How can a tailor or dressmaker buy a new sewing machine if they don’t have enough savings? How can a fisher afford a new net if there is no bank to borrow from?
In developing countries, when poor people and small entrepreneurs need to invest or recover from unpredictable setbacks, they have to resort to informal financial sources that are often unreliable. This is especially true in the countryside, where bank offices may be several days’ journey away.
This explains the rapid rise of mobile financial services that use new technology and operate alongside conventional banking. Services like microcredit and deposit accounts can now be accessed via mobile phones.
Since 2017 Finnfund has been financing JUMO, a platform that connects traditional financial services with information from large mobile phone operators. It analyses the large volume of data on mobile phone users to create financial identity for them, allowing them to obtain reasonably priced real-time financial services – such as loans and savings accounts – via their mobile phones. Many customers are low-income people and small entrepreneurs who have previously been beyond the scope of conventional banking.
“Banking services are available on the mobile phone menu, where users can choose whether they want to deposit or borrow funds. Once they have accepted the terms and conditions, the funds can be in a digital wallet, attached to their mobile phone number, within 20 seconds,” says JUMO’s founder and CEO Andrews Watkins-Ball.
Loans granted by JUMO or its partners range from one euro to EUR 400, or even more for larger businesses. Initially the maximum sum is always small but, if repayments keep to schedule, it can be gradually increased. Repayments are automatically monitored, so the service eliminates the risk of excessive debt. Meanwhile, electronic deposits simplify money handling and make it safer; cash does not need to be transported over great distances.
“Financial inclusion is an essential part of equality, giving people access to good choices. Everyone needs tools to manage their money. Poor access to basic saving and loan facilities is a major problem. Everyone deserves it and JUMO creates it,” Watkins-Ball explains.
Finnfund granted JUMO a loan of USD 6 million in spring 2017 and made a further equity investment of USD 6 million in the second half of the year. The finance is being used to support service development and expand operations in Africa and Asia.
An important aspect is to ensure that the service is operated responsibly and that, for example, customers are protected from overindebtedness. For instance, JUMO is one of the early participants in the Smart Campaign’s FinTech Protects engagement, aiming to remain at the forefront to shape responsible practices in the fintech sector (financial technology).
“Our investors are very important,” Watkins-Ball says. “Their confidence has enabled us to build our solutions and reach more people, expanding our footprint so we can take our business to hundreds of millions of customers.”
JUMO rolled out its first mobile platform in 2014. Since then it has granted over 20 million loans. It has some 300 employees, mostly in South Africa. It currently operates in Tanzania, Uganda, Zambia, Kenya, Rwanda, Ghana and Pakistan.
Watkins-Ball is optimistic about JUMO’s prospects. One of the effects of the technology is to reduce the significance of geographical distance. This in turn promotes equality.
“I see a better future for the average woman or man who hitherto has had no connection to financial services. I think access will be empowering because it will put choices in the users’ own hands, in real time. They will be able to select the products that suit their needs for investing in a business, saving for education, or whatever. “It’s about supporting people improve their own lives.”
Country: International; current operations in Tanzania, Uganda, Zambia, Kenya, Rwanda, Ghana and Pakistan
Sector: Information and communications technology
Investment year: 2017
Mobile money already commonplace in much of Africa
Access to formal financial services is limited or non-existent for more than a third of the people of the world. Most live in JUMO target countries in sub-Saharan Africa and Asia. In the majority of those countries, as many as 80 percent of adults have never been within the scope of formal banking. As mobile money services grow, the basis for improved access to formal financial services also improves. The benefits are felt mainly by the poor, the rural population and others living beyond the scope of traditional services.
• Video: Meeting with Andrew Watkins-Ball from JUMO
• Also on this subject: Microcredit brings a safer future for Cambodian farmers
• More about financial institutions and microloans for sustainable development in Development results 2016