Financial inclusion is one of the trending topics in Afrika but the number of unbanked people on the continent still remains high. Not only are many people unbanked but this also means they cannot participate in the formal economy.
In South Africa for instance, despite more than 70% of adults having a transaction bank account, only 24% make more than three monthly transactions such as withdrawals, deposits or card swipes according to the World Economic Forum. This becomes an issue in a highly formalized economy such as South Africa where in order to get credit to buy big ticket items such as a house or car a person must be able to provide bank statements that can prove things like proof of income as well as provide a track record of how one uses their money. Added to this, a credit report based on how a person pays their accounts and debts is also used in advancing credit but it doesn't take into account that more than 40% of South African households use trust-based models such as “stokvels” for savings, according to the National Stokvel Association of South Africa.
Co-founders of CommUscore (left to right): Philile Mkhize and Priya Thakoor.
This is where CommUscore believe they can add value.
"Trust is that sauce that makes these informal schemes (stokvels) work and so powerful. We want to use this very sauce enabled by technology to give the people the benefit of all this financial activity." said Priya Thakoor, Co-founder of CommUscore, when speaking to iAfrikan.
Thakoor goes on to explain that both Mkhize and herself are interested in improving financial inclusion in South Africa and "want to solve the real problems that don't get addressed".
"There is an financial inclusion challenge but there already is financial activity in this world that they [banks] don't understand. This was borne from a leadership development project we did with a business school and we decided to take it forward and do something more." added Thakoor.
Both co-founders have worked in large financial institutions in South Africa and they believe this gives them an intimate understanding of the challenges that lenders face in understanding informal markets such as stokvels.
As Thakoor acknowledged, stokvels are based on trust, which is a good thing but can be a barrier for a startup such as CommUscore who are looking at informal saving schemes as their customers.
"We strongly believe we have to build relationships with these communities to prove we’re doing something for them. We also plan to leverage strategic partners that already have some scale in managing these funds. Churches are another place where we hope to prove we can add value. It really means being on the ground and building relationships and proving ourselves. " Thakoor explained.
Simply put, CommUscore provides a software tool for stokvels to administer and run their informal saving scheme. In turn, they (CommUscore) use the data to provide members. with a credit record.
Their platform is also available via USSD and also allows for collection and tracking of each saving scheme's member contributions. They then use an algorithm they developed to provide members with a credit score which lenders can query using a person's South African Identity Number.
CommUscore is definetly a solution which has the potential to integrate some people in the informal sector into the formal sector allowing them to benefit from being able to apply for credit when they need it.