London — The mobile phone financial ecosystem is steadily growing in depth and one of the more successful areas is small-scale loans. Russell Southwood spoke to Bezo Money CEO Mubarak Sumalia about how it is addressing the market in Ghana.
Bezo Money CEO Mubarak Sumalia had no difficulty understanding what his potential customers needed and why: "I grew up in a slum in Accra and I understand why people have stayed at the same level economically and I think there's something very wrong with this."
In order to make an entry into the annual MEST programme entry competition he went to see his Mother to understand more about the credit clubs that come under the generic name of Susu collectors: "I was intrigued by the model. It was how she paid for my school fees. I wondered: why are the banks not doing this? It was a way for people to bank themselves. I thought it needs tech to be able to do this well."
The Susu collector is a financial intermediary who, for a small fee, provides an informal means for people to save and access their money. In this way, they can run credit unions where the members can have access to larger credit sums to pay for bigger payments they have to make. These collectors exist because the banks do not have financial products targeted at poorer citizens and there is a low level of financial literacy in the informal sector.
But what seemed like an obvious opening for a fintech start-up was not as it seemed: "They didn't want to use our tech because they were already happy with what they were doing. From this we began to understand that we needed to build based on need." On this basis, they began to focus on the key problem. They wanted to be able to access credit and to have a credit history: "Nobody knew their credit track record and they wanted to be able to have show that they had a track record."
"MEST gave us US$100,000 to figure it out but we got hit by the arrival of Covid. We did a crowdfunding campaign to support these women. We also went to Lagos and it is really big there. The idea was to build a digital bank for the informal sector. We raised US$200,000 and idea was to go wide."
Like all the best laid plans, it didn't work out as first conceived. In order to reach people in the informal sector, the service was initially offered using USSD that would work on basic phones. It developed a partnership with Vodafone Ghana to offer a personal savings platform for the unbanked. Thus far it has on-boarded 100,000 customers and is waiting to increase its capacity before taking on more business next year. It crashed when 200,000 tried to join. Currently is doing approximately US$80,000 a month in financial transactions.
Once it started raising its profile in the market, it found lots of young people were reaching out to them saying, why isn't there an app? Bezo Money started by saying that the service was designed for their parents but in the end responded to this demand: "We built a web app that could connect our service to mobile money wallets."
It addresses these two markets differently. The older, less financially and technologically literate are interested in being able to get credit based on their savings history. They are targeted using USSD on basic phones and Bezo Money has partnered with community leaders to explain things. Service to them is much more focused on sales agents on the ground and face-to-face offline service.
Occasionally Susu collectors run off with all the money and credibility is important. For the younger users, it's much simpler: "They just get it." The split between older and younger users is approximately 70%/30% in favour of the latter.
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Current services include: Cash in/cash out, PCP transfers, savings and loans. It has started addressing issues like renting. Some landlords demand 24 months ret in advance. Bezo Money makes the advance and the customer pays them monthly. Likewise they can make credit advances for appliance purchases like TVs or fridges. Bezo Money invests the money it takes in bonds and Treasury bills. In time, it wants to be able to offer insurance.
So has it realised its ambition of being a digital bank?:"We don't call ourselves one. We have acquired a TFO microfinance licence and we have upgraded to Tier 2 to be able to do more. Between Vodafone and MTN there are 150,000 mobile money agents and over time we want to become a branchless bank for places like villages." This is a 3-5 year ambition and it wants to scale to Francophone African countries: "Anglophone countries are saturated with Nigerian companies offering these services."
