While most African digital lenders depend on the working capital to fuel growth, Moneyfellows discreetly did what few others have: lending billions of Egyptian pounds without almost any debt or exposure to the balance sheet.
Now, after having collected $ 13 million in a C round before the series led by Al Mada Ventures, based in Casablanca and the DPI NCLUDE Fund, the Fintech of Cairo said that it is ready to go from regular growth to regional expansion.
La Ronde, which has also attracted the participation of Africa by Partech and Commerzventures, brings total funding of the company to just over 60 million dollars.
The founder and CEO Ahmed Wadi notes that, unlike fintechs that burn money on the scale, the startup has kept lean operations while digitizing one of the oldest financial systems in the world: the rotation of savings and credit (Rosca).
“We have managed to break this model and reach profitability,” said Wadi. “Doing it while lending billions without counting on the working capital is quite disruptive in itself.”
The Roscas are informal savings groups where a fixed number of participants regularly contribute to a shared pool, which pays to a member per cycle. Common on the emerging markets, they bear different names: Esusu or Ajo in Nigeria, Kameti or Chit Fund in India and Gam’eya in Egypt.
Here’s how it works: let’s say that ten people each contribute $ 1,000 a month. Each month, a person receives $ 10,000. The cycle is repeated until everyone obtains a payment. Although these groups work better in confidence circles, their offline nature limits access and scalability.
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Moneyfellows, launched in 2016, digitizes this model by opening access to a wider pool of users across the country. Thanks to its application, anyone can train or join ROSCA groups or “circles”. Similar models exist worldwide with Oraan from Pakistan and the Beauty of the United Kingdom.
Rather than acting as a lender, Moneyfellows corresponds to savers (generally last) and borrowers (generally first online) using behavioral data, credit scores and income levels.
This approach allows him to extend without lending from his record; The company only approaches when a ROSCA group has an unused slit, according to Wadi.
“If we direct circles of 10 people each and we find only nine members for some, we intervene to finance the missing,” explains Wadi, who tested the Rosca model in Germany and the United Kingdom before launching into Egypt. “Instead of canceling the group, we finance a slit, which activates and monetizes the other nine.”
In a typical loan company, a company must borrow money from banks or other financial institutions to lend it, most of the time incurring costs of interest and risk of default.
However, in the case of MoneyFellows, the risk and financing are divided between its users, keeping the proportion of RCOs niche not filled with 10%. In comparison, buy now, pay later (BNPL) suppliers and digital lenders often have complete exposure to the working capital on their loan books.
“Today, only 7 to 8% of slots in niche in active Roscas force us to intervene with the working capital,” notes Wadi.
Such an exposure can be low in percentage, but as Moneyfellows adapts, it adds. Consequently, the reason why the company, which has lifted this funding as a bridge to a much larger round C planned for next year, is also in advanced discussion with local banks to guarantee the working fund in its attempt to develop its “circles” much more quickly.
Operating profitably and outside the outside of Egypt
Moneyfellows says he has reached profitability in Egypt, placing it among a small group of African Fintech startups operating in black.
Since its launch in 2018, the platform has increased to more than 8.5 million users, compared to 4.5 million at its last important stage. Average payment per user has almost doubled in the past two and a half years, from 23,000 EGP ($ 453) to 45,000 EGP ($ 906), with high adoption among high income segments.
“This model is naturally viral,” said Wadi about the growth of the startup. “If you scan the experience of two members of an offline Rosca, they often bring the other eight with them. This kind of organic growth is difficult to beat. ” Competitive borrowing rates, he adds, have also helped to accelerate adoption.
Earlier this year, Moneyfellows launched a card product that allows users to receive payments, reimburse payments and spend on a merchant network.
The eight -year fintech also plans to introduce investment, payroll, insurance and transfer products, travel that put tons of funds in competition with other Egyptian digital banks such as Lucky, Khazna and Telda.
His next test will be to reproduce his success beyond Egypt, a wadi of ambition was expressed for the first time in 2022. He admits that the expansion took more time than expected because of the complexity of the model, which the company has chosen to refine before becoming regional.
Digiting Roscas is not as simple as the launch of a savings or loan product. According to him, the process consists in building recommendation engines to match users to the right slots, balance thousands of circles in real time and minimize the default and abandonment risks, while maintaining the confidence of users.
“Cracking the Model took more time than we thought,” Wadi noted. “But it was worth the time. Most of the attempts at the digitally Roscas scale, even by the banks and telecommunications operators, failed because they underestimated the complexity of the underlying behavior.”
After almost a decade, refining its model on one of the largest finchins in Africa, associating with more than 350 local and regional entities and facilitating more than $ 50 million in investments, Moneyfellows plans to launch in Morocco by the end of the year, having obtained key partnerships and regulatory approvals.
Morocco offers familiar land: a large non -banished population, a strong informal savings culture (known locally as the Daret) and a friendly environment. Moneyfellows also bet that events such as the FIFA 2030 World Cup will accelerate digital adoption in the country.
The company also plans to other African and South Asian markets with a similar dynamic. However, the seizure of the more diversified markets will test the adaptability of the model in the regions where informal finance is less culturally or formal relevant is more rooted.
“The Rosca (Rotation Savings and Credit Association) are very old financial arrangements, the roots going up hundreds, even thousands of years,” said Omar Laalej, managing director of Al Mada Ventures. “The AMV was impressed by the modernized version of this company that Money Fellows was able to build, which has a positive impact on thousands of families in Egypt.”
