4.5.6. Collaborate with Local Innovation Centers and Universities to Build Stronger FinTech Infrastructure
With the right enabling environment and ecosystem of market actors, digital finance — or more broadly, “FinTech” — can foster greater efficiency and transparency, resilience, and empowerment across a variety of contexts, whether in agriculture, health, education, energy, or governance. By collaborating with an emphasis on local market actors and systems, further engagement with the private sector can foster the growth of vibrant ecosystems for digital finance and financial inclusion — and ultimately, inclusive digital economies that create opportunities for all (Source: FinTech Partnerships Playbook).
- Access to reliable credit information on borrowers
- Burden of banking/finance regulations and supervision
MUST HAVE’S, CRITICAL POINTS, OR QUESTIONS TO CONSIDER
In many African countries outside of South Africa, rural households rely on kerosene for lighting. Solar systems are available which provide cheaper and cleaner power. But without the ability to purchase these systems over time, few households can muster the capital to purchase these systems up-front.
M-KOPA sells solar products to low-income households on a pay-per-use instalment plan. M-KOPA’s proprietary platform, which requires no installation, combines GSM technology with a solar power kit to allow instalment and “pay-as-you-use” financing. The latest product design, the M-KOPA III, has an 8-watt solar panel, a battery, two LED lights with switches, a torch, a USB phone charger and a portable, solar-powered radio. Customers acquire solar systems for a small deposit (about US$35) and then purchase daily usage “credits” for US$0.45, or less than the price of traditional kerosene lighting. After one year of payments, customers own their solar systems outright and they can use the system for free or upgrade to more power. M-KOPA distributes its product through a network of 1,500 direct sales agents, supported by 85 customer service centers. Repayment rates are 95 percent, and a study in 2014 revealed that 97 percent of households using M-KOPA’s solar system reported that they were saving money compared to the previous use of kerosene.
In 2014, Commercial Bank of Africa fronted a US$10 million commercial-grade syndicated debt facility as part of a US$20 million funding round. This investment marked the first time that a commercial loan was secured through mobile money provider M-PESA receivables and unique in that the loan book consisted of low-income borrowers, many without bank accounts. Lenders included the Bill and Melinda Gates Foundation, LGT Venture Philanthropy, Imprint Capital and the Netri Foundation. The funding was part of an expansion to reach one million homes by 2018.To date, M-KOPA has raised ~USD $45 million in total equity funding and debt financing.