"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.

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

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!"