As the mobile banking landscape in East Africa continues to evolve, financiers have found a lucrative way to speed up the loan business by using mobiles to analyse credit worthiness.
New branch-less bank, Branch International has ventured into this space by analysing credit risk for small scale borrowers and delivering short-term loans through MPESA.
"When you download the app, the app will look at a lot of the data on your phone, analyse your text messages with M-PESA, and your transaction history, put together a financial profile and create a credit score for you and issue you a loan within 10 minutes," said Matt Flannery, CEO of Branch International.
This information is taken from your mobile once you open the application, such as SMS and call logs, and contact lists – Information which is used to assess creditworthiness with safety and ease.
"We are trying to create a bank without branches, meaning your phone is the branch and its with you 24 hours a day,” Flannery said.
According to the CEO, the company which recently launched in Nairobi has seen great success, "giving out thousands of loans everyday”.
Unlike others with a similar model, Flannery states that there is no collateral and also provide longer term loans of up to six months.
"Branch wants to be a branch-less bank in your pocket but we are actually not legally a deposit-taking institution,” he said.
Branch is currently in partnership with Chase Bank which also backs the finances of the system.
The challenge comes in when a client has an account in one part of the continent but travels to another.
"I think one of the biggest problems in Africa is that people are depositing money on mobile payment systems all over the continent but it is fairly fragments,” said Flannery.
He adds: "So it is fairly difficult to get your money from, say, your MPESA wallet in Kenya to an MTN wallet in Uganda, we hope to help solve that problem by using an android application that connects all these mobile systems together."
Flannery’s biggest concern is managing the hyper-growth the platform is experiencing.
"Anyone who starts a company like this could get popular quite fast because the demand is great - so just managing the growth and keeping the server up is our biggest challenge.”
As a computer scientist, he is using “artificial intelligence” (AI) to make automatic credit decisions on people in Nairobi.
“So the default rate is actually only 5 per cent because the AI is quite good, better than a human being at picking people,” flannery explains.
The Branch application can be found in the Google Play Store and assure that they will not sell information to third parties,” unless it is for dedicated business purposes, like reporting individuals to the CRB."