Saida – automating loan approval process for emerging markets
Saida is leveraging users prepaid cellphones data to make instant short term loan approvals for citizens in the African continent.
Saida is leveraging users prepaid cellphones data to make instant short term loan approvals for citizens in the African continent.
For years, microfinance and banking institutions have struggled to gather user information and credit scores in order to offer and process loan applications in emerging markets. Many different approaches have been tested including group lending models and computerized test assessments. Nonetheless, most of the approaches used to date have been difficult to scale due to high costs and labor intensity, therefore generally requiring multiple days or weeks to process a loan request. Saida’s approach seems to provide a low cost and highly scalable solution to this problem.
Saida’s approach is consistent with the upcoming trend of companies leveraging data collected from smartphones and social media to run all sorts of screens from users. Good examples are IBM Watson’s Personality insights service based on users twitter data (originally intended for marketing purposes) and Fama Technologies’ screening tool for general hiring purposes.
With smartphone prices plunging across the globe, access to mobile devices has dramatically increased in most emerging countries and particularly in Africa. This trend is expected to continue in the near future, and some research firms even estimate that 30% of Africans will own a smartphone by 2017. Considering that banking penetration in African countries is significantly lower than that of developed countries, a wave of mobile financial tools is starting to spread across the region. As an example, according to the Central Bank of Kenya, mobile payments in Kenya increased by 18.2% in the last 12 months.
As seen in the app download page, the tool only require users to allow access to their cellphone’s data and to input basic information such as name, id number, email and mobile number. With this information, an automated process runs a proprietary algorithm to instantly determine the amount and conditions of the loan requested. Once the loan has been approved, the money is transferred into the users mobile wallet account. According to some user testimonials, this automated process can be completed in less than 10 minutes.
These combination of factors have rocketed Saida’s market entry into the African continent. According to data released by Y Combinator earlier this year, the startup has given out over 8,000 loans to date. In addition, the number of loans disbursed is growing 47% per week, and the retention rate over 80%. The highly anticipated entrance of competitors in this space (i.e. InVentures) is a reflection of the favorable fundamentals and should be considered as a positive sign given that these additional efforts will contribute to accelerate the mobile enabled financial tool penetration even further, and therefore increase the total pie size.
Considering the incredible value proposition and the size of the Sub Saharan market (+900 million people), I would not be surprised to see Saida become one of the best emerging market tech startups in the years to come.
Interesting article Jose. I am very skeptical about Saida’s ability to compete in the mobile micro-finance space in Africa primarily due to competition from the incumbent telcom providers. The major telcom providers in Africa e.g. Safaricom in Kenya and Airtel and MTN on a more pan-African basis provide mobile money transfer services to customers and have been doing so for several years now. In fact in Kenya, Safaricom’s “M-Pesa” service is the primary bank account for most of the un-banked population. These Telcos have already tried to extend micro-finance loans to their customers and have faced intense regulatory push bank instigated by the banks that are keen to defend their markets. Finally, how will Saida fund these loans? and do you think they will be able to maintain adequate asset quality? Having worked in Africa, I cannot name a single institution that managed to run an unsecured micro-finance lending operation successfully without some kind of assistance from the government. Look up “M-Pesa” in Kenya and “Letshego” in Botswana. These are major competitors that Saida will have to deal with