Money Fellows, a fintech startup in Egypt digitising money circles, secures 31 million in funding

The Egyptian financial technology company Money Fellows has announced the first closing of its Series B funding round, totaling 31 million. Three firms, CommerzVentures, Middle East Venture Partners (MEVP), and Arzan Venture Capital, led the investment, which the business plans to add to in the coming months.

Partech, Sawari Ventures, Invenfin, National Investment Company (NIC), 4DX Ventures, and P1Ventures are just some of the other investors that have taken part. Since its beginning, Money Fellows has amassed 37 million in financing.

The primary idea behind Money Fellows is to modernise the concept of “money circles,” also known as “ROSCAs,” in which a group of individuals agree to pool their resources and save and borrow from one another over a certain time period.

Known as Esusu or ajo in Nigeria, Kameti or chit fund in India, and Gameya in Egypt, ROSCAs represent what Money Fellows CEO Ahmed Wadi estimates to be a 700 billion potential worldwide. But Wadi didn’t try out Money Fellows in any of those nations; he did it in Germany, where he was living at the time. Without a credit history, Wadi had a hard time gaining access to financial institutions in that region. He reasoned that if he could only bring the gameya system to Europe, he could provide guys like himself another way to get their hands on money. Adoption was not a big deal in any of these places, and it wouldn’t be when he moved on to the United Kingdom.

Wadi said that since “Germany didn’t have this culture,” he ultimately decided to settle in the United Kingdom, which is home to large Asian, African, and Arab populations. However, we learned that the improved financial system meant that individuals didn’t need it.

Wadi, being Egyptian, decided to give his home country’s functional ROSCA system a shot for the third time in 2017. A year later, he debuted the website.

This is how ROSCAs function. Suppose a group of ten persons agree to pool their resources and pay 100 each for a period of ten months. Every month, one person in the group is paid 10,000, and that person’s turn comes around again and again until everyone has been paid. This method is safest when used inside a small, trusted group such as a family or close group of friends. As a result, participants in offline ROSCAs may have a hard time gaining access to further funding. Money Fellows, on the other hand, provides Egyptians with access to a larger pool of individuals who have all through a credit evaluation procedure and are available to build and join ROSCA groups using its app. Oraan, a Pakistani fintech company, and StepLadder, located in the United Kingdom, are two examples of similar international competitors.

Based on where they are in the ROSCA cycle and when they get a reward, Money Fellows defines its customers as either borrowers, savers, or planners. Consumers that reserve early slots pay a one-time service cost of around 6%; this proportion drops as the cycle progresses, and towards the conclusion, users get incentive interest.

Borrowers will be able to locate openings on our site. Everyone is trying to save costs these days. Slot 1 customers are considered pure borrowers and are subject to an additional cost. To encourage people to choose slot number two, we provide a discount. We provide one of the most lucrative saving incentives in the nation, and it drops the closer you go to the conclusion of that ROSCA.

Defaults are a part of doing business for any fintech company that offers loans of any kind. It’s not like Money Fellows thinks otherwise. With this in mind, it was purposefully built with provisions and reserve requirements to guarantee payment to clients even if certain market players fall short of their goals. The CEO claims that reserves are put aside for each new ROSCA that is introduced, and that defaults on these funds are covered in accordance with a provisioning plan.

“The good thing with ROSCAs versus consumer finance is that not everyone has equal credit exposure. So if your slot number five, for instance, when you get 10,000, you only need to repay 5000 because you historically paid 500 in the past five months,” he said. “That’s why we’re more conservative. We don’t limit people to only amounts. We also restrict them to specific slots because we know which slots carry more or less risk. That’s another beauty and how we control defaults using Rosco as the financial Engine versus the typical consumer and microfinance model.”

The financial technology company also has a business-to-business (B2B) component, through which it sells the wares of a number of Egyptian retailers through its app, at a discount to its users. The fintech makes money via fees and commissions on these products through its ROSCAs. The fintech company, which has been around for four years, has big aspirations to capitalise on interchange fees by providing a wider range of financial services, such as purchase now, pay later, pension, and cards.

Over 4.5 million people have signed up for Money Fellows, yet just 7% actually utilise the service on a regular basis. At around 1,100 USD per user, the typical payment ticket is worth about 23,000 EGPU. The startup boasts an 8x increase year-over-year and calls itself “one of the top financial applications among Egyptians.”

As Wadi said, Money Fellows will use the funds to accelerate development by extending its array of services and increasing its product offerings throughout the B2C & B2B sectors and geographically across Africa and Asia. The truth is, no one has successfully used this paradigm on a worldwide scale yet. To guarantee ROSCAs were completed in their entirety while enrolling the appropriate mix of borrowers, savers, and planners, the CEO said that significant effort and resources were required to build the company’s product and technology. “This was our primary emphasis over the previous few years, and now it’s time to expand. As such, a significant portion of what we’re raising is to aggressively develop or scale a lot quicker than what we have done, and then maybe attempt to reproduce this in other regions.”

CommerzVentures venture partner Hangwi Muambadzi commented on the investment, saying, “Rotating Savings and Credit Associations have been firmly established in developing economies around the globe for millennia.” “It is fantastic to see this new digital ROSCA-driven model [Money Fellows] emerge from Africa, producing a trusted model of providing financial solutions and establishing a new norm for using locally adapted solutions to address globally relevant challenges.