Yabx, which also operates in Asia and Latin America, aims to enter Kenya, Rwanda, Zambia, Togo and Benin by the end of March, Dayal says from India. After that, the Democratic Republic of Congo (DRC), Cameroon and Gabon are also on the agenda, he adds. “Africa is front and centre of our business.”
The company says that globally 1.7bn adults are unbanked, but two-thirds of them own a mobile phone which could be used to access financial services. Depending on country, the proportion of Africans with formal access to credit is between 2% and 10%, Dayal says. That creates an opportunity to offer initial financial products to people who the banks currently can’t onboard. Yabx uses information from mobile money wallets and other sources to construct a risk profile for potential borrowers who lack a credit history.
Assessing the creditworthiness of people without a formal history is “by far the most difficult problem in financial services,” Dayal says. Yabx uses machine learning to analyse mobile money wallet records and combine these with other sources such as credit bureaus and utility bills. The system builds up a picture of to what extent money is being invested in a small business, or used to meet personal needs.
The information generated allows loan decisions to be taken instantly and automatically, with no need for a borrower to visit a bank branch. Merchant transactions on the point of breakdown due to payment failure can be saved with Yabx maing a payment directly to the merchant with whom the borrower is trying to transact.
- As well as small business loans, Yabx provides micro and small consumer loans, unsecured working capital loans for mobile money agents and smartphone purchase financing.
- It also has a savings product, which Dayal says helps banks to strengthen customer relationships.
Yabx is already present in Tanzania, Uganda, Malawi, Somalia and the Côte d’Ivoire. In September, the company appointed Eunice R. Gatama as director for Africa business. Main banking partners on the continent include Housing Finance Bank in Uganda, I&M in Tanzania and FDH in Malawi.
There is no reason for Yabx to restrict itself to a single banking partner in any country, Dayal says. The company is also always trying to find more partners among telcos and payment-service providers, which are “critical”, he adds.
- Yabx is paid by banks according to the performance of the loans it sources. That means the company has “skin in the game,” Dayal says. Yabx has yet to reach profitability but is getting closer, he adds.
- The company is likely to reach breakeven in the second quarter of its 2022-23 financial year, which runs from April to March, Dayal says.
- Yabx may seek to raise equity funding in coming months, mainly to finance African expansion, Dayal says. The amount which might be sought has not yet been decided, he adds.
Yabx is betting that it can identify creditworthy customers without financial histories more cheaply than the banks can do it themselves.
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