hiveonline-Mercy Corps Community Finance

Savings Groups (SGs) have helped build financial resilience for vulnerable women affected by conflict in North East (NE) Nigeria and serve as a leverage point for building and growing small enterprises.  Mercy Corps is supporting them to raise hybrid chickens, creating alternative livelihoods, but it's hard to manage the accounting and get access to formal finance without credit history.  Several local MFIs in the region have closed due to the insurgency, which constrains SGs from accessing formal financial services and other commercial opportunities. Hiveonline's community finance solution helps SGs manage their finances, building credit history based on commercial activities and structuring lending for targeted goals.  Hiveonline builds the bridge to the formal financial system, even remotely, and helps informal enterprises build wealth in the community.  The blockchain based record keeping and cheap digital cash helps unbanked entrepreneurs grow businesses in the community, without the need for expensive banking services.

Women entrepreneurs are disproportionately excluded from financial services, so can't grow their businesses.  Even so, they are more likely to give back to their communities than male entrepreneurs.  Savings groups have helped them build financial resilience, but they don't help the women build a formal credit history because records are on paper.  Despite this, savings groups have been developing increasingly organized commercial activities.  Mercy Corps has been helping them to create businesses, by giving them access to hybrid chicken husbandry.  

North East Nigeria, like much of the Sahel, is suffering from insurgent raids, targeting communications equipment, discouraging finance operations like MFIs and restricting movement, especially for women, even more than COVID.  And COVID is a challenge for the group meetings, with groups of 20 to 60 women forced to meet separately, in smaller numbers, making accounting and managing their businesses even more challenging.  

In Nigeria, one in five adults is a savings group member.  All are now in need of simple to use digital solutions, which work on cheap devices with very poor connectivity.

Hiveonline is supporting SGs in Niger and cooperatives in Mozambique, in partnership with NGOs.  Mercy Corps has been running Poultry Development for Resettlement to revitalize poultry livelihoods and markets in Nigeria’s Borno State, an area experiencing unprecedented humanitarian emergency due to Boko Haram insurgency and government military response. It helps1,600 female-headed returnee households engage in safe income-generating and savings through poultry rearing and Savings Groups. It creates employment opportunities for small entrepreneurs, addresses multiple issues to returning refugees including job/wealth creation, financial/social resilience, and women’s economic empowerment. But to scale, they need more efficient accounting and voucher management.  

MFIs have pulled out of the region because of insurgency, further restricting the women's access to formal community finance. However, these and others who still remain are willing to lend to the women if they could access them through remote KYC mechanisms.  

The Inception phase will deep dive into the findings from Mercy Corps' three year programme, to identify priority digitization opportunities based on Hiveonline's existing platform, which are likely to be record management and reputation/credit history proxy, as we have found elsewhere.  Following this research, we will iterate rapidly, regularly engaging the women to ensure their needs are being met.

hiveonline addresses all dimensions: 1) structured lending to enable cashflow management for commercial activities, and facilitation of accounting for savings and lending groups; access to formal finance through individual and group behavioural profiling.  2) through deployment of a lightweight web app that runs on any device with a browser, using less than 1/3 the data of WhatsApp and designed for low literacy, dropped signal and 2G networks.  3) by creating a portable digital behaviour signature and digital wallet that can interact with but is independent of national financial institutions, together with digital vouchers to reduce inefficiency and support remote delivery.

We combine savings group accounting and a focus on communities, with sophisticated lending and voucher structures that can transact different types of value, for example chickens or grain, as well as money.  Unlike other savings group apps (Chomoka, Jamiione, mytontine etc) we focus on the commercial ecosystem, and unlike other Cooperative management tools, we provide incentivised lending to encourage sustainable behaviours and community collaboration.  Our reputation system alone could be Africa's Trustpilot, but unlike Trustpilot, it's based on facts, not opinions!  Our blockchain based stablecoin is pegged to the national currency, but unlike mobile money it enables communities to build wealth through savings, without needing a formal financial institution account or even individual phones, and at a fraction of the cost.  

hiveonline is a Progressive Web App (PWA) that works on any device with a browser, including Feature Phone+ - we've built it to be compatible with KaiOS (operating system for feature phones that supports apps) and it's working in 2G areas with very poor coverage in Niger.  It sends notifications to "dumb" feature phones via SMS, and also works on tablets and PCs if required.  There is only need for one device per community, as it can hold all the wallets for members of a group, so it's suitable for rural areas where many women lack access to phones.  The menu-like structure is designed for low literacy and the processes mimic standard savings group activity, so it's easy to learn for women familiar with savings groups.

We're on the Stellar blockchain (stellar.org) which is in use by several financial platforms other than hiveonline, as it supports low-cost transactions.  We have a three token structure - the stablecoin is pegged to the local currency, then there is a share token which the women hold to represent their cut of the savings/commercial pot, and a debt token for lending.  The reputation system uses standard machine learning techniques to build a profile based on behaviours such as attendance, voting or commercial activities, as well as transactions.

Input: 

• hiveonline Group Management app
• Identity service
• hiveonline Reputation score
• Blockchain-based accounting and record-keeping
• Blockchain stablecoin
• Training material for field agents/train the trainers

Output: 

• Digital Group (VSLA / Coop / Association) Management 
• Digital behaviour history
• Identity linkage across different systems and data sets
• Access to credit from formal financial system
• Digital vouchers
• Transparent immutable data, rails for money transfer
• Behaviour change for farmers

Outcome:

• Groups can manage services more efficiently
• Members can be identified across multiple systems
• More capacity for Groups
• Capacity building for chicken sector
• Deepening of financial system 
• More efficient markets for distribution
• Lower cost of business operations
• Professionalise group’s commercial activities
• Link funding to business skills

Impact:

• (Short term)
• Wider membership of Groups 
• Increase social security
• Increased use of Group services by women
• Increased Chicken production
• Less money lost to middle men
• (Long term - already measured by Mercy Corps through existing programme marked *)
• Economic growth of the Chicken sector*
• More resilient communities
• Increased employment opportunities for women*
• Community wealth increases*
• Better access to infrastructure, education etc.
• Stimulate jobs and growth*

Assumptions (Input to Output)

Technology

• Appropriate infrastructure Appropriate devices are available

Adaptability to change

• Groups will adopt software
• Groups can learn to use software 
• Change is managed by Mercy Corps/affiliates who have capability to roll out software to groups

Customer needs

• Women want to increase earnings from chickens
• Lenders want to lend to groups
• Groups want to increase membership

Assumptions (Output to Outcome)

Behaviours

• Women interact more with Groups
• Groups and women use software regularly
• Groups enter data accurately
• Groups able to maintain hardware 

Customer needs

• Women want to consume information
• Data meets lenders’ credit rating needs

Regulatory

• Regulatory licence can be obtained for money transfer
• Regulator allows off border storage of data

Assumptions (Outcome to Impact)

Behaviour

• Women give back to community

• Chicken farmers, Groups and women embrace automation, to enhance productivity and financial returns

Economic

• Additional employment opportunities will lead to more people working in the community
  

The cash and voucher distribution mechanism can integrate with any financial system including mobile money, banking or government portals, as long as they have the requisite APIs.  The platform can be used for distribution of social protection and aid to groups, in the same way it can be used for credit.  The fully traceable transaction chain can also guarantee that the voucher or cash has reached the desired beneficiary, and could also be used for targeted spending, for example on chickens, grain or public infrastructure, using simple tagging systems.  As the reputation system measures all the actors in the ecosystem (group members, lenders, merchants, farmers and middle men) it can also encourage ethical behaviour in financial institutions, merchants and middle men used in distribution.  

Since our target group is informal workers, the reputation system builds profiles based on social bonds in the savings groups (although we have also built in anti-fraud/terrorism checks) so even women with no formal ID, phone or credit history can build up a reputation, which can be used as a credit history proxy, making it ideal for refugees and displaced people, as well as rural women.  

NB while digital money distribution requires partnership with a licensed entity, voucher and credit distribution can be done without a licence.

We built our original savings group solution for the rural women of Niger, who have the lowest literacy rate in the world.  It's designed to be meaningful to people used to menu driven phones, or no technology at all.  We asked the women which symbols would be meaningful to them and tested it with many groups of women to ensure it was as user friendly, and as meaningful to them, as possible.  However the Niger solution was also built for very low data use, due to the high cost of data in Niger, and we can incorporate more symbols in areas where data is less expensive, to make it even more intuitive and easy to use for low literacy people.

The other feature to support usability is the ability of the group's Secretary (or Cooperative/Association manager) to operate wallets on behalf of group members, if they lack literacy or access to technology.  The app also sends SMS to dumb phones where members have them, and supports multiple security features to prevent corruption.  The ladies in Niger particularly like the ability to fractionalise lending in the group, so they can repay in installments, and the confidence that the numbers are correct.  

We have APIs that can interoperate with mobile money providers, financial institutions, or other entities, assuming they are technically capable of integration.  Our system is structured as microservices so elements (e.g. reputation system) can be accessed through APIs without needing the full app, although the reputation is mostly built based on interactions with the app.  We are integrating other data sources (e.g. cashew inventory system in Mozambique, FishForever MyFish application etc) to harvest other data through APIs in the same way.

Collaboration and integration is core to our principles because we stick to what we know - the financial structures, Machine Learning and Blockchain that are our specialities - and prefer to integrate with other systems such as agricultural inventories or third party lenders, insurers, etc, rather than losing focus. 

Partly because it's a PWA, we are able to cache data locally, making it very tolerant of dropped and poor signal.  We have also architected it to manage in very low connectivity, on the following devices with any signal strength from Poor to Excellent:

Devices

• Desktop
• Laptop
• Tablet
• Smartphone
• Feature+
• Feature (SMS)

Standards

• 2G (50 Kbits/s)
• GPRS (114 Kbits/s)
• EDGE (217 Kbits/s)
• 3G (384 Kbits/s)
• HPSA (7.2 Mbit/s)
• HPSA+ (168.8 Mbit/s)
• 4G (1 Gbit/s)

Because it is a Web app it doesn't need updating, and uses very little data (about 1/4 of Whatsapp data).  It is currently in the following languages, although adding new languages is fast:

• English
• French
• Swahili
• Hausa
• Zarma
• Spanish

We have tested it extensively with women who have some of the world's lowest technical, functional and numeric literacy in Niger, taking feedback to make it easier to use.  

c. 2-5,000 - Mozambique will be to 200,000 after a year, not sure about Niger (savings group members 800,000) due to ongoing discussions with UNCDF about next phase, which will probably include agricultural communities.

Other countries likely to be about 30,000 by end of 2020. rising to around a million after five years.  We are seeing strong demand due to the COVID crisis with new countries being proposed regularly, for example we're currently in discussion about projects in Kenya, Uganda, South Africa and others.

The key milestones are below, although we are ahead on some (e.g. the agricultural ecosystem).  Ultimately we aim to rebalance the economies in the communities we support, so that they can grow more wealth and invest in sustainable environments.  We do this partly through making their business ecosystem more efficient, and longer term give them means of monetising social and natural capital, to realise value from the strengths their communities already have. 

Multiple Instances Aug 2020

Additional customer communities onboard (Mozambique)

Number of customers building digital history

Coronavirus Response Sep 2020

Support distribution aid/government funding

Able to pay from additional funds

Scale to agricultural communities Sep 2020

Farmers repeat use

Can identify farmers across financial and agricultural databases 

Native Mobile Money Nov 2020

Customers using mobile money

Reduction in cost to customers, reduced errors

Merchant Services May 2021

Customers can access additional services e.g. seeds, materials

Reduction in time spent sourcing merchant services

Peer to peer finance Oct 2021

Communities lend to each other

Reduced cost of lending, increased access to capital

No further growth in Nordics team Nov 2021

All growth in target countries

No further staff increase in Nordics

Reduced impact of economic shocks Mar 2022

Communities better able to weather economic shocks

Reduced hardship in times of economic crisis, e.g. crop failures. More employment opportunities generated by micro businesses

Strategic shift to organic scaling Jun 2022

Building community wealth

“Rails” are in place, all scale partners on board

Communities growing laterally, using wider range of services

COVID has caused an increase in demand for digital financial services, but also halted our distribution in Niger while CARE focuses on other critical activities.  We are in discussion with UNCDF to continue the distribution.  However we have been able to overcome this barrier in Mozambique, thanks to the partners we have on the ground, and hope to continue to do so in other countries with Mercy Corps and other partners.  We have also had a planned investment delayed by the crisis, which would have enabled us to build out the platform faster and onboard more customers, but we are now in discussion with several investors, including both the ones that were originally going to invest in April 2020.  As an early stage startup our financial runway is always a concern, but we should reach break-even this year even without investment.

Working with NGOs can be challenging because of the project based approach to funding and interventions, so we are currently developing longer term relationships with commercial organisations (Mastercard, KaiOS, local MFIs and banks) beyond the existing MFI and telco relationships we have in Niger.  

Other than that, driving technology change in some of the worst served parts of Africa can be slow and frustrating, although we've found creative solutions and have been forced to develop a platform that really will work nearly anywhere.  

We are learning from our partners in Mozambique about how to manage distribution, and hope to be able to apply the same approach with Mercy Corps and other partners.  We are also vetting partners to ensure they have good distribution capability in the light of the new circumstances, and moving towards a direct to customer model so that our customers can onboard themselves without the need for field agents.

Financially, things are very tight at the moment and we need to start work on this project to supplement income from Mozambique.  With the current projects we have in the pipeline, we should be ok by the end of the year, although we are also hoping to close investment with the original investors we were in negotiations with in February (for April investment) and we also have two other investors now in discussion.  This will enable us to grow the team faster so that we can cater to the increased demand we're seeing, but we're not sure when/if this round will close.

7 full-time, 1 Paternity cover (likely to convert to full-time), 1 intern (will convert to part-time when he goes back to Uni).

We are 5 women, 4 men, 4 Europeans and 5 Africans.  

We have extensive experience building international financial systems and businesses for 9 global banks (5 core banking systems, multiple payments systems, whole business delivery of first online bank for UBS, redesign of Citigroup retail etc), plus distributed systems.  We have worked with regulators in several countries and delivered banking solutions in over 60 countries.  We do advisory and research work for Global NGOs such as UN, Red Cross and banks (HSBC, DSB) into sustainable and impact uses of technology, especially blockchain.  We have advised central banks on sustainable finance and alternative currencies.  

Our development team is formed of elite developers from Carnegie Mellon Post-grad University in Kigali, experienced at building impact focused apps.  Our Researchers and product owners have World Bank, Economist Intelligence Unit, NGO and African start-up experience.  Sofie was responsible for infrastructure for Citigroup for 13 African countries and 5 of us come from Africa.  Latif's Mum is a savings group Treasurer in Tanzania.  Anne, our lead back-end developer, promotes girls in coding at events across Africa.  We are majority women, majority African, speak 9 languages and only one of us lives in the country they were born in.

We worked with CARE on our first savings group app with partnerships with Capital Finance MFI, Orange and Airtel, and we're now also working with Norges Vel, AMPCM (Mozambique Cooperatives Association), Technoserve and Rare in Mozambique, as well as Mercy Corps in Nigeria.  We're working with the Red Cross and others on progressing blockchain technology for humanitarian purposes.  Mobile operating system KaiOS, who are currently rolling out in Africa, is using our case as an example of services that can be delivered via their system.  

Partnerships in development include IBISA (insurance, Niger), Self Help Africa, Mastercard and others.

Our NGO partners help us reach customers through their distribution networks, as they are already supporting the groups who need our technology.  They also fund the development projects for their communities.  The financial partners offer lending products and in some cases, customer access, and we plan to introduce insurance with IBISA.  We take a cut of the price of third party products introduced through the platform.

Segments:

• Users: Unbanked Entrepreneur communities
• Service providers :Financial Institutions, digital platforms, merchants
• Platform data users: NGOs / other agencies

Value Proposition:

• Risk aggregation for informal business communities to borrow  
• Distribution of relief to informal businesses
• Access to merchant services and financial products 
• Ability to continue building resilience in social distancing
• Accurate accounting for low literacy community finance groups 
• Structured and blended/behaviour incentive loans
• Monitoring community savings groups for NGOs

Delivered through a web app, which can run on any browser enabled device:

• Digital behaviour and financial history, as a credit history proxy 
• Community aggregation of funds and risk profiles 
• Digital accounting for savings groups, cooperatives and associations
• Native, traceable, low cost mobile money (with licence) 
• Link to Telco mobile money 
• Structured lending products
• Multiple funds/wallets for investment/insurance management and intergroup lending

Revenue streams:

• NGOs/FIs pay for foundational projects 
• Customers pay transaction fees/subscriptions
• FIs and Merchants pay commission  
• Governments, NGOs, Merchants and IFIs pay for traceable aid distribution and analysis

Distribution channels to end customers are:

• Distribution partners 
• Technology platforms
• Direct to customer: advertising and word of mouth

Customer relationships:

• Institutional customers: PR, formal sales pipeline, then regular change management 

• End customers site visits,  customer support 

Key partners :

• Financial Institutions  
• Merchants 
• Stellar blockchain
• Telcos 
• KaiOS 
• NGOs

Key activities:

• Research 
• Product design/development
• Sales and Marketing
• Financial Management
• Licencing and Regulation

Key resources :

• Expert researchers/product owners 
• Developers  
• Customer relationship 
• Blockchain, Cloud  
• Partner network 
• Regulators and Central Banks 

Key costs:

• People
• Fixed costs/professional services
• Operational technology costs 
• Advertising and marketing
• Travel

We are currently reliant on partner funding, usually raised through grants, while we build scale through their distribution networks.  We made 500k EUR last year and aim to reach break even in 2020, although this is partly dependent on partners raising funds, so the date may move into 2021.  The savings group platform is now capable of deploying at relatively low cost, based on translation and change to currency.  

Commission on lending and transaction fees will take over as the main source of revenue from 2021, and we also plan to monetise data to both NGOs and commercial organisations, through aggregated and anonymised reporting.  Plans are currently to charge 2% on lending, based on the reduced cost to lenders, and 0.5% on transactions, although this is likely to vary from country to country.  We charge subscription to large groups and cooperatives, although we are not charging the groups in Niger because of CARE's sponsorship of the early build.  

We also monetise our research, although this is a small revenue stream, however it serves the secondary purpose of getting us in front of potential customers in NGOs, as the people we interview are often the innovation leads for NGOs.

We raised 940,000 USD in 2017 from Angel investors (Sebbot Invest, Cryptowell) for our original Danish product, some of which paid for early development of the savings group platform.  We also had 145,000 USD from Techstars Accelerator in 2019 which was part equity, part convertible debt.  We have also got flexible bank debt which we are using to manage cashflow this year.  

We are currently raising about 1.3 million USD, aiming for convertible debt.  We were due to close a round in April, however the COVID crisis interrupted this and we are still in dialogue with the original investors along with two others, hoping to close later this year.

Operating expenses: 467k, mostly on people, premises and technology

COGS: 288k all on tech (including people)

We regard the World Bank as a key stakeholder in shaping the direction of microfinance, as well as holding a key role in financing developing economies.  We are well positioned to promote the stability and security of the region through our product, in partnership with the WB and our NGO partners in the region.  While we are already working with some key NGOs and our research work has introduced us to many others, we value the endorsement and visibility this competition would give us.  

We would look to Google for expertise with integrating audio communications into the app, as well as other accessibility features, to further improve the platform for illiterate users.  We would also like to learn from their experience with app based payments solutions, and with partnership models.  

We are also an early stage startup with a business model currently based on NGOs raising grant funding, and the extra cash would enable us to build out our African development team to build product faster, and manage all or at least most of the customers coming through the pipeline so we can scale across the region faster.  

We are looking to expand our partnerships further into commercial organisations, in particular African banks and MFIs, as well as supply chain key partners in the countries where we're delivering the platform (Niger, Nigeria, Cote d'Ivoire, etc).  While it's very popular with NGOs, our experience with MFI partnerships has demonstrated it's also very useful for the finance sector, and we would love to learn more about their needs.  We can also learn from agricultural processors and exporters working in the supply chains we're in (cashews, fish, chickens, cocoa) about the challenges and opportunities they face, which impact our customers (farmers, cooperatives and savings groups). 

Ecobank, Societe Generale, Atlantic Bank to build out our customer network in West Africa and help them with last mile access into rural savings groups.  

Fair Trade in countries where they operate, to help them manage corruption and authentication, while helping farmers improve their yields and livelihoods.  

Brac, Grameen, Kiva for microfinance opportunities to reach more savings groups