10X Focus: MoneyFellows — FinTech startup digitising a traditional practice
What's known as chit in India, is known as cundinas in Mexico, hui in China, tanomosiko in Japan, and Gam'eya in Egypt and wider Middle East. They are all similar forms of lending circles practiced before banks and lending institutions became commonplace.
This unique lending model has a rich cultural connotation since a time when most dealings were based on trust rather than legally approved paper. Even today, these circles are practiced in every corner of the world — especially those where adoption of services from financial institutions remain low, like Egypt.
This phenomenon is also called the Rotating Savings and Credit Association (ROSCA), which is where a small group of people contribute an amount to a larger pot each month and take turns to receive the full amount every month.
However, while this practise is common in Egypt, it isn't regulated by the government, making it a risky investment for lenders as the world becomes smaller and people can move away easily after taking the money.
To bring back trust and efficiency to this age-old lending system, MoneyFellows, a FinTech startup based in Cairo, Egypt, has taken this concept online. Thereby instilling trust and accountability, making lending safer and more efficient.
Moreover, by taking the process online, MoneyFellows has turned the biggest threat to trust — movability of people — into a strength; as through the digital platform they are easily able to scale their services.
Founded in late 2016 by Adham Badr, Ahmed Wadi, MoneyFellows recently told Menabytes that they have raised more than $1 million in their bridge round. The investment was raised from 500 Startups and Dubai Angel Investors, who were also the lead investors in MoneyFellows' $600 million seed round raised in 2018. Their Pre-Series A was also joined by other individual investors and Beirut-based Phoenician Fund.
“Our business model is currently comprised of collecting service fees from our users depending on their payout position in the money circle – starting with 5% fees for users with early payouts at the beginning of the circle, incrementally decreasing to zero fees for users paid out at the end of the circle. With millions of dollars moving through our accounts MoneyFellows are able to earn a percentage of float interest on our money in circulation. We are also planning to introduce several new options to generate revenue, including allowing our users to utilise MoneyFellows for bill payments, as well as using MoneyFellows in a variety of merchant locations,”Ahmed Wadi, founder of MoneyFellows, explained to Menabytes
Some of the platform's features include salary automated deductions, fixed payout dates as well as smart scoring system. As revealed to VentureBurn, the startup plans to introduce new e-wallets as well as "direct debit facilitated by the startup’s banking partners" with the recently raised capital.
The FinTech startup has partnered with multiple financial institutions to facilitate this vision, including Fawry that recently went public.
With over 65,000 active monthly users out of 250,000 registered users on the platform, MoneyFellows is seeing a 60% month-on-month growth rate. MoneyFellows senior business strategist Mohamed Effat also told VentureBurn that “We have generated hundreds of thousands of dollars in revenue thus far, with over $5-million circulating through MoneyFellows."
Till date, MoneyFellows has raised $1.6 million including the latest bridge round. It is now planning to close their Series A round by the end of this year, looking to raise $3 million — almost double of what they have raised so far. The funds will be used to spread awareness of their brand to grow its user base and strengthen its presence in the region.