M-KOPA on the PAYG Asset Funding Model

ByRichard C. Sloan

Nov 24, 2021

It might be hard to imagine living on less than $ 6 a day, but that is the reality of 85% of the population in Saharan Africa.

In addition to the economic hardship this creates, people in this category are extremely underserved by financial services, as their low income and lack of credit history often prevent them from accessing credit cards or a service like buy now, pay later (BNPL) common in more mature credit markets.

This means that making full upfront payments for everyday essentials is often a challenge, an issue that M-KOPA has been trying to address with its pay-as-you-go business model since launching in 2011, by funding life-enhancing products such as smartphones, solar lighting, energy-efficient televisions and refrigerators as well as digital financial services through its funding platform.

“People can’t necessarily save for a big lump sum, but what they can do is pay for something every day over time and have access to this service. [or product] at the same time, ”M-KOPA Commercial Director Mayur Patel told PYMNTS in an interview.

In 2019, the company launched smartphone financing and has sold more than 750,000 Nokia and Samsung smartphones to date through partnerships with Nokia and Samsung, enabling customers in Kenya, Uganda and Nigeria to spread their payments over daily or weekly installments after making a down payment.

But despite the model’s success, these are often small amounts, with people making daily payments as low as 30 cents. Patel said what makes the economy work for M-KOPA is the fact that it is a “big game”.

In its first nine years, the company served 1 million customers through solar, refrigeration and electronics products, but it took less than two years to serve the next million, an acceleration caused by rapid adoption. smartphones in the region and the huge opportunity it presented for the financing of the company’s smart devices.

According to Patel, one of the challenges the company has faced in replicating the business model in other markets has been the uneven adoption of digital payments across the continent, which is mainly concentrated in East Africa where Mr. -Pesa dominates.

But that is starting to change, with the growing adoption of mobile money in West Africa and countries like Ghana, which has the region’s fastest growing mobile money market.

More inclusive than the BNPL model

Traditionally, most BNPL companies run credit profiles on customers to determine if they are eligible for a loan. But M-KOPA is “very inclusive,” Patel said, and instead of intense credit checks that would disqualify most of their customers who don’t have bank accounts or guarantors, valid ID and a small deposit is sufficient to access its service.

What also makes the company different is that it strives to help customers so that no one is “stuck with an obligation to us that they cannot afford,” Patel said.

Customers who sign up for an uncovered product can return it within the first 30 days for a full refund of their deposit “for any reason,” he said. “Maybe the smartphone is not what you wanted, it does not meet your needs, or maybe you have run into financial difficulties.”

Even beyond the 30 days, customers can get a 50% refund of their down payment within the first 90 days, and in a crisis or emergency where there is no safety net, a customer can always return the product provided it is in working order and in exchange, see their outstanding debt canceled.

“This makes this model fundamentally different from a lot of other FinTech companies that try to fund customers only in cash,” Patel noted, adding that “it has no value. [to us] to have someone with an asset they can’t afford.

The model seems to be working. To date, the company has provided more than $ 500 million in financing that has provided more than one million customers with access to its products and services.

Beyond asset financing

In 2019, M-KOPA and InsurTech Turaco partnered to provide a bundled insurance product to M-KOPA customers and direct sales representatives who can access overnight cash back in the event of an unforeseen hospital stay, with a payment made to the next of kin in the unfortunate that the insured dies.

Since launch, more than 25,000 Kenyan consumers have been insured, access to insurance made possible through the accumulation of credit history customers can create through repaying their assets with M-KOPA.

Patel said the goal now is to expand the offer from hospital bills to cover funeral and burial costs, from Kenya to other countries.

“We took the time to set up a highly reproducible business model [and] there is nothing unique that makes it just an opportunity in East Africa, ”he said.

The opportunity to scale could be “tens of millions” in the future, he added.

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