Islam forbids regular credits with interest, but Muslims still have the desire to spend much and pay back in small installments. One of the ways around the limitations is ‘money circles.’ Ten friends throw the same amount once a month in favor of one of the group. It’s easier to take ‘one’ from the family budget, and the ‘ten’ that one of the circle has is already a serious amount that he can spend on something significant. In ten months, it goes full circle, nobody owes anything to anybody, but everybody has a nice new acquisition at home. And by the way, zero loss on paying the interest to the bank – people in the west can only feel envy. The scheme is popular and has been working for generations.
MoneyFellows, the Egyptian startup of the day, translated it into a mobile app. Everything happens the same way as offline: a user enters a circle, pays once a month, and receives the total amount once. In the pre-smartphone era, the circle had to include people who at least know one another – this guaranteed the payment. MoneyFellows takes care of this issue, it covers the amount instead of the freeloader if necessary, and then knocks the money out of him.
In exchange for convenience and security, the startup charges a commission – from 6% from those at the beginning of the circle to 0 from those at the end, the latter are instead motivated by coupons and special offers. Economically, it all looks identical to any European bank, but there is no formal credit with interest, the law is observed, the system works.
MoneyFellows reports 20 thousand circles throughout the company’s history. From this, one might count about USD 100M spun between the users and several million for the startup itself. It brought in USD 31M in its recent round.
#fintech #credit #roundb #egypt
Translation: Kostiantyn Tupikov
Alexander made his career in Russian internet companies including Mail.Ru, Rambler, RBC. From 2016 to 2018 he was Chief Strategy and Analytics officer in Mail.Ru Group. In this position, he worked on M&A, investments, and new project launches. In 2018 he became Deputy CEO in Citymobil, a Russian Uber-like company that was invested by Mail.Ru Group and Sberbank (the biggest Russian bank), then he left the company to launch his own projects. Now Alexander is a co-founder of United Investors – the platform for co-investments in Russian early-stage startups. His blog #startupoftheday (#стартапдня) is one of the most popular blogs about startups in Russia.