Where can small African businesses turn when they need working capital loans, but they have no security and limited banking history because most customers pay with cash? The answer is to apply for a loan using a mobile phone app and then to receive and return the funds by mobile money, according to Mina Shahid, CEO of Numida, a Ugandan fintech business. Per an interview given to PYMNTS:
…Shahid said that customers repay via mobile money. This is also the disbursement method used for 99% of borrowers, with bank transfers reserved for the highest value loans above $2000.
The company manages its credit risk by limiting the amounts lent to new customers and steadily building up its knowledge of customers over an extended period. Numida seeks to establish a long history of accumulated data about the reliability of their customers.
[Examining the] growing wealth of repayment data from the large volume of relatively small-value loans processed over the years has enabled the company to develop “a significant set of fraud flags that are automatically triggered in the loan application flow and [can then] pull disbursements prior to a subsequent loan based on the app usage behavior,” Shahid explained.
Numidia must be doing something right because their app has been downloaded over 100,000 times from the Google Play store. It has an average rating of 4.4 stars out of 5, as derived from over 2,000 reviews.
Mobile money is accelerating economic growth by creating new ways to sustain entrepreneurs in countries like Uganda. Enabling new financial services will entail risk, but telcos enjoy two kinds of return when they back the roll-out of mobile money. Over time, mobile money services provide a financial home for an increasingly varied range of businesses. Accelerating economic growth also benefits telcos in the long run because of the correlation between the wealth of the nation and the consumption of communication services.
