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Money Fellows classifies its users as borrowers, savers or planners depending on their position in a ROSCA cycle and when they receive a payout.
01.11.22 | Source: Tech Crunch

Egyptian fintech Money Fellows has raised $31 million in what it describes as the first close of its Series B investment. The round, which the startup expects to top up in the coming months, was led by CommerzVentures, Middle East Venture Partners (MEVP) and Arzan Venture Capital.

Other participating investors include Partech, Sawari Ventures, Invenfin, National Investment Company (NIC), 4DX Ventures and P1Ventures. Money Fellows has raised $37 million in total funding since its inception.

Money Fellows’ premise is the digitization of money circles or what’s commonly known as the Rotating Savings and Credit Association (ROSCAs), a system where a group of people agree to contribute money for a specific period, thereby saving and borrowing together.

ROSCAs, which Money Fellows CEO Ahmed Wadi says is a $700 billion opportunity globally, are quite popular in over 90 emerging and developing markets with several names: Esusu or ajo in Nigeria, Kameti or chit fund in India and Gameya in Egypt. But it wasn’t in either of these countries that Wadi first tested Money Fellows, it was in Germany, where he lived at the time. There, Wadi found it difficult to access financial services because he lacked a credit history. He thought by replicating the Gameya system in the European nation he could provide an alternative financing system for people like him. However, adoption wasn’t significant there nor in the U.K., which was his next stop.

“Germany didn’t have this culture and at some point, it felt like it made sense to go to the U.K. where they have Asians, Africans and Arab communities that traditionally use this model,” said Wadi. “But we found out people didn’t need it because they had an advanced financial system.”

On the other hand, Egypt has a functioning ROSCA system, and Wadi, being from the country, chose it as his third try in 2017. He launched the platform a year later.

Here’s how ROSCAs work. Let’s say 10 people come together and agree to pay $1,000 monthly for 10 months. At the end of each month, a member gets $10,000 and it keeps rotating until everyone receives their payout. This system works best with a tight-knit group of friends or family because it can be risky when strangers are involved. However, this limits offline ROSCAs in that participants may find it difficult to access more capital. But with Money Fellows, people have a broader pool of participants — each passing through a credit assessment process — around Egypt so that they can form and join ROSCA groups through its app. Similar players globally include Pakistani fintech Oraan and U.K.-based StepLadder.