Moneyfellows Secures $13M to Expand Group Savings Beyond Egypt

MoneyFellows' Unique Growth Strategy in Egypt

Most digital lending companies in Africa rely heavily on working capital for expansion. However, MoneyFellows has achieved significant growth, lending billions of Egyptian pounds with minimal debt or balance sheet risk.

The Cairo-based fintech recently secured $13 million in a pre-Series C funding round. This round was led by Al Mada Ventures and DPI’s Nclude Fund, and included participation from Partech Africa and CommerzVentures.

With this new investment, the company’s total funding now exceeds $60 million. MoneyFellows intends to leverage this capital to transition from consistent growth to broader regional expansion.

Digitizing Traditional Savings Groups

Founder and CEO Ahmed Wadi emphasizes that the startup has maintained lean operations while modernizing a long-standing financial practice: the rotating savings and credit association (ROSCA).

ROSCAs, known by various names like “esusu” or “ajo” in Nigeria, and “gam’eya” in Egypt, are informal savings groups where members contribute regularly to a fund distributed to one participant per cycle.

Traditionally, these groups function best within close-knit communities, but their offline nature restricts accessibility and scalability.

MoneyFellows, established in 2016, addresses these limitations by digitizing the ROSCA model. Its app enables users to easily create or join ROSCA groups, referred to as “circles.”

A Novel Approach to Lending

Unlike traditional lenders, MoneyFellows doesn’t directly extend credit. Instead, it connects savers – those typically last in line for a payout – with borrowers – those who need immediate access to funds.

This matching process utilizes behavioral data, credit scores, and income levels to assess suitability.

The company only intervenes when a ROSCA group has an incomplete membership, according to Wadi.

“When a circle of ten members only has nine participants, we provide the funding for the missing member,” Wadi explains. “This allows the group to proceed and generates revenue from the existing nine members.”

Minimizing Financial Risk

Conventional lending requires borrowing funds from financial institutions, incurring interest costs and the risk of loan defaults.

MoneyFellows distributes both the risk and funding among its user base, keeping the percentage of unfilled ROSCA slots below 10%. This contrasts sharply with the full working capital exposure often seen in buy now, pay later (BNPL) services and other digital lenders.

Currently, only 7-8% of active ROSCA slots require the company to provide working capital, as noted by Wadi.

Although this percentage is relatively low, it represents a growing financial commitment as MoneyFellows expands. To accelerate growth, the company is actively negotiating with local banks to secure working capital, in preparation for a larger Series C funding round planned for next year.

Achieving Profitability and Geographic Expansion from Egypt

MoneyFellows has announced it has attained profitability within the Egyptian market, distinguishing itself as one of the few African fintech startups currently operating with positive financial results.

Since its inception in 2018, the platform’s user base has expanded to surpass 8.5 million individuals, a significant increase from the 4.5 million users reported at its last funding round. Furthermore, the average disbursement amount per user has almost doubled over the past two and a half years, rising from 23,000 EGP ($453) to 45,000 EGP ($906), demonstrating increased engagement from higher-income demographics.

Wadi explained that the platform’s growth is inherently viral in nature. He noted that when the experience of a traditional Rotating Savings and Credit Association (ROSCA) is digitized, participants frequently introduce additional members to the platform. This organic expansion, he contends, is exceptionally difficult to replicate through other means.

Earlier in the year, MoneyFellows introduced a card-based product enabling users to receive funds, manage repayments, and make purchases through a network of affiliated merchants.

The fintech, established eight years ago, also intends to integrate investment, payroll, insurance, and remittance services into its offerings. These planned additions will position MoneyFellows as a competitor to other Egyptian digital banking platforms, including Lucky, Khazna, and Telda.

The company’s subsequent challenge lies in replicating its success outside of Egypt, a goal Wadi initially articulated in 2022. He acknowledges that expansion has been slower than initially anticipated due to the inherent complexities of the business model, which the company prioritized refining before pursuing regional growth.

The digitization of ROSCAs is not as simple as launching a standard savings or loan product. The process necessitates the development of sophisticated recommendation systems to connect users with appropriate opportunities, real-time management of numerous circles, and the mitigation of default and dropout risks, all while preserving user confidence.

“Perfecting the model required more time than we initially projected,” Wadi stated. “However, the investment of time proved worthwhile. Many attempts to digitize Roscas, even by established banks and telecommunications companies globally, have failed due to an underestimation of the behavioral intricacies involved.”

Following nearly a decade of model refinement within one of Africa’s largest fintech landscapes, and after establishing partnerships with over 350 local and regional organizations and facilitating over $50 million in investments, MoneyFellows is preparing to launch in Morocco by the end of the year, having secured essential partnerships and regulatory clearances.

Morocco presents a favorable environment, characterized by a substantial unbanked population, a robust informal savings tradition (locally known as “daret”), and a supportive regulatory framework. MoneyFellows also anticipates that events such as the 2030 FIFA World Cup will further accelerate digital adoption within the country.

The company is also evaluating potential expansion into other African and South Asian markets exhibiting similar characteristics. However, entry into more diverse markets will assess the model’s adaptability in regions where informal finance holds less cultural significance or formal banking systems are more established.

“ROSCAs, or Rotating Savings and Credit Associations, represent a long-standing financial practice, with origins tracing back centuries,” commented Omar Laalej, managing director at Al Mada Ventures. “AMV was particularly impressed by MoneyFellows’ modernized approach to this business, and its positive impact on countless families in Egypt.”