L-Pesa, a mobile financial services company is set to revolutionize the micro-finance industry. With a presence in 13 countries around the world including Fiji and India and soon coming to Uganda, L-Pesa offers hustle and collateral free micro loans from as low as $5 to as much as $3000 to individuals and SME’s entirely through their mobile phones. Think about getting a loan anytime, anywhere within seconds.
We caught up with Mr. Tuval Ron Ezra who is the founder and managing director of L-pesa to tell us about what L-Pesa is, how it works, the benefits and what makes it unique from traditional banking. Here is the Q&A. (Feel free to add your questions that are not covered in this interview to the comments to get answers)
What is L-Pesa?
L-Pesa is a financial solutions company that uses progressive mobile banking to deliver microfinance loans. Essentially, L-Pesa is a microfinance institution that is using technology to transform your mobile money experience. We ensure that both businesses and individuals can become self-sufficient, by providing micro-loans to our customers.
Apart from borrowing money, what else can one do with L-Pesa?
L-Pesa also offers small loans to farmers who are in need of high quality seeds for the development of their farms. In addition, this service can be used to send money to your friends and family all over the world. Our service is unique due to its speed and convenience. For example to registering for L-Pesa takes about 30 seconds, and once you have applied for an L-Pesa loan, you can receive it within 5 minutes.
In how many countries does L-PESA actively operate in Africa?
In Africa, there are currently ten countries where you can make use of the services provided by L-Pesa. These include Tanzania, Kenya, Uganda, South Africa, Burundi, Democratic Republic of Congo, Mozambique, Egypt, Lesotho and Rwanda. Our services extend beyond the African continent though. In India for example, the popularity of L-Pesa continues to increase, and we already have more than 20,000,000 registered users.
HOW IT WORKS:
How does L-Pesa work?
Using L-Pesa is exceptionally simple. All you need to do is register your phone number, following which if you are legible for a loan, you can apply to receive one and have your application approved within minutes.
To begin with, a new customer should register their mobile phone number so that they can access the service. Next, the customer can apply for a loan and will be informed of how much must be paid back in each installment, and over what period of time. When the loan has been repaid in time, it is possible to apply for the next loan for a higher amount.
Who qualifies for a loan?
Anyone can qualify for a loan, as long as they have a registered mobile money account that has their original name as per their identification card. It is only when there is a mismatch of this information that one will be unable to use the services provided by L-Pesa. In addition, they need to have 6 months history with one of L-Pesa’s mobile banking partners, and have completed a minimum of 10 transactions on that mobile banking account.
How do you determine credit worthiness?
Credit worthiness is determined using our unique credit score system, which is based on a customer meeting a repayment deadline and completing the repayment as required. When this is done as per the terms and conditions, then a loan applicant will be given the opportunity to increase the minimum amount that can be borrowed.
Do people need collateral to borrow?
There is no need for any collateral to borrow. All you need to do is register your phone number and as I mentioned above, you must have a registered mobile money account with one of our mobile banking partners that has a minimum of 10 transactions and a 6 months history.
How do you ensure people pay back?
There are several ways. To begin with, the duration for repayment of the minimum micro-loan is spread over five weeks to ensure that the payback amounts are minimal. In addition, we offer incentives for those who repay as required with a credit score system. This system enables one to borrow more if they make their payments on time. If they fail to repay on time, then their credit score drops to zero and they need to build it up again. Finally, failure to pay the debt on time will require you to pay a nominal fine.
COMPARED TO THE TRADITIONAL BANK:
How Different is taking an L-PESA loan from taking a loan with the traditional bank?
L-Pesa helps customers overcome all the issues they would face when attempting to get a loan from a traditional bank. We are also interested in cultivating long term mutually beneficial relationships with all our customers. To begin with, there is the convenience of being able to get access to a loan from any location, and at any time of day or night using your mobile phone.
A traditional bank requires you to make your application physically at the bank during business hours. Furthermore, using L-Pesa is much faster than a traditional bank as you are able to get your loan within minutes. Finally, there is no need to fill out long and complex forms when you want to access a loan. With L-Pesa, all you need to do is register your mobile phone number.
What is the interest you charge on loans and how different is it from the bank?
When you take out a loan worth $5, you are required to make a weekly payment worth $1.40. This means that you will pay a total of $7. With a bank, you are not able to take a micro-loan, and the interest charge for your loan could be upwards of 15%. Furthermore, the repayment period for a bank loan is much longer, meaning that in the long run, your interest payments may amount to more than the principal amount that you borrowed.
THE L-PESA BUSINESS:
Who is L-Pesa’s target market?
L-Pesa’s target market is anyone who has a mobile phone and access to mobile banking services like MTN Mobile Money, Airtel Money, Africell money, M-sente among others.
What is the response you have gotten from current users of L-PESA? Has it been positive?
It has been very positive, allowing us to expand and offer our services in 10 African countries and more in the near future. Furthermore, we have been able to extend what we have on offer, and include micro-loans for farmers which offer them access to high quality yields.
Any statistics on user base, volume of transactions?
The user base for L-Pesa has consistently grown since our services were launched. By the end of October 2015, L-Pesa had 32,000,000 registered users who have access to micro-loans. In Uganda, we expect to reach 5,000,000 users by the end of 2017.
COMPETITION AND REGULATION IN UGANDA.
Who regulates L-PESA operations- is it Bank of Uganda?
L-Pesa operations are regulated in every country that we operate in. This regulation is always done by a local national bank.
MTN Uganda is rumored to launch a similar service soon. Won’t this throw you out of business?
No it will not. Competition is always welcome as it provides L-Pesa the opportunity to improve our offering and cater to the specific needs of those in the Ugandan market. That is why in Uganda, we have entered into joint ventures with local partners from the micro finance market. All of these local partners are granted an L-Pesa license for seamless delivery of our services. Furthermore, our reach and convenience extends to numerous countries on the globe, providing fantastic options for all our customers.
THE FUTURE OF MOBILE MONEY:
How do you see Micro loans impacting business and development in Africa?
The impact is expected to be immense. The traditional banking sector has a large number of restrictions that has denied people access to finance, particularly at the bottom of the pyramid. Access to micro-loans will enable these people who are at a disadvantage to elevate themselves and their lives, allowing them to explore entrepreneurship and contribute to the development of the economy. Africa as a whole stands to benefit the most, due to the enthusiasm and commitment of the people looking to succeed.
What opportunities do Micro loans present for Africa?
The opportunities begin with the possibility of creating profit making enterprises, which in turn will lead to job creation and community development. In addition, micro-loans can help to revive and elevate the farming sector, increasing the current yield which will reduce poverty and food scarcity as well. Micro-loans are an excellent way to help people from all walks of life experience economic and financial freedom.