Asaak: automating financial literacy

For informal sector workers such as drivers and traders, there are two main challenges in growing a personal trade into a thriving business: access to knowledge and access to credit. In Africa, this sector accounts for 86% of all business (ILO.org) and is critical as it provides a path towards financial growth for unskilled individuals. Unfortunately, the credit and knowledge gap remain as significant barriers. 

Asaak has witnessed this firsthand as an asset-financing company in Uganda. To help bridge the credit gap, Asaak lends motorbikes, smartphones, and fuel to drivers. To address the knowledge gap, Asaak is planning to expand its platform to include automated training services for English, basic financial literacy, and advanced trade skills.

At Asaak, we believe that literacy and financing can empower all workers to reach their potential. An automated solution to these problems based on NLP would accelerate the growth of workers globally at scale.

Asaak is addressing the significant credit and knowledge gaps among informal sector workers in African communities. Although 86% of African business is informal, less than 40% of drivers surveyed by Asaak have an internet-ready device and only 50% of them have self-described fluency in English. These two segments were found to be highly correlated.

Both internet access and English fluency are necessary to unlock key educational and business opportunities. For example, drivers cannot make a stable income without both a smartphone and the ability to read and write in English, since both are hard requirements at institutions like Uber or SafeBoda. Instead, drivers join informal organizations like SACCOs, which provide some services but cannot guarantee a stable flow of work due to a low-tech approach. 

A successful driver also needs a vehicle. By loaning one, drivers are able to earn equity on their asset, eventually taking full ownership. The problem is that the 50% of drivers who do not have a smartphone or understand English are not able to qualify for a loan from any bank, and are forced to go to local micro-lenders that charge steep rates without value-added services.

Asaak’s solution consists of a web software platform that allows Asaak and its partners to provide accessible, low-cost financial services and free educational services to informal sector workers and small businesses.

The platform provides a layered offering that helps workers access credit and quickly learn entrepreneurial skills, regardless of their background.

1. The first layer enables Internet access through smartphone financing

1. The second layer provides knowledge accessibility through English language training

1. The third layer provides financial accessibility through asset financing: our core business

1. The fourth layer enables business growth through training in finance and technical skills necessary to grow a trade into a business

To enable this platform on the origination side, Asaak uses a combination of sourcing partnerships and a mobile application process to identify and fund candidates willing and able to use business assets productively. On the education and servicing side, Asaak uses natural language processing to power a conversational chat interface (chatbot) that helps customers alongside an in-house support team.

Asaak aims to directly improve the quality of life for all informal sector and small business workers across Africa. Starting with our core segment of boda drivers in Uganda, we are working closely with our clients to understand and build towards their needs. In Uganda, this segment includes 500,000 boda drivers which is 8% of the entire informal sector of 6 million service workers (National Labor Force Survey 16-17). 

After several research studies surveying hundreds of drivers, we have determined a set of common needs across the segment:

1. A motorbike
2. A smartphone
3. Access to refuel and repair services
4. Access to institutional employers

We started off providing motorbike financing but now have coverage for each of those needs. In reference to #4, drivers require English fluency and often need special additional training to work for a ride-share or delivery institutions like Jumia. Today, we partner with these types of institutions to source drivers for loans. We are also starting to refer qualified non-institutional candidates trained through our platform. This allows us to work with a broader pool of clients and provide a greater impact by supporting clients in the long-term effort to start their own businesses.

Asaak directly addresses the challenge by financing and supporting workers exclusively in under-served communities in Africa. We provide each layer of support necessary to expand a basic skill into a business: access to an internet-ready device, access and references to free interactive training material on English, a line of credit for productive assets, and the skills necessary to use those assets efficiently to start and grow a business. We provide the capital (asset financing), networks (institutional partnerships), and technology (mobile app service suite) to empower each of our clients.

Asaak’s technology-enabled and client-first loan origination system is unique among Africa-focused lenders. Our main competitors in the mobility lending segment include Tugende and Watu, both of which are older and operate at a larger scale today. However, they have not placed an emphasis on technology, instead scaling through fundraising, hiring, and write-offs. Asaak is built to scale by using innovative technology like OCR, NLP, and predictive ML to automate as many parts of the underwriting and servicing workflows as possible.

In the financial education space, Numida provides analytics to African entrepreneurs but without lending the assets necessary to make those analytics actionable. This limits their scope to small business owners who already hold many of the keys to growth. By combining finance with education and technology, Asaak is building the first scalable, integrated solution to drive business growth in underserved communities across Africa.

Unlike Tugende, Watu, and most other lenders, Asaak aims to provide long-term value for its clients. We do this by maintaining the cheapest interest rates in the market, providing auxiliary services that complement and enhance the value of financed assets, and regularly conducting focus groups and training sessions with our clients. By engaging with and maintaining relationships with our clients while leveraging technology, Asaak can provide the most effective and efficient solution.

The core technology powering Asaak’s solution is machine learning. Asaak uses machine learning for several key workflows:

1. Various regression and classification models are used to provide insight into a client’s ability to service a loan during both origination and servicing
2. Optical character recognition is used to scan and validate IDs and financial documents during the application process
3. Natural language understanding is used to handle customer inquiries and provide interactive training services (work in progress)

To date, Asaak has used its multi-faceted client data together with off-the-shelf libraries, services, and techniques to power these three use-cases. Asaak is also starting to develop its own proprietary techniques and models in natural language processing, specifically understanding uncommon languages through transfer learning and teaching sessions over a chat interface. We have plans to layer in audio transcription and generation on top in order to provide a universally accessible interface. We believe that this natural language interface together with local understanding are keys to success within our target population of less educated workers without much experience with user interfaces.

Natural language processing is already being used by many service providers operating in Africa, from large providers like Flutterwave.com to smaller ones like Cherahani.org. This technology is typically applied in chatbots that engage clients through text message or social channels. Chatbots provide a natural extension to the text-based workflows established in the last several decades by digital payment processors like M-Pesa and Flutterwave. In most African countries, mobile money adoption is over 50%, significantly higher than in the US. This is in part because the banking industry does not support the working lower class, and in part because mobile payments are now perceived as faster and more secure than cash. 

Workers in both rural and urban communities in African countries are used to transacting over text messages, be it with man or machine. Cherahani uses a Swahili chatbot to interface with female clients from rural areas. Flutterwave is developing an AI platform for small businesses like Cherahani to more quickly deploy their own conversational agents. The infrastructure and psychological conditions are in place to allow chatbots to thrive in Africa.

Our activities focus on providing financial and educational services, including:

• (a) providing cheap financing for assets like smartphones and motorbikes for all,
• (b) providing free English language training and translation services for all,
• (c) providing free finance and trade-specific asset management training for established clients

These inputs are the catalysts for the following outputs for informal sector workers:

• (a)  -> (1) new workers in a given sector quickly become productive and build experience and credit history
• (a, b) -> (2) new and established workers unlock more stable and lucrative job opportunities with large institutions like Jumia that require English and a smartphone
• (c) -> (3) established workers learn to save money and become masters of their craft

These outputs drive workers towards these short-term outcomes:

• (1, 3) -> (i) workers are able to save a larger portion of their earnings as a result of financial education and cheap financing
• (2, 3) -> (ii) workers earn more over time and gain experience more quickly as a result of better core skills and a working relationship with an institution or cooperative
• (1, 2) -> (iii) workers are able to explore work opportunities online thanks to internet access and a proven track record using technology to engage in business. 

These in turn give way to Asaak’s long-term goals: local business growth and financial security for our clients and their communities:

• (i) -> (x) workers with finances become entrepreneurs who can hire and manage other new workers, forming a small business
• (ii) -> (y) workers with mastery become leaders who can train and motivate other new workers, forming mentorships within communities
• (iii) -> (z) workers with flexibility are able to supplement a significant portion of their daily income with online work, providing financial resilience even under extreme conditions such as COVID-19 lockdowns

Today, our solution serves 300 boda drivers and 100 small business owners across Eastern and Central Uganda.

By next year, we are planning to grow 10x by doubling down on Uganda operations as well as launching pilot expansions into neighboring countries in East Africa with the help of our partners. This would expand our reach to include about 3000 drivers and 1000 small business owners.

In 5 years, we plan to expand to Western Africa and grow to support 100,000 drivers and 10,000 small business owners.

By next year, our goal is to launch operational lending pilots in Kenya and Tanzania and grow our educational service pilot into an official platform offering in Uganda. 

In five years, we aim to launch pilots across 10 countries in Eastern and Western Africa and license our entire platform to local service providers in at least 5 of these countries, reducing our operational risk and improving our ability to scale.

COVID-19 and related lockdowns in Uganda have created unfavorable conditions for many of our driver clients because mobility is being restricted by the government. Boda drivers have been banned from operating while the lockdown is in place, and drivers have had to find new work with delivery companies or in other fields.

We also believe that local operational presence is critical to the success of long-term customer relationships, even with an automated platform in place. However, we do not have operational partnerships outside of Uganda, which limits our impact in terms of scaling to the rest of East Africa and beyond.

In terms of adoption, we have also found there to be a strong stigma against impersonal automation rather than real human interaction; over 75% of our client inquiries come in through a call to a human agent.

We believe that lockdowns present a short-term barrier that will naturally ease as COVID is brought under control near the end of 2020. Uganda already has one of the lowest rates of new cases in Africa thanks to a swift and enforced government response. Asaak will continue to invest in the mobility sector as it provides reliable work and community for many young Africans without secondary education. In the meantime, Asaak is working to help its drivers place into new driving jobs with our partners.

Our lack of operational partnerships is a short-term barrier that we are working to support by working with our existing partners who operate beyond Uganda to identify potential local financing partners, and applying to grants like MIT Solve for opportunities to connect with larger international partners like WorldVision or Village Enterprise. 

The stigma against automation is a long-term barrier. We believe that over time, clients will realize the value in the efficiency and availability of a computer agent. We also believe that our natural language processing and understanding engines, both internally at Asaak and in the industry at large, will continue to improve to levels at which conversations with a computer start to feel natural.

Full-time: 10

Part-time/interns: 2

The Asaak founding team consists of dedicated members with the skills necessary to succeed in deploying financial and educational services internationally at scale:

• Kaivan Khalid Sattar, CEO, was a quantitative analyst at the Federal reserve with experience in macroeconomics, data science, and credit modeling
• Edward Egwalu, COO, is an operations and IT specialist with experience running local technology-enabled operations in Uganda
• Dylan Terrill, CBO, is a business and finance manager with broad experience in investment banking, financial modeling, and fundraising
• Anthony Leontiev, CTO, is a full-stack technology leader with skills in distributed systems and machine learning, applied across education and finance

This team already has 3 years of experience deploying financial services in Uganda. We have built a local operations team from the ground up, conducted user research and pilots to identify the key industry segments, and continuously worked to improve our product, user experience, and client rates.

The team has developed partnerships and relationships with many key stakeholders: officials within the Ugandan government, large multinational ride share and logistics companies, and smaller local credit cooperatives. On the fundraising side, we work with regional and international institutional investors for both equity and debt.

Asaak’s key relationships are with large service providers that employ local Ugandan workers as contractors. These providers represent a gold standard for work as they choose to engage only with those workers who have a smartphone and fluency in English. Primarily, Asaak works with these providers by lending assets to clients referred by the provider. Asaak also brokers the hiring of willing and able candidate clients who are not already within any partner’s network. 

Asaak also works with smaller credit cooperative institutions called SACCOs and even less formal organizations of boda drivers called boda stages. As with large partners, Asaak provides loans to SACCO and stage clients. However, Asaak does not refer its own clients to these organizations because we believe that our institutional partners are better suited to provide stable work and growth potential for our clients.

Asaak provides asset financing to African SME’s, especially in the transport sector, through a mobile platform. We are building an asset class that delivers social impact and attractive returns by making Africa investable to the outside world. We borrow money from fixed income investors targeting 13-15% annual returns and lend to African small business owners with strong cash flows and character. After repaying debt investors, Asaak retains the remaining profits. 

Our typical customer Mugisha is a young Ugandan who grew up in a village. He dropped out of school to support his family with agricultural work. In his mid-20’s, he realized he cannot make enough income from farming to start a family so he moved to the nearest city to look for work. Having limited formal education, he cannot read and write in English so there are no office jobs for him. Mugisha also doesn’t have enough money to start a business. The most accessible job in Uganda is driving a boda; anyone can rent a motorcycle and start carrying passengers. The rentable motorcycles are old, requiring frequent repairs at the renter’s cost. Mugisha would love to own a motorcycle but has no documented income or credit history to access a bank loan.

We work with bottom-of-the-pyramid customers with primary level education to double their income through our suite of asset financing products. We do this in a profitable way to achieve maximum scale so we can one day reach the 11M boda drivers throughout East and West Africa.

Our business model is to originate secured business purpose loans with minimal bureaucracy using borrowed capital. Being the only fintech asset financier in Africa, we have introduced significant technological innovations to the industry which allows us to have a 4x faster turnaround time and a 3x lower customer acquisition cost than our brick-and-mortar competitors. We raise equity capital from venture capital firms to invest in our tech and data, constantly automating more of the lending process to streamline the user experience. We raise debt capital to grow the loan portfolio.

On occasion, we raise grants in order to test initiatives like a new loan product or the provision of value-added services like education to our client base. Our thesis is that the provision of smartphones plus financial and business training will pay for itself in the long run in the form of fewer late payments and higher revenue growth in our SME clients, leading to more high quality loans disbursed to each borrower. This MIT Solve grant will help us build a track record for a novel approach to COVID-19 resiliency for SME’s by digitizing their business models. Subsequently, we can raise debt capital from private lenders to purchase more smartphones and sell them on credit. Just before the COVID-19 induced lockdown in Uganda, we had achieved profitability as a company and are confident that our business model is self-sustaining.

Asaak is applying to Solve in order to unlock additional funds and partnerships to empower our solution. We do not believe that solve can help us deal with the short-term impacts of COVID-19 lockdowns. Instead, we believe that there is long-term value in identifying partners to help us scale our solution across Africa and securing funds to hire data scientists, operations managers, and language experts.

On the hiring front, we believe in hiring technology talent from leading higher education institutions like CMU-Africa. We are looking for additional support in hiring operations management and recruiters in each new operating country. We also believe that partners like WorldVision and Village Enterprise can help supplement operational staff as part of joint ventures or software licensing agreements.

In order to source and acquire the best talent, and in order to deliver our new educational services free of charge and build at maximum capacity in accordance with our growth plans, we need additional funding dedicated to this project. Our current equity and debt funds are already allocated entirely towards our core business of asset financing. 

We believe that MIT solve and its network of fundraising partners and solvers can provide both the partnerships and funds we need to make the project successful.

We need partners to assist with on-the-ground operations in African countries outside of Uganda. This includes hiring local directors, managers, and customer agents, connecting with local government officials, lawyers, and tax experts, and marketing to new customers. 

We are specifically looking to partner with Village Enterprise in the near term and WorldVision in the mid-long term.

By working with Village Enterprise, we could scale to Kenya and expand our reach to all regions of Uganda. Village Enterprise has impacted over 1 million people across Kenya and Uganda and has a similar mission to Asaak. However, they do not have a technology platform, instead relying on employees and operational partners for most workflows. We believe Village has strong on-the-ground experience and a working model that could use some of our automated techniques to scale more effectively.

WorldVision is a larger potential partner with operations in over 15 countries in Africa impacting over 30 million people worldwide. We would like to work with WorldVision in a joint venture, developing services together to meet the needs of their existing community constituents. We believe that their network provides the fastest path towards scaling a product for lower-income workers in Africa.

Asaak qualifies for the GM Prize on Good Jobs and Inclusive Entrepreneurship because we are focused on improving the livelihood of low-income earners without means but with entrepreneurial desire. With our focus on vehicle financing across Africa, we believe that there are many possible synergies between Asaak and GM, especially as we think about sourcing vehicles and retraining drivers who are not allowed to ride during lockdowns to work in other environments.

Asaak qualifies for the Gulbenkian Award for Adult Literacy because our solution focuses on adding layers of digital literacy on top of our existing financial service offering. By providing English, finance, and asset management training through our mobile platform, we are empowering workers to become masters of their craft, explore new careers, work online, and ultimately provide financial security and prosperity for their families. We are interested in growing through partnership and would be open to a pilot in any community with underserved lower-income earners, including in Portugal.

Asaak qualifies for the AI for Humanity Prize because natural language processing is pivotal to our solution. We are using NLP to service basic inquiries but are working to expand our chatbot to act as a benevolent teacher as well as a loan officer. To build an effective educational feedback loop, we plan to continue raising the bar on language translation and transfer learning, efficient model training, and educational dialog flow for African languages.

Asaak qualifies for the Future Planet Capital Prize because we are a nearly profitable venture with a tested business model that focuses on impact. We use automation and analysis to provide the most meaningful products to the right people, saving time and money over our competitor's solutions.