One-line solution summary:
A target savings scheme that provides low interest and collateral free loans that also incorporates a micro-pension and micro-insurance plan
Pitch your solution.
This solution solves the problem of the lack of a flexible system that can accommodate the low and irregular income patterns of workers in the informal sector to provide them with pension and insurance services. It achieves this by using incentives of low interest and collateral free loans attached to meeting defined savings targets to drive culture change and remould the beneficiary’s understanding of financial planning. A portion of the loan repayment (when certain conditions are met) compulsorily goes into contribution to a micro-pension plan and a voluntary insurance premium against adverse business conditions.
It transforms beneficiaries by training them in financial literacy using automated SMS system with a group option of using illustrated lesson plans for cooperatives. It also graduates them to eventually become creditworthy to formal financial institutions across the region through provision of bank verification number (BVN), credit scores and a detailed credit history.
Film your elevator pitch.
What specific problem are you solving?
- On average, Nigeria’s societies are closely knit and as such, it is common to have the rich and poor inhabit the same neighbourhood. As a result, we are all exposed to the social and economic impact of poverty which include low standard of living, social vices, high mortality rate, nutritional and other health challenges, etc.
- Poverty persists partly because of low access to finance, as the present structure of the established financial system does not effectively address the financial needs of the poor, who have consequently been financially excluded.
- The problem we need to solve, therefore, is reducing poverty by increasing access to finance.
- In recognition of this, the Central Bank of Nigeria plans to increase the rate of financial inclusion in the country to 95% by 2024 from the current rate of about 60-64%.
- Our strategy of achieving this is to increase financial literacy which is complemented by financial services that are adapted to the needs of the poor. Our solution, for instance, is able to increase access to finance for the poor by eradicating the need for collateral whilst simultaneously incentivising savings culture that is required for building wealth.
Who does your solution serve, and in what ways will the solution impact their lives?
The target population are self-employed producers or service providers serving final markets and having few paid employees. They operate as well-knit cooperatives with members related to each other. They are located mainly inside the markets or scattered in workshops throughout neighbourhoods in Ibadan, Nigeria. Examples are traders, artisans, craftsmen, caterers, hairdressers/stylists, tailors, estate agents, painters, and low scale entrepreneurs with small capital investment and low level of formal training.
E GO BETA will transform the lives of beneficiaries through 1). An entrenched savings culture 2). Access to credit 3). Digitising their history with us and thus graduating them to access larger loans from the formal sector through provision of BVN (unique biometric IDs), a detailed credit history and credit score 4). Provision of financial literacy and 5). Micro pension and micro-insurance services.
E GO BETA team have worked with marginalised populations in various parts of Nigeria and have opened savings accounts for a sample population while studying their patterns of living. In addition we are also working on partnering with FIWON (Federation of Informal Workers Organisation of Nigeria) to access their directory of registered members for social protection services.
Which dimension of the Challenge does your solution most closely address?
Explain how the problem, your solution, and your solution’s target population relate to the Mission Billion Challenge WURI West Africa Prize and your selected dimension.
E GO BETA incentivizes financial savings by providing collateral free loans as a reward for meeting defined savings target. The system measures consistency in savings over a defined period and automatically qualify beneficiaries for loans appropriate for the milestone reached. A portion of the repayment has been structured to go into a micro-pension plan compulsorily while a voluntary micro business insurance plan can be purchased at the point taking the loans. The solution takes a beneficiary through a clearly defined path to graduate them to eventually becoming creditworthy in the formal sector by placing appropriate incentives along the path.
Where is your solution team headquartered?
Ibadan, NigeriaWhat is your solution’s stage of development?
Who is the primary delegate for your solution?
Adebolajo Adeyemo
Which of the following categories best describes your solution?
Describe what makes your solution innovative.
- To reduce the income gap between the rich and the poor, there is need to widen the knowledge base of the latter whilst simultaneously incentivising them with tools that enhance the opportunities to cross into established financial systems.
- The benefits of the traditional micro-finance systems have been limited partly because current systems try to extend traditional financial services to the poor without the impartation of the requisite knowledge base that expands the horizons of the poor. As a result, the poor remain poor despite having access to micro-finance services.
- Our solution recognises the fact that money itself does not solve poverty, it is the way that money is used that lessens poverty. That is why, in addition to affordable credit in the form of low-interest loans, our solution is knowledge-driven to equip our participants with the ability to make productive financial decisions that can lessen, and ultimately lift them out of poverty.
- Our solution further incorporates the best practice of education, banking, insurance and pension services into a robust micro-finance product that is delivered with low-cost technology. This way, our participants simultaneously enjoy the benefits of several services without extra cost.
- On our part as the service provider, by integrating these services, we have lowered the cost of delivering these services over the long term. The training arm of our solution is designed to upscale productivity and impart new skills, while the integrated micro-finance solutions helps top secure the financial future of our participants.
Provide evidence that your solution works.
E GO BETA is an improved “lend-to-save” model built on the framework of the successfully tested Jipange KuSave Experiment in Kenya and adapted to the Nigerian market. Unlike the Kenyan experiment, E GO BETA collection methods are not strictly based on Mobile channels only. Although, we integrate third party payment solutions into our core software such that beneficiaries can save directly using a wide range of options across multiple channels; our collection method is hinged on how the agency method which is our target market relates with payment solutions. Nigeria currently has payment solution agents located in every market and street corners throughout the nation including rural areas. Informal sector workers send and receive money through these agents who make low commissions off each transaction.
Unlike the Kenyan experiment, beneficiaries in E GO BETA solution have several products as add-ons that serve as incentives along the path in reaching their savings milestones. These include a business insurance plan to hedge against adverse conditions, a pension plan and graduated financial literacy lessons.
Please select the technologies currently used in your solution:
What is your theory of change?
- The mismatch between the present structure of the traditional financial system and business operations of the informal sector needs to be bridged in order to deliver financial services to those at the lower rung of the income ladder, and thereby broaden the financial sector.
- Our solution is focussed on the economically engaged, including daily wage earners that operate within Ibadan metropolis, regardless of age, gender, level of education, etc. This will include, but not limited to public transport workers & drivers, barbers & hairdressers, mechanics, traders & market women, among others.
- The solution will equip our targets with basic knowledge for business practice and financial planning skills that will empower them to grow their businesses, meet financial goals and obligations, and eventually participate in the formal financial services sector within three-to-five years.
- The above will be achieved by the implementation of our integrated solution that combines training for skill acquisition, interest-free loans for business improvements, long-term saving plans, micro-insurance and micro-pension solutions.
- In the long term, established financial institutions and regulators will need to develop some flexibility that enables them to partner with the poor vis-à-vis their economic benefits.
- The first incentive for participants will be to access interest-free loans which will increase according to the level of their progress in terms of business improvement that is evidenced by the growth and consistency of savings. Our training programme will be developed to support their progress, while the creation and allocation of credit scores that track the patterns of loan repayment serves as transparent way to measure attitudinal alignment with the programme.
- As their savings improve, the savings plan will be layered with micro-insurance for business owners and micro-pension plan for non-business owners.
- Activities: administer trainings & interest-free loans as well as allocation of scores in relation to credit and savings consistency -> Output: skill acquisition for business development, personal and & business financial planning, and project execution skills -> Outcomes: increased confidence of participants, higher & secured income of participants, behavioural changes that enhance accessibility to traditional financials services system.
How can your solution be incorporated into social protection and service delivery systems in West Africa?
E GO BETA beneficiaries will be provided with Bank Verification Numbers (BVN)– a biometric identification system in use in the Nigerian financial space. These is made possible through our partners who have banking licenses thus we would be able to capture biometric IDs of all beneficiaries and be able to link this with existing databases where such information has already been provided. The current regulation in the financial market in Nigeria allows for electronic financial transactions to be done without provision of any ID card once the transactions are within a specified daily limit. Most of our target customers may not have any of the nationally recognised ID cards required to operate conventional banking accounts but they would be able to operate E GO BETA savings with whatever form of ID that they have including membership cards of their cooperatives.
Describe how 'user friendly' your solution is to incorporate into social protection programs and delivery systems in West Africa.
E GO BETA core application software simply runs on existing Bank Verification Number system in use in Nigeria. Our core application software is enabled to incorporate unique IDs of beneficiaries into their transactions. Subscribers who currently do not have BVN would be most delighted to be provided with one.
Explain how your solution is interoperable with existing technologies and open standards.
- It will be made available soon
How does your solution account for low connectivity environments and for users with low literacy and numeracy levels?
We will use existing bank/money agents to collect savings contributions, users can also collect loan payments from these agents. Agents operating in communities with high density of subscribers to our solution will be provide posters printed with customer information for subsequent explanation to clients
USSD (Unstructured Supplementary Service Data) codes will also be deployed for all basic functions such as loan application, retrieval of balance of loan payments or savings/micro-pension balance or credit score and answers to FAQs. As our customer base expands we plan to introduce a customer care line that will provide service in English and the predominant local languages of our clients.
Our service officers will be deployed to attend the periodic meetings of cooperatives and groups subscribed to our solution to provide direct answers to questions.
We also intend to partner with radio stations covering our target areas to disseminate information on FAQs and how subscribers can receive answers to pertinent questions
Select the key characteristics of your target population.
How many people does your solution currently serve? How many will it serve in one year? In five years?
Our solution is a prototype that will be deployed soon, so currently we do not have existing subscribers. However, we plan to scale up rapidly and tap into the huge demographic potential of the Nigerian market by launching in Lagos, Ibadan and other cities in Southwest Nigeria. We intend to use the existing widespread money agents base, strong local cooperative network and word-of-mouth referral system to build a subscriber base of 1 million people in the first year of operation. Subsequent expansion plan is to grow organically (using the trader’s routes and linkage to the ports and markets in Lagos) into the Southeast, Niger delta, Northeast and Northcentral regions of the country. This will enable us to reach a minimum target of 10 million subscribers within 5 years of commencement of operations.
What are your goals within the next year and within the next five years?
A. The majority of informal sector workers lack the incentive to save money. We intend to use the allure of access to loan capital to incentivize a savings culture by forcing our subscribers to save consistent over a defined period of time and to achieve a savings target in order to qualify for loans. With time a savings culture will be enacted in our subscribers. The multiplier effect of the behavioral change in the lives of relations and close associates will generate a significant ripple effect of a savings culture in the populace
B. We intend to provide subscribers with growth opportunities by providing scalable loans as an incentive for business growth.
C. Our solution (with our partners) provides subscribers automatic ticket to the formal banking sector through generation of a bank verification number (BVN). We will also provide regular credit scores and credit history for all subscribers. This will ensure visibility to the formal sector and ensure time spent in the informal sector is captured for subsequent advantage in the formal economy sector.
D. The automatic micro-pension plan for everyone who takes a loan will guarantee access to funds in retirement, thus enabling maintenance of a decent life.
E. Access to micro-insurance coverage will help our subscribers to weather the vagaries of the business climate. This will enable then to recover quickly from a business downturn.
What barriers currently exist for you to accomplish your goals in the next year and in the next five years?
The main barrier we anticipate is operational funds. We require start-up capital and access to funds to provide the low-interest loans that our solutions promise. We intend to deploy a fully functional operational software; such software currently exist but we need funds for license.
How do you plan to overcome these barriers?
We intend to seek funds from outside partners like the World Bank. We hope to also approach donor agencies for funds to distribute as loans. Finally, we plan to seek funds from angel venture capitals.
What type of organization is your solution team?
How many people work on your solution team?
Full time staff= 3.
Part time= 2
How long have you been working on your solution?
1 year
Why are you and your team well-positioned to deliver this solution?
Education
The team is made up of University graduates, all member of the team possesses a Master’s degree including MBA. This advanced education puts the team at an advantage of approaching challenges with a refined set of skills acquired through multiple years of education.
Background
Our team includes members with nearly two decades of combined experience in retail banking in Nigeria. This will help to ensure a smooth take-off and polished back-office operations. The retail banking skills will also be beneficial in our marketing strategies as we convince our target clients to adopt our solution.
Since we will have a finite number of physical offices we expect limited physical interaction with clients. Our team also include a nearly 5 years of customer care experience in the telecoms industry. We anticipate that this will be brought to bear in providing a unique customer care service to our clients.
Network
The already established networks that our team possess in the banking and telecom industry will be very useful in forging partnerships as we scale up the delivery of our solution.
What is your business model?
- Value proposition: financial uplifting through knowledge impartation and accessibility to low-cost integrated financial solutions. Our solutions are also poised to deliver cultural change by creating and/or reinforcing saving culture, and other financial discipline that boosts achievement of long-term financial goals.
- Our partners include the executive members of trade unions through which the solution will be communicated and distributed to other members. Technical partners, such as insurance and pension companies that support us to deliver the micro-insurance and micro-pension aspects of the solution. Other vendors that provide specialised services such as technology platforms among others.
- Revenue: our solution rides on five revenue sources that include fee income, in form of loan application and processing fee; Interest income, Commission income from micro-insurance and micro-pension providers; and income from trainings. We also plan to augment our revenue base with additional grants so to support our expansion drive.
- Costs: staff (trainers, administrative staff, etc), technology platforms and tools, general admin costs, alternative electricity supply system.
- Channels: trade unions serve as primary channel for marketing and distribution. IT support will help to deliver self-help and/or group activities.
- Segment: our target segment is the working class in the informal sector, whether self-employed or otherwise.
- Key resources: initial working capital, strategic alliances, low-cost IT tools, among others. Key activities of our solutions include training and offering integrated micro-finance products which encompass micro-insurance, micro-pension and long-term savings, and low-interest loans. We are also poised to drive long-term savings.
Do you primarily provide products or services directly to individuals, or to other organizations?
What is your path to financial sustainability?
- Our financial sustainability strategy is hinged on delivering low cost services to a large population, and thereby drive significant business volume when aggregated over the long term. Also, our income sources are well diversified into five key areas.
- Participants will be required to pay Application & Processing Fees to access our loans.
- The second source of income is from Interest on Loans. Although interests are subsidised, the total interest income will be substantial when aggregated among several debtors.
- Commission income: to deliver our solution, we will partner will Insurance and Pension Fund Administrators to drive the micro-insurance and micro-pension aspects of our solution. This way, we are indirectly serving as a channel of distribution for their respective micro-finance products and thereby creating a win-win business case for all parties to the transaction.
- Furthermore, the current clamour for micro-insurance and micro-pension services in Nigeria makes us positive about obtaining necessary business support from our technical partners.
- Our commission will be driven by the volume of insurance premium and pension asset that we generate for our professional partners.
- Our last source of income is from trainings. While our initial training will be free, subsequently trainings will be delivered at a subsidised fee. These subsequent trainings are designed in a graduated manner to prepare participants for accessing higher loans from the traditional financial institutions over the medium-long term. Participants will also be incentivized to enrol.
If you seek to raise funds for your solution, please provide details.
We seek to raise a combined $250,000 in a mixture of grant and equity.
We expect to raise this amount over the next 12 calendar months
What are your estimated expenses for 2020?
Fixed costs = $50,000
Variable costs = $50,000
Loan portfolio = $100,000
Why are you applying to the Mission Billion Challenge WURI West Africa Prize?
To access grant funding
In which of the following areas do you most need partners or support?
Solution Team
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Sola Adeyemo Africa DISCUSS
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Solution Name:
E Go Beta