In my travels on the internet, I came across a Nigerian startup called BFree that recently closed a US$1.7 million Series A round. It’s a credit management fintech that deals in ethical debt collection and it kind of took me aback because of my Zimbabwean sensibilities when it comes to borrowing. Debt, or chikwereti in the local lingo, is one of those things that draw shame and anxiety because it’s a necessary evil but the avenues to get it are not always the best.
What I mean by this is lines of credit are not readily available to the ordinary Zimbabwean, save for the civil servants who have some access to it through the government acting as a guarantor of sorts. Banks like BancABC and FBC for example have loan facilities available for civil servants and there are even companies that offer credit for gadgets and devices.
This, of course, isn’t to say that everyone else is left out. You can buy certain goods on layby at stores across Zimbabwe but cash flow issues are a major problem in Zimbabwe’s largely informal economy. For actual cash, microfinance institutions and loan sharks rule the day and some have some really steep interest rates because not everyone is lucky enough to have collateral to back loans through formal channels.
This forces many to deeper into the pit of debt and it becomes a never-ending cycle of trying to catch up to payments.
How does BFree address these issues?
Bfree is interesting because it has created a platform that allows for the collection of loans from one place. More importantly, they were also aware of the humiliation that came with loan collections. The company then set out to remedy this by creating a customer-centric approach “that leverages ethics and technology in leading customers sustainably out of debt and onto the path of financial freedom”.
The fintech then created a platform that three tiers, customer self-service collection that helps customers manage loan repayments from a variety of different institutions. An automated collection that the company says are don’t via Artificial Intelligence that allows automatic repayment of loans.
“Our Artificial Intelligence collection process makes collection more efficient and scalable. It thrives on understanding the customer and providing unique repayment plans and optimal channels for them. All of this is done with 100% compliance with global industry ethical collection standards.”
Bfree
The final tier is through human interaction. Bfree says that they have a contact centre that will help customers meet their obligations. All the loan repayments are structured in a way that allows the customer to reach the end goal of paying back whichever institution they borrowed from.
As far as how the startup pays its own bills, Bfree earns its money by the commission which varies depending on the size of the loan, duration etc.
The startup, according to a report by Techcrunch, is working with 30 credit institutions including microfinance, digital lenders and banks. It is also on an expansion drive that stretches to 16 new markets including Ghana, India, Uganda, Brazil, Colombia, Mexico, Russia, Poland, Pakistan and Indonesia
I think the concept is brilliant for Zim but…
If our financial system worked as most do, this I think would help with the credit shyness of the banks and other institutions. It would also mean that Zimbabwe would need to adopt a standardised credit score system that isn’t only linked to bank accounts but to mobile money as well.
In a Twitter Space we held last year on EcoCash’s tenth anniversary, there was a contributor to the conversation who said that mobile money was overlooked as a means for collateral. EcoCash, OneMoney and Telecash have done a great deal for financial inclusion and the fact that they cannot be seen in the same light as the traditional financial institutions is very disappointing.
If something like this was to make its way into Zimbabwe mobile money would also need to be a factor because you’d be hard-pressed to find anyone in adulthood who doesn’t have any of the wallets on offer. The accounts are really easy to open and the flow of transactions could to one degree or another be used as a means of collateral that the individual can pay the loan based on their cash flow. This is especially important for the informal economy because a good number of sales are in cash or via mobile money.
But if wishes were horses right? Unfortunately, we have seen a tightening of the reigns by the financial authorities which means that innovations like these will keep passing us by.
Cover image credit – CEO Business Africa