they could use technology and data science to underwrite and manage the risks. They understood that they could disrupt the traditional intermediation of banks and link the borrowers to net savers who seek better risk-adjusted returns. Their classmates, Ashish and Piyush, joined Ajit and Abhishek and started the journey of RupeeCircle.

Fueling the aspirations for growth of the LMI segment

As a digital peer-to-peer (P2P) lending marketplace, RupeeCircle connects credit-worthy borrowers with investors who seek faster and better returns on their investments compared to traditional instruments, such as fixed deposits or liquid mutual funds. The company uses proprietary credit-scoring models to assess and underwrite loan requests, uses new technology to process the applications, and matches borrowers to investors (lenders). It uses a variety of alternative data points to assess a borrower’s ability to pay back even when they lack traditional credit history. 

RupeeCircle reaches out to borrowers from the salaried and self-employed low to middle-income (LMI) segment who earn less than INR 30,000 (USD 400) per month. RupeeCircle has developed an in-house loan origination and loan management mobile app and backend systems to onboard borrowers and lenders through a step-by-step assisted digital process. Once an investor applies and completes the Know Your Customer (KYC) processes, they get an overall view of all the registered borrowers. They can also see detailed reports of any borrower and can accordingly decide the amount they would invest in them. 

The RupeeCircle system categorizes all the borrowers based on their risk profiles. This categorization helps investors to diversify their risks and hand-pick suitable borrowers for themselves. The step-by-step assisted digital approach has helped RupeeCircle take its proposition to the doorsteps of people from the under-banked segments. They comprise many who are first-time users of the app or may even be nascent digital users and include house cleaners, drivers, factory workers, and security guards. 

Recently, Reserve Bank of India (RBI) sought comprehensive financial data from all the NBFC P2P players in the market. The P2P business works on volume as operational costs are high. RBI used this data and decided to increase the lending cap from INR 1 million (USD 13K) to INR 5 million (USD 65K). This gives a fillip to the business of companies like RupeeCircle, which has already made considerable progress within two years, as highlighted in the figure below.

expectations of FinTech start-ups from the Côte d’Ivoire government

The evolution: Strategy to increase business in existing areas and to expand to new areas

RupeeCircle started its services in 2017 and was part of the second cohort of the Financial Inclusion Lab. Before joining the Lab, RupeeCircle faced the challenges that a start-up typically faces—primarily sporadic growth and unpredictable declines in revenue. Hence, its challenge was to arrive at sustainable go-to-market and scale-up strategies. It also wanted to understand its market potential based on various segments that it could target across geographies. Boot camps, diagnostic sessions, and clinics conducted by CIIE.CO and MSC helped RupeeCircle to identify these challenges and strategize its expansion plans in a more stable, sustained, and structured manner.

The MSC team helped RupeeCircle build a city-selection matrix based on a group of selection parameters for Indian cities, ranging from smartphone penetration to a city’s susceptibility to natural disasters. The start-up used this matrix approach while expanding its market and customer segments in Chennai and Kochi. A better understanding of the target customer segment helped RupeeCircle to rethink and redesign the product. The team mentored RupeeCircle to amplify its reach using better and create targeted digital marketing strategies by tailoring them for relevant social media outlets, search engine channels, and content to address specific target segments. Besides gaining wider visibility, the company was also able to overcome operational challenges by making use of the India Stack.

Weathering the COVID-19 pandemic

The coronavirus pandemic has put both the lenders and borrowers of RupeeCircle under stress. Many borrowers have lost their livelihoods and consequently their re-payment capabilities, for the time being. The lenders prefer to save in very low-risk financial instruments for the metaphorical “rainy day” amid the crisis. To survive this, RupeeCircle plans to:

  • Onboard borrowers from the “essential goods and services” sector, such as delivery boys of the grocery-delivery companies—at least for the short term. This sector is booming and will continue in this trajectory due to the ongoing mobility restrictions and lockdowns for the general population in many Indian states. As a result, the employment opportunities and incomes of delivery boys is on the rise. By onboarding borrowers from this sector RupeeCircle will be able to retain some of the existing lenders as well as scout for potential lenders by mitigating the risk of default.
  • Further automate and digitalize the borrower and lender on-boarding process to the best extent possible, thereby reducing physical touchpoints and maintaining social distancing.
  • Re-calibrate its credit rating and lender-borrower matching algorithms to adapt to the current situation.

The long-term goals

Looking past the pandemic, RupeeCircle wants to be the “Amazon of Credit” that connects the under-banked segments of India with the new-age millennial investors of India. It is currently operational in Mumbai and Chennai but has plans to have a pan-India presence. Its future objective is to scales up to serve the generation of 500 million “credit-invisibles” and “credit-unscorables” in the country. To supplement its borrowers, RupeeCircle also plans to undertake various marketing and public relations activities to project P2P lending as a high-potential, alternative asset class that offers favorable risk-adjusted returns to suit the burgeoning high-income millennial population in India. With its customer-centric model, data science, technology, and continuous innovation, its ambition is to disrupt the banking system as we know it today.

This blog post is part of a series that covers promising FinTechs that are making a difference to underserved communities. These start-ups receive support from the Financial Inclusion Lab accelerator program. The Lab is a part of CIIE.CO’s Bharat Inclusion Initiative and is co-powered by MSC. #TechForAll, #BuildingForBharat 

Impact of the COVID-19 pandemic on CICO agents in Indonesia

Posted on by MSC

Cash-in cash-out (CICO) agents, with their last-mile reach, are the backbone of inclusive digital payment ecosystems. Estimates suggest there are over 3 million such agents across Indonesia, though they often become dormant due to low transaction volumes.

The current pandemic has worsened this situation and reduced the transaction volumes of these agents by 50%-90%. Our report explores the impact of COVID-19 on CICO agents, highlights their coping strategies, and provides policy recommendations to support their recovery.

Riskcovry: Insurance-in-a-box

Posted on by MSC

This blog is about a startup in the Financial Inclusion Lab accelerator program, which is supported by some of the largest philanthropic organizations across the world – Bill & Melinda Gates Foundation, J.P. Morgan, Michael & Susan Dell Foundation, MetLife Foundation and Omidyar Network.

“Why should I pay for an unnecessary insurance bundle when I just need one or two products?” asks Kumar, the owner of a fabric shop in Delhi. Like many of his fellow traders, Kumar runs a small shop in a crowded, narrow street of Chandni Chowk, one of India’s oldest markets. Low-hanging, rundown electric wires line the alleyways of the market. This elevates the chances of an electrical malfunction, which may result in a fire that can easily spread and burn down many shops, harming lives and properties in an instant. Chandni Chowk has suffered many such man-made calamities, including one where a fire broke out, gutting more than 40 shops and destroyed goods worth thousands of dollars.

Despite being aware of these risks, shopkeepers like Kumar are reluctant to buy insurance to safeguard themselves or their properties. This is because insurance brokers or companies usually try to sell them generic insurance products that are more expensive and cover irrelevant risks, such as coverage against floods.

Kumar needs access to an insurance product that is customized to the risks that concern him and his shop, such as fire-related hazards.

The light-bulb moment

Suvendu, Vidya, Sorabh, and Chiranth (Figure 1) used to meet frequently at various insurance industry-related forums and seminars, where they shared their pain points and experiences. They had all experienced the complexities involved in the identification and purchase or sale of insurance products. Soon, these discussions turned more intense and passionate and they realized their common desire to solve the problems that plagued the insurance sector through technology and analytics. Hence, the idea of Riskcovry was born in February, 2018.

The unique pitch

According to reports from the Insurance Regulatory and Development Authority of India (IRDAI), India’s insurance penetration is 3.7% of its Gross Domestic Product (GDP), which is half of the world’s average. Moreover, the insurance density of India is just USD 74, way below the global average of USD 638. These statistics indicate a significant gap in the insurance market of India in terms of customer outreach and insurance products owned per customer, respectively. From an entrepreneur’s perspective, this is a big opportunity to make a proverbial “dent in the universe.”

To address this market gap, the Riskcovry team provides personalized insurance products for shop-owners like Kumar. Riskcovry carefully designed an efficient user experience (UX) journey and implemented it through a well-thought-out user interface (UI) for its online insurance portal. Through this, Riskcovry managed to transform the entire cycle from the selection of relevant insurance products to its online purchase into a quick process that involves four to five steps and does not take more than a few minutes to complete. 

Riskcovry has thus set itself apart from its competitors by enabling the customization of insurance products and providing a simple and speedy process for customers to buy them online.

The impact on LMI segments

Riskcovry currently works on both relevant data points and trust, something that the low- and medium-income segment lack. 

  • Riskcovry collects financial and non-financial data points through its online portal. Its in-house data analytics team then identifies risky but potential LMI customers who otherwise do not have enough formal data to have insurance. Riskcovry sells to these customers at a reasonable price that ranges from INR 20 (less than USD 0.5) to INR 1,500 (USD 20) and varies based on the type of insurance cover, such as life, health, or asset, as well as the duration—three months, six months, or annual.
  • Riskcovry identified “trust” as an important pull-factor for such customers. Since these customers prefer to buy insurance through people they know, Riskcovry distributes through local agents. It skills unemployed youth and women at block levels to work as insurance agents and sell relevant products to their shopkeeper friends, acquaintances, and family members. As a part of its “Mission Maharashtra” project, Riskcovry has already activated 5,000 entrepreneurs across 355 blocks in Maharashtra.

The roadblocks

Like any startup, Riskcovry faced its share of difficulties. The team did not take long to launch its online portal for its target customers—small shopkeepers. However, it soon realized the need to have an agent-assisted model where an insurance agent helps the customer buy the right product by walking them through the company’s online portal. This model was critical for Riskcovry as its customers were skeptical about the purchase of insurance without a “human” talking them through it. However, as a start-up, the sales team of Riskcovry was small and unable to scale up to meet the growing demand of these customers.

Moreover, another problem challenged the team at Riskcovry—it had no brand value yet. Therefore, customers who wanted to purchase insurance were reluctant to consider Riskcovry. 

To overcome these challenges, the start-up sought the help of the FI lab.

Support of the FI lab 

The FI lab comprises CIIE.CO and MSC, its knowledge partner, along with some prominent donors. It provides portfolio support, technical assistance, boot camps, demo days, diagnostics, support calls, and clinic sessions to each of the startups in every cohort. 

Riskcovry was facing challenges concerning its inability to reach out to customers and enabling the appropriate product channels. The sales team of Riskcovry was unable to reach out to its end customers efficiently due to its small size. Besides, its end-customers had some concerns regarding trust.

The FI Lab helped build a strategy to convert Riskcovry’s B2C business model to a B2B2C model. This new model used the existing customer relationships of retail chain stores and Business Correspondent Network Managers (BCNMs). This business model addressed Riskcovry’s customer outreach problem and mitigated customer concerns regarding trust. In addition to providing market connections, the Lab also helped Riskcovry to build its pricing models and refined its pitch to help convert these connections.

The FI Lab also helped identify the appropriate product channel for Riskcovry’s customer segment of small shopkeepers. This meant reaching out to cooperative banks to use the assisted model to sell life insurance to customers. It also meant bundling loan products with insurance and using small finance banks and MFIs as channel partners.

The FI Lab helped identify the appropriate product channel for Riskcovry’s customer segment of small shopkeepers and helped strategize the appropriate channel for the relevant product. This meant reaching out to cooperative banks to use the assisted model to sell life insurance to customers. It also meant bundling loan products with insurance and using small finance banks and MFIs as channel partners.

Since the small sales team of Riskcovry was inadequate to reach out to its end customers, the FI lab helped build a strategy to convert Riskcovry’s B2C business model to a B2B2C model. The new model used the existing customer relationships of retail chain stores and Business Correspondent Network Managers (BCNMs). This business model not only solved Riskcovry’s customer outreach problem but also mitigated the concerns of its end customers regarding trust. In addition to providing market connections, the Lab also helped Riskcovry to build its pricing models and to refine its pitch to help convert these connections.

Riskcovry has forged industry partnerships with some of the top grocery retail chains and BCNMs as enterprise partners and has worked to reach numerous customers in tier II and tier III cities. Through these partnerships, the Riskcovry team has cut down the time needed to market to end customers or insurance beneficiaries from months to weeks. It has also scaled up its reach from a few customers to a few hundred customers. 

Creating opportunities from the COVID-19 crisis

No one anticipated the pandemic and the health, financial and economic hardships it would bring. Hence, there was no specific insurance cover for it, anywhere in the world. The quick spread of the disease has overwhelmed many insurance companies, which took time to adapt and build policies to cover it. This is where Riskcovry’s agility and capability have come to the fore. 

The startup has been quick to sense the situation and has been rapidly building customized, Do-It-Yourself (DIY) insurance coverage offerings from its insurance policy suppliers. It has recently launched insurance covers against COVID-19, which cover hospitalization and other medical expenses. You can read about it here.

By sharing APIs with non-financial service providers, such as EdTechs and AgTechs, Riskcovry is also exploring how to integrate its relevant insurance products with their product offerings.

Plans for the future

In the longer term, beyond the current pandemic situation, Riskcovry plans to promote its novel insurance idea in emerging markets across the globe. The objective is to make its distribution channels more robust, promote quick insurance products, and make insurance exciting. 

Follow #TechForAll and #BuildingForBharat to stay updated on fintech start-ups driven to bridge the social, financial and economic inclusion gap

This blog post is part of a series that covers promising FinTechs that are making a difference to underserved communities. These start-ups receive support from the Financial Inclusion Lab accelerator program. The Lab is a part of CIIE.CO’s Bharat Inclusion Initiative and is co-powered by MSC. #TechForAll, #BuildingForBharat 

Coping with COVID-19 in Bangladesh

Posted on by MSC

MSC conducted a round of research to understand how the low- and middle-income (LMI) segments cope with the COVID-19 pandemic. We covered five countries—Bangladesh, India, Indonesia, Kenya, and Uganda. We spoke to 80 low- and moderate-income households in Bangladesh to examine how this pandemic has affected their lives and know their perspective. Our report, with additional inputs by Stuart Rutherford, offers a glimpse into the community’s challenges, concerns, and new opportunities in these trying times.

SHG awareness and SRLM employee training comic on coronavirus

Posted on by MSC

The COVID-19 pandemic has brought upon us the responsibility to create awareness, influence precautionary behavior, and drive the safety of State Rural Livelihoods Mission (SRLM) staff members and SHG members. We have developed engaging training material for SRLM staff members and SHG members in the form of conversational comics on COVID-19. These explain preventive measures through accessible, visual narratives and include aspects of workplace safety at the SRLM office, staff safety in the field, and ensuring customer protection. These booklets can be customized by concerned SRLM based on their specific guidelines if required. Feel free to share them and join us in fighting back. #staysafe.

Access the English version for SRLM Employee Training  Comic on Coronavirus here.

Access the English version for SHG Member Awareness Comic on Coronavirus here. 

Access the Hindi version for SRLM Employee Training  Comic on Coronavirus here.

Access the Hindi version for SHG Member Awareness Comic on Coronavirus here. 

Women are making inroads in the African tech ecosystem

Posted on by MSC

Around the world, gender diversity remains a huge challenge for businesses. The profitability of businesses is on average 34% higher when they are led by a woman, according to the Roland Berger study for Women in Africa. However, although data is lacking for Africa, estimates indicate that women lead only 9% of start-ups in the subcontinent. This is despite Africa’s position as the only region in the world that has more female entrepreneurs than male ones, with 65% of the continent’s goods produced by women. However, female entrepreneurship in Africa continues to face challenges, especially in the digital world where women are underrepresented. 

The financial industry, however, is evolving. It increasingly relies on information and communication technologies (ICT) as well as on big data to meet customer demands for products that are quicker and easier to use, as well as more transparent. The financial industry has been moving towards products and services exclusively centered on the customer, which has forced institutions to rethink their business models. 

Africa is at the forefront of innovation and entrepreneurship. The FinTech industry is booming. An increasing number of young Africans, born in the digital age, have embarked on the FinTech journey. The FinTech sector has started to find solutions through new business models to alleviate many basic challenges, such as water, electricity, education, and health access. FinTech companies use technology to reach a larger customer base while avoiding infrastructure expenses. Through these new business models, they can manage their costs more effectively and offer a range of affordable digital financial services. 

Professional african woman-vector

Professional african woman-vector

However, only 27% of female entrepreneurs in Africa work in technology. Few women embark on the tech entrepreneurship journey, mainly due to lack of knowledge, lack of financing, or, simply, lack of support. They also lack female role models to follow. 

Cultural barriers play a major role in adding to the reluctance of women to take up tech entrepreneurship roles. African women are less inclined to take risks or are less able to take risks compared to men. Traditionally, they are seen as the ones who manage their households, not the ones who take risks. Culturally, therefore, African women do not fit in with the world of tech entrepreneurship. They frequently limit their enterprising drive, especially in tech, out of a fear of social backlash.

“Cultural and religious conservatism in our societies leads to the development of a natural tendency for self-censorship among women”, says Ismaïl Douiri, CEO of Attijariwafa Bank, the leading Maghreb banking group.

Education is another major challenge to the adoption of tech entrepreneurship by women. In Africa, the literacy rate among boys is on average 1.3 times higher than among girls. Moreover, men are more likely to get secondary and post-secondary education than women. 

According to Ismaïl Douiri, “in most African countries, education systems have been geared towards getting a degree rather than acquiring the qualifications and skills that support successful integration into the labor market.” Most students lack technical and sectorial skills. Information and communication technologies are virtually absent in the African education system. The high cost of education also makes it a significant barrier. 

Women who overcome cultural and education barriers face challenges related to financing. Globally, men represent 92% of partners in the top 100 venture capital firms, and women-founded start-ups receive only 2% of the investments of these firms. 

In its latest report, tech start-up investment fund Partech confirmed that across Africa FinTech start-ups raised USD 132.75 million in equity out of the total USD 1.163 billion raised by start-ups in 2018. FinTechs have benefitted from 39.7% of the total financing. However, estimates indicate that women-led start-ups globally receive only 2% of all venture capital funds, a figure that is even lower in the tech world. 

Yet, supporting women’s involvement in technology start-ups offers a definite financial benefit. The purchasing power of women continues to rise across the continent. For technology companies, the ability to understand women’s needs and aspirations better creates a definite opportunity to serve them. Who is better positioned than women to design products that meet the consumer needs of women? 

Initiatives are being implemented to address these challenges and empower women in the world of tech start-ups, most notably in French-speaking Africa. Banks and mobile network operators have been launching an increasing number of contests, awards, and programs dedicated exclusively to women and technology, such as the Linguère Digital Challenge, which works to advance women in the field of ICT. Similarly, The AFAWA Initiative (Affirmative Finance Action for Women in Africa), designed to improve access to financing for women in Africa, works to close the financing gap that is estimated at USD 42 billion.

Likewise, the eTrade for Women Initiative launched by the United Nations Conference on Trade and Development (UNCTAD) works to empower women digital entrepreneurs to act as a force for inclusive wealth creation in developing countries. 

In Senegal, women represent 30% of the digital ecosystem, compared to 10% in France. Senegal has a range of initiatives in place to support women and an increasing number of incubators and investment funds to help start-ups grow, with the country aiming to reach 35,000 direct jobs in the field of new technologies by 2025.

The ecosystem is buzzing with many initiatives that promote women who embark on the digital entrepreneurship journey and encourage those who hesitate. 

Let us not ignore the great success stories of some women-led tech start-ups, such as Quickcash, founded by Patricia Zoundi, a money transfer company that has succeeded in taking into account the needs and realities of African people. 

Arielle Kitio, heralded as the “Femme Digitale Africaine de l’année 2019” (African Digital Woman of the Year 2019) launched her start-up Caysti (Cameroon Youth School Tech Incubator), a tech awareness center for children from 6 to 15 years old, in 2017. “Thanks to our intuitive and game-based abcCode software, they learn coding in their native language—French, Hausa, or Wolof.”

In Cameroon, Rebecca Enonchong runs AppsTech, while also being a member of VC4Africa and chairing the board of AfriLabs, which brings together innovation centers and tech hubs from across Africa. Today, the AfriLabs network comprises 151 member hubs in 40 countries, which in turn supports more than 700,000 tech entrepreneurs across Africa.

Even though the numbers are evolving and mentalities continue to change, the start-up ecosystem in Africa still needs to work to enhance women’s representation. Nearly 24% of African women of working age are involved in starting businesses, which is much more than anywhere else. Women represent a strong opportunity, and they need to receive better support. They must be able to carve their role with conviction and self-confidence. To this end, they will also need tools, knowledge, and inspiration. 

Are you worried about launching and developing your enterprise with little financial means? Visit the Digital Finance Hub, dedicated to the entrepreneurship ecosystem, that provides tools designed to support entrepreneurs on their journey. Creating a solid talent pool—including among women—is key to increasing the impact of tech start-ups and achieving greater economic, financial, and social inclusion. Ladies, don’t be shy, the tech ecosystem needs you!

Working African Women- Vector

Working African Women- Vector