There are 1.7 billion people globally are underbankedMost of which are from emerging markets. For them, it can be difficult to access debt, which is a problem that fintechs try to solve. One way they promote financial inclusion is by underwriting credit through a proprietary algorithm.
Is one such company Fairmoney, Which describes itself as “the mobile banking revolution for emerging markets”. Fairmoney, founded by Lauryn Hanney, Matthew Gendreau And Nicholas Berthjot, Is a licensed online lender that provides instant loans and bill payments to consumers in emerging markets.
Three years after launching Your mobile loan service in Nigeria, company Set up shop in IndiaAsia’s second most populous country in August 2020.
Prior to expanding, FairMoney experienced exponential growth in Nigeria in terms of debt disbursements. LaSt year, It disbursed a total loan volume of $ 93 million, representing a 128% increase in 2019 and a 3,189% growth rate from the first year of operations in 2018. As it stands, the company is forecasting a disbursement volume of $ 140 million by the end. 2021.
“I think we are able to deliver 25-30% more than some of our rivals and I think we are a market leader.” But compared with traditional banks, it was the seventh largest digital financial services provider in that region.
Fairmoney has come a long way since its Nigeria launch in 2017. In its first year of operation, the company had over 100,000 users. Now, it claims to have 1.3 million unique users who have applied for more than 6.5 million loan applications. FairMoney offers loans ranging from (1,500 ($ 3.30) to (500,000 ($ 1,110.00)) with its longest loan facility in 12 months. The annual percentage rate falls from 30% to 260% – high APR, says Hainy, Nigeria This is due to the higher default rates in. That said, FairMoney also claimed the NPL ratio to be less than 10%.
According to the CEO, data-driven insights were behind the option to expand in India. The Indian market is quite similar to Nigeria. In the Asian country, only 36% of adults have access to credit, which does not serve microfinance banks, leaving an untapped market of approximately 141 million people. But unlike Nigeria, India has better unit economics and a more favorable regulatory environment for the lending business.
“If our ambition is to create leading mobile banks for emerging markets, we need to start with very large markets,” Hanney said. “We tested our products in 10 different markets like how is the economics of yield, NPL, risk cost, customer acquisition cost, infrastructure cost and India stands out for us.”
Since its expansion six months ago, FairMoney claims to have processed more than half a million loan applications from over 100,000 unique users. This number is 12–36% for 5,000–6,000 loans per day with APR. Hanley says the company achieved this with zero advertising spend or marketing.
Due to the challenging logistics behind international expansion, it is challenging for African-based startups to expand outside the edges of the continent. Although a rarity, there are few startups to undertake such a task. Last year, the Nigerian fintech Paga with 15 million users and a network of over 24,000 agents acquired the Ethiopian software company Fast track your expansion In Ethiopia and Mexico.
Fairmoney is on a similar path, as well. And with over 100 employees spread across Nigeria, France and Latvia, the company hopes to build an engineering and marketing team in India.
Last month, it hired services Rohan saline To become its Chief Product Officer (CPO) and facilitate expansion. Khara was the former head of product for financial services for the Indonesian super app Gojek and held senior roles at Microsoft, Quikr and Mobikwik. With a wealth of experience creating consumer products in large emerging markets such as India and Indonesia, Haini says – FairMoney is poised for large-scale growth in Nigeria and India.
“We both share the view that financial services need fixing in emerging markets and for us, Rohan Fairmani brings expertise to scale the scale from around one million users to 10 or 20 million users.”
Born in Germany as a Nigerian father and German mother, Hanny began his entrepreneurial journey in 2015 by starting a food distribution company in Sweden. Seven months later, he founded Le-Studio VC, a Paris-based startup studio and a € 15 million fund that he ran as CEO for three years.
“After those three years, I realized that being an investor was not yet for me. I realized that I was too young and I wanted to build something myself,” he said.
Neobanks like Revolut in Britain and N26 in Germany were picking up across Europe. Wanted to make it so for Nigeria due to lack of access to affordable financial services to people during travel.
But despite studying other Nobank models, Hanny and his team could not replicate them in a developing market like Nigeria. Credit by Nigerian banks was still quite low because of the strict methodology employed in loan allocation. Sensing an opportunity, he launched Fairmani as a neckbank, taking advantage of a credit-first model. Like Nubank in Brazil, Fairmani began offering loans to solve the debt problem. But its broader vision is not just a digital bank, but also a commercial bank.
The company is working towards obtaining a microfinance bank license to operate as the former in Nigeria. However, according to the CEO, commercial bank licenses may take five to ten years.
“In the next five to ten years, I think two of the five largest commercial banks in Nigeria will be Nebank. We want FairMoney to be one of them,” he said.
The Lagos and Paris-based company raised $ 11 million Series A in 2019. Between now and the time it would get a commercial bank license, Hanney says the company would have picked up its Series B round for that task by itself.
After India, which emerging market will FairMoney expand to next? The CEO said that there is no one at this time. The company plans to move from a credit-led value proposition to a full-fledged financial services provider, to deepen its vertical and replicate Nigeria’s growth in India.