Get All Access for $5/mo

"We Got Funded!" Egypt-Based Money Fellows Raises US$31 Million In Series B Funding Round To Foster Greater Financial Inclusion In The Country By digitizing the concept of money circles, the startup aims to create opportunities within a largely untapped space in the fintech sector.

By Aalia Mehreen Ahmed Edited by Aby Thomas

Opinions expressed by Entrepreneur contributors are their own.

You're reading Entrepreneur Middle East, an international franchise of Entrepreneur Media.

Money Fellows
Ahmed Wadi, Founder and CEO, Money Fellows

Cairo-headquartered fintech platform Money Fellows has raised US$31 million in a Series B funding round led by venture capital (VC) firms, Germany-based CommerzVentures, UAE-based Middle East Venture Partners, and Kuwait-based Arzan Venture Capital. The round also saw the participation of South Africa-based VC firm Invenfin, Kuwait-based private equity company National Investment Company, as well some of Money Fellows' existing investors including USA-based VC firms Partech and P1Ventures, and Egypt-based VC companies Sawari Ventures and 4DX.

Launched in 2016, Money Fellows is a mobile-based platform that digitizes rotating savings and credit associations (ROSCAs)- a financial solution based on a money pool concept wherein each subscriber pays a monthly amount, and the total funds rotate through members at regular intervals. Each month, one of the subscribers gets to borrow the entire amount, and will eventually have to repay it in full to ensure the next member can withdraw their funds.

Also known as money circles, ROSCA is a financial tool, widely referred to as "gameya" in the Middle East, that has long been available across Egypt's societies in its offline, traditional form. What Money Fellows thus aims to do is create a digital evolution within this largely untapped space. "We've changed the app's experience and user journey to make it more of an intention-based join process," explains Ahmed Wadi, founder and CEO of Money Fellows. "Users who want to borrow, save, or plan can simply join the platform, choose a goal based on their intentions, and we will take them through a standalone experience tailored to their needs. We are able to link them in a ROSCA with other users with different intentions in the backend."

With each money circle's value ranging between $206.2 (or EGP5,000) and $4,118.6 (or EGP100,000), any given subscriber has the option to join more than one money circle at the same time. The first step in the process involves the payment of monthly installments that start at value as low as $20.6 (or EGP500) and can go up to $825.3 (or EGP20,000). Users can then choose any one of three durations: five, seven, or 10 months.

"Each ROSCA is made up of several slots or months, and the fee begins at 11% for the first slot in the longest duration of ROSCA and gradually decreases as the user selects later slots," Wadi says. "Slots at the tail end of each ROSCA have a negative fee, which is considered a saving incentive for late saving slots. Money Fellows also uses a credit scoring model to assess users and determine their ability to join in order to ensure no circle user will be defaulting. Our innovative concept of digitizing ROSCAs thus makes it easier, safer, and more organized for end users, easing the financial planning process."

Source: Money Fellows

Related: Teach Them Young: KFI Global Founder Marilyn Pinto Is On A Mission To Teach Financial Literacy To The Next Generation

Now, although a 2022 report by the Central Bank of Egypt shows that financial inclusion in Egypt has increased by 115% over the past six years, access to banking solutions is still not a viable or affordable option for many segments in Egypt. As such, Wadi believes his startup offers a feasible alternative to ensure financial inclusivity for the masses. "A lot of the unbanked population resort to alternative solutions such as offline ROSCAs," he says. "So offering them a better, more efficient, safe and convenient way of a solution that they're used to seeing and can relate to, will thus allow us to attract and acquire them with ease. ROSCAs are also way more transparent than other alternatives- people know where the money is going, where it's coming from, and the pricing on each and every slot is very clear. There are no hidden fees, and ROSCAs are also known to be Shari'ah compliant which also helps in some cases."

However, it wasn't all smooth sailing for the Money Fellows team from the start. Introducing a digitized version of what was already seen as an alternative financial vehicle, came with its own set of unique challenges. "Before we had enough market recognition for our brand and customer trust, it was challenging to attract certain types of customers to the platform- this was especially true of savers," Wadi reveals. "This required a lot of work on our part, but we concentrated on providing a top-notch user experience to not only win over users but also encourage them to refer their friends and family. There is no doubt that nothing beats word of mouth when it comes to establishing customer credibility."

The Money Fellows team. Source: Money Fellows

Having overcome such obstacles, Money Fellows now has a model that Wadi believes can emulate what contemporary fintech solutions offer. "We've had experiences that almost mirror what BNPL would do using ROSCAs," he says. "For example, if a user wants immediate cash out to buy a laptop, we'd add that user to a ROSCA in the backend, link them to a merchant who sells that laptop, settle with the merchant, and the user gets the laptop and pays us back on a monthly basis. The advantages of doing it through a ROSCA are that it is more culturally, socially, and most importantly, financially affordable because there is no cost of capital. ROSCAs are self funded, which is why we can offer the best borrowing rates and saving incentives in the market today due to the unique ROSCA economics."

Now, with the fresh infusion of capital, Wadi is looking to take his startup to the next level of growth. "Our plans are to focus on customer growth and scale across Egypt, as well as to expand our product offerings," he says. "We are also seriously considering and exploring country expansion. Moving into 2023, one of the primary goals is to break even or get very close to it. We intend to achieve this not only through growth, but also by optimizing customer acquisition cost, increasing retention rates and user stickiness, and introducing new products that we can cross and upsell to our customers, thereby adding new revenue streams."

So, what is Wadi's advice for budding entrepreneurs who are still struggling to raise capital during the ongoing funding winter? "Focus on unit economics and the path to profitability; don't grow too slow or too fast until the product and its pricing are validated, and operations have been automated to a certain extent; and maintain company culture," he says. "These are all to focus on for long-term success instead of short-term quick wins that can sometimes backfire!"

Related: "We Got Funded!" Cairo-Headquartered FlapKap Raises US$3.6 Million In A Seed Round To Realize Its Mission Of Empowering Underfunded SMBs In The MEA Region
Aalia Mehreen Ahmed

Features Editor, Entrepreneur Middle East

Aalia Mehreen Ahmed is the Features Editor at Entrepreneur Middle East.

She is an MBA (Finance) graduate with past experience in the corporate sector, and was also co-founder of CyberSWIFTT- an anti-cyberbullying campaign that ran from 2017-2018 as part of the e7: Daughters of the Emirates program.

Ahmed is particularly keen on writing stories involving people-centric leadership, female-owned startups, and entrepreneurs who've beaten significant odds to realize their goals.

Thought Leaders

10 TV Shows Every Entrepreneur Should Watch on Netflix

Have some free time on your hands? Get into one of these series.

Culture

I've Grown a High-Performing Team in Just 2 Years — Here's are 5 Growth Strategies I Learned

A team's strength lies in its people's individual skills and how they synergistically come together.

Starting a Business

I Left the Corporate World to Start a Chicken Coop Business — Here Are 3 Valuable Lessons I Learned Along the Way

Board meetings were traded for barnyards as a thriving new venture hatched.

Franchise

The 10 Hottest Trends in Franchising

If you're looking to buy a franchise, start with this list. We break down 10 of the industry's hottest trends, and more than 400 brands to choose from.

Business News

He Changed His Lottery Strategy After Taking Advice From His Father. Then He Won $7 Million.

The anonymous 38-year-old man broke the record for the most money won in the Michigan online lottery.

Business News

Wells Fargo Reportedly Fired More Than a Dozen Employees for Faking Keyboard Activity

The bank told Bloomberg that it "does not tolerate unethical behavior."