ARYZE had the opportunity to speak with Bernie Akporiaye of fintech startup MaTontine regarding financial inclusion. We discussed the company’s goals, the nature of financial exclusion in Francophone Africa, and what most financial services providers get wrong when trying to break into this market.
Bernie Akporiaye has a bold vision of the future of financial inclusion. Picture this: a Senegalese farmer from a remote village requests a small loan. Through AI technology with a full knowledge of her risk profile, that request is broadcast globally to potential investors offering loans at various interest rates, of which she can choose the most advantageous. Whereas today no one is willing to fund her, in this future, the world will compete to lend this woman money.
This vision guides MaTontine, a fintech founded by Akporiaye and his sister, Dr. Tosan Oruwariye. The company provides financially excluded people in Francophone Africa with access to small loans and basic financial services. Today’s world looks much different from the one Akporiaye envisages for the future: 85% of the 118 million people in French-speaking Africa have no access to formal financial services.
However, 50% of the African population today belongs to an offline ‘tontine’, which is the traditional name for a ROSCA (Rotating Savings and Credit Association). They work like this: a group of people, usually women, each regularly contribute an equal amount of their savings to a pool, and give that sum to one person in the group to use for whatever she needs. For example, each woman in the group could contribute $10 once monthly, with each woman receiving that sum until everyone has gotten the money. Over $3 billion per year is lent in ‘tontines’. Due to their social nature, default rates among these organisations are nearly 0%. However, tontines can only generate very small loans at a slow rate, which is insufficient to truly combat poverty.
MaTontine’s goal is to use this traditional model to provide increased financial services access. The company gives loans to multiple women in the tontine at once. Each woman repays that loan when she receives the funds pooled by her tontine group. In this way, each woman has access to a quicker and larger loan than before. MaTontine have digitized the tontine process and created a credit-scoring system in order to provide further services such as loans and insurance, whilst employing thousands of women as tontine managers. The company aims to integrate financial education into their offerings.
Although traditional banks have largely ignored this market, MaTontine is far from the first company looking to tap into the unbanked African population. MaTontine focuses on Francophone Africa because it is an underserved market; most new fintechs target the English speaking population. Akporiaye believes that those companies which have attempted to reach French-speaking Africans have failed for several reasons – namely, their all-digital approach, mutual mistrust, and the difficulty of reaching that population:
Banks are not structured to be able to serve these people. Everyone [in fintech] is talking about digital financial services as a solution to this problem, but the target group, they need to be able to see you. There is a need for financial inclusion. Even if they have a smartphone, they’re not comfortable using it for financial services if they can’t see you. So, having a presence in the community is important.
MaTontine’s combination of offline social structures with digital tools makes their model unique. So does their use of traditional ROSCAs over Village Savings and Loan Associations, a lending model created by NGOs within the last forty years. The company’s strength is that it doesn’t have to teach their new members anything about that structure; Akporiaye accredits MaTontine’s high adoption and retention rates to this fact. The only deviation from the traditional model is that they require that members use digital money. Since roughly 70% of people in their target population already use tontines, they are able to leverage potential clients by targeting large women’s groups to reach existing tontines. This works because tontines are predominately made up of women, for what Akporiaye calls ‘cultural reasons’:
Cultural in the sense that, way back in the day, tontines were a way for women to safeguard the little finances they had out of the reach of their husbands to be able to look after their families. It was a case of solidarity as well, where women came together to help each other solve their own problems outside of the sometimes traditional constraints of being a woman in male dominated society.
Since MaTontine’s target demographic is women in underdeveloped areas of francophone Africa, literacy rates among its primary users are low. Akporiaye argues that the company was designed around this, so it does not interfere with their operations:
Definitely there was a challenge around low literacy rates, but as a startup, these challenges are barriers to be overcome as opposed to roadblocks. So we basically designed our solution with the understanding that our members are illiterate.
However, teaching a semi-literate population to effectively use technology did pose a key challenge for MaTontine regarding financial inclusion. Further, most of their target demographic still do not have smartphones. To circumvent these issues, they modelled their business around basic feature phones:
We have an app because we’re a fintech company and we wouldn’t be cool if we didn’t have an app, but our members rarely use it. The only thing a member needs to know is “I send my money, and I either receive my winnings or my loan”. To send their money, they use existing mobile money infrastructure. So to send money to us, they go to a guy in an umbrella or kiosk and they say, I’ve got 10 dollars, here is my phone, here is my 10 dollars, here is the code I need to send it to. They give that to the guy at a kiosk, and we’re able to track that money. They only get three types of messages back from us. One is related to basic education and the other two regard their money: when they get a loan, or when they get their winnings, their savings. They might not be literate, but they know what those numbers mean.
Focus on financial inclusion and facilitating financial literacy
Their target group’s semi-literacy also challenges MaTontine’s ability to provide basic financial education, and thus financial inclusion, for their members, a key focus for the company. By later this year, they are hoping to launch an interactive, game-style financial education tool, as it is clear a lack of financial literacy among their members is a problem. Says Akporiaye:
Where literacy is a barrier that we need to overcome is around this concept of financial education. I think if we’re honest with ourselves, some of the challenges that our members have is that they haven’t really understood this concept of their capacity to borrow. If you ask them if they can afford a loan with $5000 they say yes, they don’t do the math of what their capacity to repay is. Everyone is desperate for money, so they’ll just say yes.
Due to their focus on facilitating financial literacy and leveraging existing financial structures, MaTontine is more than just a financial services company looking to break into an underserved market. They are enhancing the wisdom and traditions that already exist, rather than imposing an external idea of what finance should look like. So, where is MaTontine in achieving Akporiaye’s vision and creating financial inclusion? Currently – global pandemics notwithstanding – they are growing through Senegal with plans to enter Cote D’Ivoire next year. Says Akporiaye:
When we think about scaling we say ‘nail it in Senegal, scale it in francophone Africa, and then grow through the west of Africa.’ So that’s what we’re looking at in the next ten years. But right now we’re in 12 regions in Senegal, our goal is to expand throughout Senegal, and then after that go to Cote D’Ivoire next year, and then Mali the year after, then Cameroon, Niger and Burkina Faso.
With high adoption rates, low default rates and a growing global platform, MaTontine seems especially well positioned to meet the financial needs of francophone Africa. By enhancing traditional, offline practices with digital resources, the company is building real tools to help bring Francophone Africa out of poverty. For more profiles of entrepreneurs and startups, please visit ARYZE’s blog. For more information about ARYZE and its plans to combat financial exclusion, please visit our website. You can also listen to co-founder Morten Nielsen talk about financial inclusion in this podcast.