Idea: A peer-to-peer lending solution similar to the Nobel peace prize-winning Grameen bank solution from 2006, but technology-enabled, targeting Africa. Where Grameen bank got most of its capital from donors and eventually the central bank, you can host kickstarter-esque projects on a platform that people from all over the world can finance for 20% interest. This would give the poorest people in the world access to finance, and give people with savings an opportunity to earn higher interest rates.
Problem: We mentioned yesterday that over 50% of Africa's population is unbanked and some reasons for it. What we can add today is that 83% of Africa's employment is informal, suggesting that starting your own business is the norm, requiring capital. But we know that access to capital is limited due to the lack of banking infrastructure. On the investor side, although there is increasing demand for mass-consumer-accessible impact investment opportunities, there are very few investable opportunities available. Likely due to poor social impact transparency.
Insight: Not yet
Validation method: The supply-side of this business model is definitely where I would start. You would need to focus on a specific African market, then find some local communities to start with. Although online marketing allows you to validate the market with limited cost and effort, this is a trust-oriented business that would require some face time. So you may need to get your feet on the ground and talk to some of the locals with a guide and interpreter. The first step would be getting in touch with a few local NGOs, and ask to be connected with the small business owners to understand their appetite for such loans. Given the small amount of investment capital required, you could even try do a few pilot investments at $10 to $100/SMB.
Notes: There are a few startups that have been attempting to do something similar, but they have struggled with sourcing the local investments. For the best results, this startup should be as grass-roots led as possible, focusing on women who can help women. There are lots of interesting strategies that you can gather from studying similar micro-lending programmes from around the world. For example, creating small accountability groups to support each other, verify identity, but also decrease the rate of defaulting. To put it into perspective, Grameen bank managed to get to 99.6% repayment rate, compared to the 93% repayment rate you see in America.
Why am I doing this? I’m an innovation consultant who helps businesses build new products, and ventures. And I want people to see how easy it is to build, and validate an initial business idea. Hopefully inspiring them to start their own business.
Am I worried that people will take the ideas? I hope they do. These ideas will hopefully make the world a better place. Just remember, “Ideas are cheap. Execution is everything”. What’s most likely is that within a month of testing the idea, the idea would have completely pivoted, but this is a starting point.