Here are some interesting facts:
85% of Sub-Saharan Africa is financially excluded
100% of African countries do a traditional group savings system
90% of these traditional saving groups are made up of women
1-2% is the default rate of these group savings system.
Yet women are financially excluded by a ratio of more than 2:1.
We want to try a new approach to poverty alleviation: reward financially responsible African women by providing them with a range of financial tools, as well as financial services (like small loans) that enables them lift themselves out of poverty.
Despite clear evidence that in Africa women are known to be financially more prudent than men, they are disproportionately more financially excluded. Furthermore, regardless of the multiple, innovative, financial solutions implemented in the region, African women remain one of the poorest in the world.
Importantly, one sees the same approach of micro-finance institutions and their micro-credits, and NGOs and their financial education programs still not significantly moving the needle in terms of alleviating poverty.
We believe a key reason for this is that despite the great work that these organizations do, they are nevertheless trying to implement systems that are foreign to a target population that is very poorly educated. Even with the best financial education techniques like flash cards and videos in local languages, it’s still going to be very difficult to make the adoption of this type of financial education intuitive to this target group.
So how about we try another approach? One that is uniquely African, leverages a group savings system that has been used for generations, has default rates of 1-2%, and used in every single African country!
This is the genesis of our solution, MaTontine. We went back about century to a system used all over Africa. It is called Tontines in Francophone Africa (Natt in Senegal, Esusu in Nigeria, Upato in Tanzania etc.); the industry term is Rotating Savings and Credit Associations and here’s how it works. A group of say 10 people, each with its own manager, contributes say $10 every month into a pot and at the end of the month one member of the group collects the pot of $100. This cycle repeats itself until everybody has won the $100 pot (see link below to explainer video).
Our innovation is to build a digital platform that automates this whole process and incorporates a credit scoring system in order for us provide access to small loans and other financial services like micro-insurance to our members. All financial transactions are done digitally using mobile phones and mobile money.
The key feature of our system though is that instead of just giving people “easy” money like some organizations – a system that some people have learnt how to scam, we only provide loans to people who have good credit scores. So we therefore reward people who behave financially responsibly on our platform. The psychology we want to embed in our members is that the more financially responsible you are, the higher value services you will receive; whether it’s crop insurance for farmers, or micro-health insurance for fisherwomen. This behavior over time will enable us lend $100 to a trader today, but $500 in three years and $1,000 in five. That’s how people will make the individual choice to get themselves out of poverty.
MaTontine is a digital financial services platform, with a mission to improve the financial outcomes of our members by unlocking access to financial and related services through the use of digital technology and entrepreneurship. We have automated the traditional savings circles found throughout Africa, and built a software platform that enables us work with a range of partners (mobile payment providers, insurers, banks, NGOs etc.) in order to provide access to small loans & related financial services for the financially excluded in Francophone Africa.
The Problem
The problem we are trying to solve is an enduring and challenging one: how to unlock access to financial services like small loans to the poor at scale. The banks and Micro-finance Institutions have realized that they cannot do this profitably at scale with their current infrastructure. It turns out that it’s actually very difficult to profitably make small loans like $100. Consequently, for our members the only providers of these type of loans charge between 25%-100% per annum.
Our Solution
We solve the problem for our members by utilizing mobile phones and our platform to digitize the benefits of traditional savings groups. Thereby reducing the cost of borrowing by 75% or more. MaTontine provides the infrastructure and business model to unlock financial services for its members.
Why we are different For sure we are not the first to digitize traditional tontines. Our major differentiation is that instead of just tontine automation we provide access to a range of financial services to our members. Importantly, with our business model we generate revenues for thousands of women who are tontine managers by sharing our revenues with them.
Meet Ndèye our typical member
Ndeye is a 35 years old trader with a high school degree, married for over 12 years with a family of 3 kids. She is an existing tontine manager and lives in close proximity to her tontine group. She is a highly respected member of her community. She is good at managing money and is responsible for financial management of her household; she always needs cash for ‘everyday’ emergencies. This might include buying more products for her stall or urgent medical care for her kids.
Our Work so far
In May 2016, we launched an Alpha pilot with 30 members. We worked with this group to validate the customer journey and tested the following three hypothesis:
- Will low income members of a traditional savings circle adopt a digital savings circle platform for their use if there is a potential to access financial service products?
- Will low income members of a traditional savings circle pay for a fairly-priced digital financial services product?
- What percentage of low income members in a savings circle will request financial products when offered?
Based on the success of the alpha pilot, in August 2016, we undertook the Beta pilot to build on the alpha pilot and test the same hypothesis on a wider group of 475 members. In addition to the three previous hypotheses, we further tested these hypotheses:
- What is the potential default rate of low income members when offered our unique loan product? The answer was 0%.
- Will the members stay on the platform if they do not meet the criteria for a loan? The answer was yes because they believed they would eventually get a loan.
- Will the intra-community relationships be maintained with digitization and what will support these relationships? The answer was by encouraging and facilitating regular meetings the relationships endured.
The completion of our beta pilot was hugely significant.It enabled us prove that MaTontine as a digital financial services platform worked. We demonstrated unequivocally that there was a demand for a solution like ours. The beta pilot group testing enabled us develop processes that are highly scalable.
Of the 475 members of our beta pilot group, 96% were women earning a monthly income of $100-$200. Results from the beta pilot to date has shown that our members have saved $23K on our platform, 167 of whom have borrowed $12K with zero default rate and all have remained on the platform even those that did not take the loan product.
Success story - Mame Fall Tontine
The Tontine group Mame Fall is made up of 10 members who contribute $100 per month. Before MaTontine they were not able to get loans at reasonable rates. As they couldn’t put up guarantees, they found themselves borrowing at rates of 25%-100%.
With MaTontine they were able to leverage their savings on the platform to get loans at rates of 10%. Most of these women used these loans for commercial activities like buying products for their shops, or goods to sell. Everyone repaid their loan on time!Why Crowdfunding?
We want to be the African version of Kiva, who have proven that crowdfunding can have an immense impact on people’s lives through the provision of small loans to well-organized groups.
The uniqueness and accessibility of Crowdfunding allows us to connect to a diverse range of supporters who believe in our mission to improve the financial outcomes of our members.
What funding will do
The funding sought will lay the groundwork for getting thousands of people who are financially excluded out of poverty, by providing them access to small loans at a reasonable cost.
For our pilots we funded the loans ourselves so we could prove the concept worked. Subsequently, our innovation won us prestigious awards like the Orange Social Venture prize, entry to the Village Capital FinTech 2017 program and the Jamber Tech Program. At the same time, we assembled a range of partners including mobile payment providers, insurance companies, MFIs, Women’s groups etc. The last piece of the puzzle is the funding part.
The funds raised will be used exclusively to provide loans to our members. It would enable us increase the impact we have from 500 to over 2,000 people across Senegal; and importantly encourage other commercial lenders like banks and MFIs to come unto the platform because then we would have proved to them that it is commercially viable for them to lend at much lower rates; further increasing the number of people impacted.
Who will you help?
Our target population are women in both urban and rural areas living on less than $5.00 per day. These women have been typically excluded more than men even though they are known to be financially prudent.
Importantly though, we only want to help people who are prepared to take ownership of their financial outcomes. We encourage them to do so by providing a platform to save and transact in a financially responsible way; and then we reward them by providing them with a range services of ever increasing value, based on their continuing responsible behavior.
