During my internet travels, I came across a Nigerian startup called BFree which recently closed a US$1.7m Series A round. It’s a credit management fintech that does ethical debt collection and it surprised me a bit because of my Zimbabwean borrowing sensibilities. Debt, or chikwereti in the local jargon, is one of those things that brings shame and anxiety because it’s a necessary evil but the ways to get it aren’t always the best.
What I mean by this is that the lines of credit are not easily accessible to the ordinary Zimbabwean except for civil servants who have access to them through the government acting as a sort of guarantor. Banks like BancABC and FBC, for example, have loan facilities available for government officials and there are even companies that offer credit for gadgets and devices.
This, of course, does not mean that everyone is left out. You can buy some backordered goods in shops across Zimbabwe, but cash flow issues are a major problem in Zimbabwe’s largely informal economy. For real money, microfinance institutions and loan sharks rule the roost and some have very high interest rates because not everyone is lucky enough to have collateral to back loans through formal channels. .
This forces many people to sink further into the debt pit and it becomes an endless cycle of trying to catch up on payments.
How does BFree solve these problems?
Bfree is interesting because it has created a platform that allows collecting loans from one place. More importantly, they were also aware of the humiliation that came with loan collections. The company then set out to remedy this by creating a customer-centric approach”that leverages ethics and technology to sustainably get clients out of debt and on the path to financial freedom”.
The fintech then created a three-tiered platform, a customer self-service pickup that helps customers manage loan repayments from various institutions. An automated collection which, according to the company, is not done via artificial intelligence which allows the automatic repayment of loans.
“Our artificial intelligence collection process makes collection more efficient and scalable. It strives to understand the customer and provide them with unique repayment plans and optimal channels. All of this is done with 100% compliance with the global ethical collection industry standards.
The final level is through human interaction. Bfree says they have a contact center that will help customers meet their obligations. All loan repayments are structured to allow the client to achieve the end goal of repaying the institution from which they borrowed.
As for how the startup pays its own bills, Bfree earns its money through the commission which varies depending on loan size, term, etc.
The startup, according to a report by Techcrunch, works with 30 lending institutions, including microfinance, digital lenders and banks. It is also on an expansion campaign that extends to 16 new markets, including Ghana, India, Uganda, Brazil, Colombia, Mexico, Russia, Poland, Pakistan and India. Indonesia.
I think the concept is great for Zim but…
If our financial system worked like most others, it would, I think, contribute to the credit shyness of banks and other institutions. It would also mean that Zimbabwe should adopt a standardized credit scoring system that is not only linked to bank accounts, but also to mobile money.
In a Twitter space we held last year on EcoCash’s tenth anniversary, a contributor to the conversation said mobile money was overlooked as a means of collateral. EcoCash, OneMoney and Telecash have done a lot for financial inclusion and the fact that they cannot be viewed from the same perspective as traditional financial institutions is very disappointing.
If something like this were to make its way into mobile money in Zimbabwe, it would have to be a factor as well, as you’d be hard pressed to find anyone as an adult who doesn’t have any of the wallets on offer. The accounts are really easy to open and the flow of transactions could, to one degree or another, be used as collateral that the individual can pay the loan based on their cash flow. This is particularly important for the informal economy as many sales are made in cash or via mobile money.
But if wishes were horses, right? Unfortunately, we have seen a tightening of the reins from financial authorities, which means that innovations like these will continue to elude us.
Cover image credit – CEO Business Africa