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Two young men who turned salary advance challenge into business

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Picture this: You run a company with over 100 employees, most of whom take salary advances. This definitely gives the HR office and payroll processors more administrative work. Now, consider a Sacco with thousands of members who take micro loans every so often. Managing such transactions efficiently can be a big task and often gets messy, with loans taking days to approve while collection turns into a wild goose chase.

These two cases pose a challenge of managing the distribution of money and subsequent collection. That’s the challenge that Fredrick Alunala faced seven years ago while running his web content development business of just 17 employees. “One of their major challenges was accessing salary advances,” says Alunala, the CEO of Ndovu Group, a financial technology investment company. “It was tricky to issue the advances to them and balance the cashflows needed for the business to run since my margins were not that much.”

Alunala, together with his partner Samuel Kyalo, seeing a new business opportunity in this challenge, put on their thinking caps to get a solution that would allow companies maintain a float account such that whenever employees needed salary advances, they would just dial a code and receive money instantly then check-off done from their salaries.

And so M-MKOPO, a mobile financial solution for disbursing credit, was born.

Samuel Kyalo, co-director of Ndovu Group, the company behind the innovative M-MKOPO financial solution. Photo: Courtesy

Over time, they realized that the idea would also work in financial institutions like Saccos and micro-lenders.

“Due to the risk involved in running a lending business, we resolved to become a software supplier and revenue-share with the lenders,” he said in an interview with BUSINESS TODAY.  “Our revenue share with the lenders is 2.5% of the principal loan disbursed, which takes care of support and maintenance they need including system upgrades.”

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Clients also pay a one-off setup cost to cater for initial customization and integrations with third parties, such as PRSPs, SMS, USSD, and Safaricom’s M-Pesa.

M-MKOPO empowers Saccos and microfinance institutions (MFIs) to become their own loan merchants in the league Mshwari or KCB-MPESA. The M-MKOPO solution allows them to issue real-time loan disbursements through a USSD code *261# as the primary. “Our niche is to empower the lenders by providing them with a technology both for back-office management and user end through USSD and apps,” says Alunala.

There are more than 1,200 Saccos in Kenya, most of them outside townships, over 50 registered MFIs and about 10 (microfinance banks) MFBs in Kenya, who are M-MKOPO’s main targets. Considering that all payments and transactions are going mobile, these SACCOs and financial institutions need solutions that their members can use efficiently yet securely.

How it works

M-MKOPO’s signed up merchants use their own money to lend by depositing float cash in their “Business to Customer” (B2C) account at CBA Bank. The M-MKOPO system is integrated to M-Pesa allowing the system to debit float held in MPESA B2C and credit the specific loan applicant’s MPESA in 10 to 15 seconds. “This efficiency is what our merchants prefer,” he says. “We also customise their products to the USSD and APP.”

Alunala said they are in talks with fast moving consumer goods (FMCG) vendors to integrate their systems with M-MKOPO to allow for bill payments by all Sacco/MFI users in the M-MKOPO system. “Because most loans are borrowed to pay specific bills, we want to remove the extra mile and charges by integrating the feature directly to specific FMCG vendors. This will also increase their sales and members will have an easy time accessing products by virtue of the integration.”

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So far the system has in the last four to five months transacted over Ksh31 Million, with over 45,000 registered customers. M-MKOPO is working with Lompasago Sacco, Lifeboat Sacco, Ushindi Bora Micro-lenders, Connect Credit Micro-lenders and currently integrating with United Bank of Africa Kenya through its local PRSP partner “Onfon Media Ltd” to offer retail mobile lending and savings solutions in Kenya.

In DRC, M-MKOPO is working out a partnership with United Bank of Africa DRC and M-Pesa DRC. Ndovu plans to take M-MKOPO to Uganda, Tanzania, Rwanda, Burundi and Nigeria. “Other than automating lenders, the major opportunity that lies ahead is integrating merchants.

“Our niche is to empower the lenders by providing them with a technology both for back-office management and user end through USSD and apps,” says Alunala.

Alunala says Ushindi Bora, which agreed to try out the product helped it break ground. “We walked with them, and refined the solution even further through their market support,” he says.

M-MKOPO’s security levels are tight, backed by the Extended Validation Secure Socket Layer from the USA (GEOTRUST), which has an encryption insurance of $1.2 million (Ksh120 million).

The solution also provides audit trails of all transactions, VPN integration, IP white-listing, frequent, penetration testing, double encryption of data, one-time PIN authentication and firewalls as well as other classified security measures.

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LUKE MULUNDA
LUKE MULUNDAhttp://Businesstoday.co.ke
Managing Editor, BUSINESS TODAY. Email: [email protected]. ke
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