Ethiopian startup eQub is the fintech pitch-off winner at 4YFN 2024, Mobile World Congress startup event. TechCrunch was on the ground in Barcelona to meet head of business development Nahom Michael this week.
The name of the startup is an Amharic word referring to a local form of peer-to-peer credit, Michael said. Equb is a group of people who join forces to save money, which is then distributed in turn.
Known as a revolving savings and credit association or ROSKAS, this method of financing is common in many countries, especially across Africa, where it is used for both personal and business loans. but it has not yet entered the digital age.
This is the opportunity that eQub wants to take advantage of. Starting with an app, it targets users among the growing number of Ethiopians who have bank accounts and mobile phones but limited access to credit.
The creation of a digital Equb is an improvement in itself: For eQub members with bank accounts, they can add money without having to go to an ATM. For eQub administrators, it also means they don’t have to deal with piles of cash.
In addition to convenience, eQub’s points system is also a way for users to build credit history by showing that they are consistent savers. In the long run, it could help eQub expand into BNPL, regular loans and more. but for now, it sticks to the original ROSCAS model: no collateral and no interest. Instead, it makes money by charging a transaction fee when funds are withdrawn.
In her pitch, Michael told the jury and the audience that the app had attracted around 25,000 users since its launch, translating into 200 savings groups. He also showed TechCrunch that the app gives users two options: Either join an existing group or a curated group created by the startup.
Image Credits: eQub
In both cases, eQub takes steps to ensure that savings are safe. For self-managed groups, it does detailed KYC, which is already more than traditional, offline Equbs. This makes sense: these people usually share personal ties, which is not the case with curated eQubs.
However, Michael explained to TechCrunch via text, the requirements are “getting strict” for such groups, “including digital ID, employment letter or business license for proof of stable income, 3-6 months bank accounts, also sign a digital agreement that allows us (eQub) to take legal action in the event of such cases.”
Michael said the startup now has more than 10 banking partners, an approach that can also help limit risks through data sharing. More could be coming: “recently,” said Michael, “insurance companies have offered to create a special limited insurance policy for saving groups where defaults occur due to the death of an eQub member.”
In addition, the startup has 20 corporate partners as part of its B2B2C strategy: If a company’s employees already participate in Equbs, the app now gives the employer a way to make it digital.
One of her next targets will be gig workers, an important component of the workforce in the sub-Saharan country’s cities. eQub hopes to reach 1 million of those users by 2025. But while there’s built-in virality to the app, faster growth will require more marketing, which is one of the reasons the company is looking to raise a round pre-seed worth $500,000. The exposure it got at MWC may help it with that, but also with another goal: expanding to other countries in the near future.
