This Singaporean Fintech Startup Introduced Mobile-based Microlending to Mongolia Access to capital is difficult in emerging markets, especially for people without a long financial history, says AND Global co-founder

In Mongolia, where the average monthly income is $400, getting credit and small bank loans is difficult. So the citizens turn to friends or family members for financial help.

Anar Chinbaatar and his friends Boldbaatar Ochirsuren and Bayarsaikhan Volodya got so tired of friends asking to borrow money, that they established AND Global in 2015 to provide non-collateralized instant consumer, micro and micro business. "The endless queues and paperwork requirements of traditional banks are time consuming, and people often are forced to risk their valuables as collateral for pawnshops or other non-traditional lenders. The lending industry in Mongolia is fractured," says Chinbaatar, the chief executive officer of the Singapore-registered fintech startup.

AND Global started off in microlending in Mongolia. It raised $1 million in seed funding in April 2016, and later received $4 million with a $30.8 million valuation from influential backers in Mongolia and Japan including former Japanese parliament member Takami Yuichi, investor Satoshi Matsumoto and his wife Yasuyo Matsumoto.

"We've developed a suite of digital financial solutions from micro-lending all the way to p2p money transfers for the people in emerging countries," says Chinbaatar, who, along with his co-founders, has now expanded to other countries in Asia. At present, the company has 220,000 registered users and 63,000 active borrowers. The company has seen 45 per cent month-on-month growth rate for new customers, and the app has a 4.6 star rating in the Google Play Store.

In an interview, we asked Chinbaatar about his business model, work strategy and future plans. Edited excerpts:

What's the idea behind AND Global?

The idea arose from the concept of having a better form of lending since informal lending is common in emerging markets like Mongolia. This is because access to capital is very difficult in emerging markets, particularly for people without a long financial history. Most people have the "willingness and ability" to pay back what they borrow. So the only challenge is to assess potential customers using non-traditional methods and provide them with tailored financial products that fit their needs and ability to repay.

Why AND Global?

"AND" means best friend in Mongolian. We treat our customers like our "best friends". The way we do this is to use the latest AI technology, combined with non-conventional data, to help identify how much our customers can afford to borrow.

How does LendMN work?

LendMN is the Mongolian consumer face of AND Global. Customers download the LendMNapp, fill in the application, and get approved for a specific credit amount. We use machine learning to offer collateral-free loans to individuals and micro businesses: this technology allows us to issue personal loans in less than 5 minutes. It's a convenient, speedy and collateral-free service, all carried out through a mobile app. None of these features are offered by traditional finance companies in Mongolia.

How does AND address the issue of loan sharks?

Loans sharks take advantage of people's desperate situation by taking valuables as collateral, and charging weekly interest rates up to 10 per cent. The approach doesn't help people in the long run, but instead, they end up losing their collateralized valuables because they cannot repay the loan on time.

We not only charge lower fees for loans, but we don't take valuables as collateral. Additionally, we are more focused on educating people about financial discipline by providing them a smaller loan that can be repaid without a heavy financial burden, and gradually increasing to the level where the customer is able to repay. Once they have the basics, they become eligible for larger and more official financial services provided by traditional institutions like banks. In July and August, we issued a total of US$9.5 million in loans, and have a repayment rate of 98.5 per cent.

How much money did you initially invest in the venture?

The first $1 million took six months to raise. There aren't any VCs in Mongolia. There's no startup ecosystem: people don't know about startups. So we started at the bottom, showing people a one-pager about our "crazy idea": lending money with no collateral. People really thought we were crazy. All of the angel investors were actually traditional investors. We had to explain why there wouldn't be personal responsibility for bankruptcy. But it goes beyond that. It's an opportunity to create a Mongolian brand from our Singapore international headquarters. An opportunity for the new generation. Different investors respond to different pitches.

After meeting almost 100 investors, we were finally successful in raising $1 million from three angel investors: Oyungerel Janchiv and Idermaa Garavsuren from Mongolia, and Japanese investor Takami Yuichi.

What is your interest rate?

We offer tailored loan products with variable rates for each individual. This varies somewhere between 3-6 per cent a month of the total loan, including all transfer and processing fees. Customers can decrease their fee and increase the loan amount by demonstrating reliable, on-time repayment behaviour.

Did you face any backlash for financial institutions?

Initially, all banks and traditional institutions did see us as a threat, which is natural. Being the first non-bank financial institution was a big challenge for us in Mongolia. They thought it was phishing or hacking or money laundering.

To overcome such challenges, we took LendM public on the Mongolian stock exchange in March, raising $2.1 million. The initial stock price was 25 Mongolian Tugrik. However, in less than four months, it's reached 69 Mongolian Tugrik and the market capitalization of the local company is valued at $20 million. The whole purpose was not only to raise money, but also to get social license and to prove the valuation of our business model. Imagine that we have such valuation in our first pilot small market, what the valuation would be after we entered 100 times bigger market in South-East Asia. That is the opportunity we tell our partners and investors to realize.

Future plans for AND Global?

We are replicating our lending solutions across new geographies in Southeast Asia, especially in markets like the Philippines and Myanmar. Once we have the proper licensing, we'll be in a good position to go into production in these markets. We have official teams and offices in Singapore, the Philippines and Myanmar to help expedite the expansion process.

We are also trying a new franchising model: we are building our fintech platform on a cloud system to make it available for every country in the world to use. It will be available as a free software trial, and we'll provide complete support to those who become paying customers.

Vertically, we are introducing newer financial services beyond microlending. With our existing app, customers will now be able to pay their bills, send money to their friends, and make payments using QR technologies.