While underbanked and unbanked customers in the developed world exist — and face a myriad of difficulties in securing access to financial products — the situation in developing world economies in regards to the unbanked and-underbanked population is a good deal more complicated.
One, because the population is larger — according the World Bank’s most recent data on the subject, globally 69 percent of adults have access to a bank account, but in developing countries that figure falls to 63 percent.
That is actually an improvement. According to World Bank’s figures, 1.2 billion adults have obtained an account since 2011, including 515 million since 2014 — but there is still a lot of progress to be made. And South African-based JUMO, fresh off a $52 million funding round led by Goldman Sachs, is hoping to be part of leading that progress.
Social Impact Financial Products
JUMO first launched four years ago in in Tanzania, with an interest in offering up what it calls “social impact financial products” for customers. More specifically, JUMO offers customers microloans, access to savings (in partnership with banks) and insurance products.
The problem in connecting consumers to services in still-developing nations is that there is an asynchrony between what is profitable and productive for banks to offer in terms of financial products and the needs of customers and small businesses in developing nations.
“It is a very tough play yard to work in,” JUMO CEO Andrew Watkins-Ball said.
Small-dollar loans — less than a thousand dollars — are hard for banks to offer profitably. And there isn’t a credit-checking infrastructure that would even make it possible to make a go of it. It's not only hard for banks in the region to underwrite profitably, it is incredibly hard for them to evaluate consumers in terms of credit-worthiness.
So, on top of the financial products it offers, JUMO has also developed a proprietary credit profiling process that uses behavioral data gathered through mobile networks in order to properly assess the risks associated with its otherwise credit-invisible base of individual and small to medium-size business (SMB) borrowers. According to the firm’s internal figures, it has underwritten $700 million in loans over the last four years and worked with over 9 million consumers in the six African markets it serves (Tanzania, Kenya, Zambia, Rwanda and Uganda).
And though Watkins-Ball says that the firm is not done with Africa yet, its latest big round of funding will go toward its next really big leap forward, and outward, as JUMO looks to expand its services to Asia.
The Rewards, And Risks, Of Experience
Which markets in Asia, JUMO hasn’t disclosed as of yet, though the firm has already begun offering some of its products in Pakistan.
But what it has seen in its exploratory work is that much of what JUMO has already learned and built in Africa is directly applicable to various Asian markets. But, Watkins-Ball noted, for all of the bigger-picture similarities, at a more granular level Asian developing economies are also quite different than their African counterparts, and from each other.
There are no-one size-fits-all solutions in building a global financial services platform to connect historically underserved consumers to the larger world of financial services, because every locality is different, as are the needs of every population.
But JUMO, he noted, was designed to be be flexible and expandable in the number of services it can offer and access. In 2019, Watkins-Ball said, the firm will be teaming up with its African banking partner to roll out what he refers to as the next generation of savings products, although he declined to offer any additional detail on what that might mean in direct terms.
But more than any particular service, the challenge of 2019 and beyond will be building a platform flexible enough to be future-proof in any market where the company expands going forward.
“That’s why we’ve built our platform to be flexible — so that we can always tinker with localizing it around the needs of the local customers, which in some cases can be very serious,” he said. “A $20 loan that can be accessed without collateral in the middle of the night in a rural village can mean the difference between getting a sick person to hospital and going without medical care.”