American firm Inventure mines phone data to offer small loans

Ami Gosalia, the head of growth  at Inventure. PHOTO | COURTESY
Ami Gosalia, the head of growth at Inventure. PHOTO | COURTESY 

Martin Gacheru’s salon business based in Nakuru was not doing well. The startup was facing restocking challenges which required an urgent capital boost.

However, Mr Gacheru was servicing loans from various banks which made borrowing new funds impossible.

One day, while fidgeting with his phone, Mr Gacheru noticed an app, downloaded it, answered a few questions and received Sh2,000 instantly on his M-Pesa account.

Surprised by how fast the loan had been cleared, Mr Gacheru Googled for more information and found out that the firm behind the app and funds was called Mkopo Rahisi.

It was owned by Inventure, a leading early-stage venture capital company based in Silicon Valley, in the US.

Inventure is a mobile-based firm which provides short-term, no collateral, low-interest loans through a simple application on a user’s phone powered by Android.

“I acquired several loans which I repaid weekly until I was able to restock my salon,” Mr Gacheru told the Business Daily in a phone interview.

Mr Gacheru is one of the 50,000 borrowers who have benefited from Mkopo Rahisi, a credit facility launched in March 2014 in Kenya.

The service has seen 180,000 applications downloaded and disbursed 200,000 loans valued at Sh500 million. Mkopo Rahisi is one of the many mobile-based credit providers available in the country.

Others are the KCB-M-Pesa facility, a partnership between leading mobile service provider Safaricom and Kenya Commercial Bank, and M-Shwari — offered by Commercial Bank of Africa and Safaricom.

Equity, through Equitel, also gives its customers loans via their phones.

However, unlike the competition, Inventure does not require collateral, a bank account or savings to lend one money.

“We are different from our competitors because we don’t require savings or a bank account. We also provide credit instantly, under five minutes, from when you download the app to having the money in your mobile money account.

‘‘Additionally, we don’t merely use traditional financial data to assess risk so we can lend to more people at more affordable interest rates,” said Ms Ami Gosalia, the head of growth at Inventure.

With the user’s permission, Inventure collects data from the applicant’s mobile device to verify their identity, build financial, behavioural, and social characteristics. The firm uses the data collected to customise loan terms for each client’s unique circumstances.

Crucially, she said, Inventure has found a way to build a financial profile for those who have none.

All potential clients need to do is connect to Inventure’s Facebook page, answer a few quick questions on their use of mobile money transfer platforms; where they stay, work and academic background to find out whether they qualify for a loan.

Applicants then download the app from the Google Play store and agree to give Inventure access to data on their devices.

They then complete a questionnaire and submit answers. They instantly receive a message informing them on whether on not they qualify for a loan, what loan they qualify for, and terms of payment.

Challenges for customers

If they accept the terms the loan is sent to their mobile devices through M-Pesa. The use of the app has not been without challenges for customers as Hosea Langat narrated to us. Mr Langat said he initially used to borrow from Mkopo Rahisi for domestic expenditure.

However, he foundit difficult to repay weekly because he earns monthly.

He said that the initial amount of Sh2,000 was also too little and could not cater for all his needs.

After many customer complaints Mkopo Rahisi reviewed the repayment period to monthly and increased the loan to Sh50,000. “Most of the challenges that I initially experienced have been solved,” Mr Langat said.

“I have borrowed Sh50,000 which I am supposed to pay within six months at monthly instalments of Sh11,000,” he said.

Loans attract an interest of between five per cent and 11 per cent, depending on the customer’s credit score. They have to be repaid in 21 days.

“Of the borrowers who successfully complete their first loan, 92 per cent return to qualify for higher loan amounts or better repayment terms based on their needs and financial capabilities,” Ms Gosalia said.

The firm recently expanded into Tanzania and plans to set shop in other African countries in the next three to six months.

Inventure is seeking to hire a regional director based in Kenya who will be in charge of the East African market.

The Kenya office staff consists of an operations director, a software developer, a security expert and customer service agents.