Money Fellows, An Egyptian Fintech Startup, Receives $31 Million In The First Close Of Its Series B Round

Money Fellows, an Egyptian fintech has secured $31 million in what the startup called the first close of its Series B investment. The round was led by CommerzVentures, Middle East Venture Partners (MEVP), and Arzan Venture Capital. It also received participation from investors like Partech, Sawari Ventures, Invenfin, National Investment Company (NIC), 4DX Ventures, and P1Ventures. Following the round, Money Fellows has raised $37 million in total funding since it was launched. The Series B round is expected to go up in the coming months.

Money Fellows operations are built around the digitalization of money circles, commonly known as the Rotating Savings and Credit Association (ROSCAs).  This is a system where a group of people agrees to contribute money for a specific time, allowing them to save and borrow together. 

According to Money Fellows’ CEO Ahmed Wadi, ROSCAs are a $700 billion opportunity on a global scale and are popular in more than 90 emerging and developing markets. They are known by different names, Esusu or Ajo in Nigeria, Kameti or chit fund in India, and Gameya in Egypt, etc. The CEO first tested Money Fellows in Germany, where he lived at the time. He found access to financial services difficult because of his lack of credit history. He eventually thought about replicating the ROSCA system in the European country, this way he could provide funding for people like him. Sadly, adoption wasn’t significant in Germany and the UK, the second place he tested the product. “Germany didn’t have this culture and at some point, it felt like it made sense to go to the U.K. where they have Asians, Africans, and Arab communities that traditionally use this model. But we found out people didn’t need it because they had an advanced financial system,” he said.

Egypt, on the other hand, had a functioning ROSCA system and was the CEO’s home country and his third try. He launched Money Fellows a year later. 

Unlike the traditional ROSCA system which is mostly done by family and friends, Money Fellows has a larger pool of participants, but each has to undergo a credit assessment process before they can become a part of the platform. 

Users are classified as borrowers, savers, or planners depending on where they operate in the ROSCA cycle and when they receive their payout. Money Fellows charges a one-time fee of about 6 percent to users who choose its early spots. The percentage decreases down the line, with incentivized interest paid to users at the bottom of the line. “People looking to borrow can find slots on our platform. People are looking to save too. So if you are a slot number one, you’re a pure borrower, so we charge a fee. If you’re a slot number two, we charge you slightly less. It decreases the more you’re willing to wait until the end of that ROSCA, where we incentivize the users with one of the most attractive saving incentives in the country.”

Money Fellows has a system that caters to factors such as defaults, ensuring that payouts are completed.  Its CEO said that reserves are set aside for every new ROSCA; this covers defaults from those funds. “The good thing with ROSCAs versus consumer finance is that not everyone has equal credit exposure. So if your slot number five, for instance, when you get $10,000, you only need to repay $5000 because you historically paid $500 in the past five months. That’s why we’re more conservative. We don’t limit people to only amounts. We also restrict them to specific slots because we know which slots carry more or less risk. That’s another beauty and how we control defaults using Rosco as the financial Engine versus the typical consumer and microfinance model,” the CEO said. 

Money Fellows also has a B2B play where it partners with various merchants in Egypt to sell their products within the app so its customers can get discounts. A commission is generated by Money Fellows from markup on these products in addition to charging fees in its ROSCAs. The startup has plans to offer more financial services such as buy now pay later, pensions, and cards; a strategy to generate income from interchange fees.

The fintech currently has more than 4.5 million people registered on its platform. Only 7 percent of them, however, are monthly active users. The average payout ticket per user is around 23,000 EGPU ($1,100). The company, which regards itself as “one of the favorite financial apps for Egyptians,” claims to have experienced an 8x year-over-year growth.

The CEO added that the startup plans to increase growth by diversifying its portfolio of services and widening its product offering across the B2C and B2B segments. It also wants to expand to Africa and Asia. 

“To be honest, this model has yet to be cracked globally. It took so much time to develop our product and technology to ensure ROSCAs were fully completed while onboarding the right mix of borrowers, savers, and planners. This was our key focus over the past couple of years, so now it’s the time to grow, and so a big chunk of what we’re raising is to aggressively grow or scale a lot faster than what we have done and then hopefully try to replicate this in other markets,” the CEO said.

“Rotating Savings and Credit Associations have been deeply embedded in emerging markets across the world for centuries. It is brilliant to see this new digital ROSCA-driven model [Money Fellows] emerge from Africa, creating a trusted model of delivering financial solutions and setting a new standard on using localized solutions to solve for global opportunities,” Hangwi Muambadzi, a venture partner at CommerzVentures said while speaking on the investment.