The winner of the fintech pitch-off at the Mobile World Congress startup event, 4YFN 2024, is the Ethiopian startup eQub. This week, TechCrunch met with Nahom Michael, its business development lead, in Barcelona.
According to Michael, the startup’s name is an Amharic word that describes a regional variation of peer-to-peer lending. An Equb consists of individuals who pool their resources in order to save money, which is then apportioned in turn.
This financing option, also referred to as a rotating savings and credit association, or ROSCAS, is widely used for both personal and business loans in many African nations. However, it has not yet entered the digital era.
eQub is hoping to take advantage of that opportunity. It begins with an app, aimed at the increasing number of Ethiopians who possess mobile phones and bank accounts but have restricted access to credit.
The ability for eQub members with bank accounts to add money without visiting an ATM is one benefit of making an Equb digital. It also relieves eQub administrators of the burden of handling large sums of money.
Aside from convenience, eQub’s point system allows users to establish credit history by demonstrating their reliable savers. While eQub is currently adhering to the original ROSCAS model—which requires no collateral and no interest—it may eventually assist the company’s expansion into BNPL, regular loans, and other areas. Rather, when money is taken out, it charges a transaction fee, which generates revenue.
Michael informed the jury and audience on the traction slide of their pitch that since the app’s launch, it has drawn about 25,000 users, which translates into 200 saving groups. Additionally, he demonstrated to TechCrunch that the app offers users two choices: they can join a group that already exists or one that the startup has carefully selected.
eQub is taking precautions to ensure that savings are safe in both scenarios. It performs comprehensive KYC for self-managed groups, which is already more than traditional, offline Equbs. This makes sense because, unlike curated eQubs, these individuals typically have personal ties.
However, Michael texted TechCrunch to clarify the requirements.
“become rigorous” for such groups, “including Digital National ID, Employment letter or business license for proof of consistent income, 3 – 6 months bank statements, a digital agreement is also signed that allows us (eQub), to pursue legal action in case of such instances.”
Michael said that the startup now has more than 10 banking partners, an approach that can also help limit risks thanks to data sharing. There could be more to come: “recently, Michael said, “insurance companies have offered to create a special limited insurance policy for saving groups where defaults occur due to the death of an eQub member.”
As part of its B2B2C strategy, the startup also has 20 corporate partners: Employers who already have their staff members participating in Equbs can now digitize this through the app.
Gig workers, who make up a significant portion of the labor force in sub-Saharan cities, will be among its next targets. By 2025, eQub wants to connect with one million of these users. Although the app has inherent virality, more marketing will be needed to support faster growth, which is one of the reasons the company is looking to raise a $500,000 pre-seed round. The attention it received at MWC could aid in both this and its other objective, which is to soon begin international expansion.
