Cairobased moneyfellows series 37mkeneokafortechcrunch: Money Fellows Secures $31 Million in Series B Funding Round

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Egyptian fintech firm Money Fellows has successfully raised $31 million in the initial closing of its Series B investment round. The funding round, which Money Fellows plans to bolster in the coming months, received substantial support from leading investors including CommerzVentures, Middle East Venture Partners (MEVP), and Arzan Venture Capital, reflecting strong investor confidence in the company’s innovative approach.

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Other prominent participants in the funding round include Partech, Sawari Ventures, Invenfin, National Investment Company (NIC), 4DX Ventures, and P1Ventures. This recent funding injection brings Money Fellows’ total funding to $37 million since its inception.

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Money Fellows has carved out a unique position in the fintech industry by digitizing the concept of Rotating Savings and Credit Associations (ROSCAs), commonly known as money circles. This traditional practice involves a group of individuals coming together to regularly contribute a predetermined sum of money, enabling them to collectively save and borrow.

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ROSCAs are prevalent in over 90 emerging and developing markets and are known by various names such as Esusu or ajo in Nigeria, Kameti or chit fund in India, and Gameya in Egypt.

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Money Fellows’ CEO, Ahmed Wadi, recognized the global potential of this system, estimating it to be a $700 billion opportunity. His journey to introduce a digital ROSCA system began outside Egypt, first in Germany and later in the UK. However, the concept struggled to gain significant traction in these markets due to their advanced financial systems and a lack of cultural familiarity.

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Ultimately, Wadi returned to Egypt in 2017, where ROSCAs are an integral part of the financial landscape. He launched Money Fellows in 2018, providing a digital platform that allows users to create and join ROSCA groups, complete with a credit assessment process for participants. This approach broadens participation and mitigates some of the risks associated with traditional offline ROSCAs.

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The ROSCA cycle involves individuals making regular contributions, with one member receiving the entire pooled sum, and this cycle repeats until all participants have received their payouts. Money Fellows categorizes its users as borrowers, savers, or planners, depending on their position in the ROSCA cycle and payout schedule.

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The platform charges a one-time service fee that decreases over time, while interest is paid to users at the end of the cycle, offering an attractive savings incentive.

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To manage the risk of defaults, Money Fellows has established provisions and reserve requirements, ensuring that participants continue to receive their payouts even if others miss their commitments. The system’s design also takes into account varying credit exposure based on a participant’s historical contributions.

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Beyond facilitating ROSCAs, Money Fellows has ventured into a B2B play by partnering with merchants in Egypt to sell their products through the app, offering customers discounts and generating revenue through product markups and ROSCA fees. The company plans to expand its financial services to include “buy now, pay later” programs, pension offerings, and credit card services.

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Money Fellows boasts over 4.5 million registered users, with 7% being active monthly users. The average payout per user is approximately $1,100. The company has experienced significant year-over-year growth, with an eightfold increase.

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With this fresh infusion of capital, Money Fellows aims to accelerate its growth by diversifying its service portfolio, expanding into both B2C and B2B segments, and extending its geographical reach across Africa and Asia. The company sees vast untapped potential in replicating its model in other markets, addressing the global opportunity presented by ROSCAs.

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Hangwi Muambadzi, a venture partner at CommerzVentures, praised Money Fellows’ innovative approach, highlighting the company’s ability to harness localized solutions to address global financial challenges. The digital ROSCA-driven model pioneered by Money Fellows represents a fresh perspective on delivering financial solutions, combining tradition with modern technology.