How Matt Flannery brought fintech to sub-Saharan Africa

21 Nov 2017

Matt Flannery speaking at Inspirefest 2017. Image: Conor McCabe Photography

At Inspirefest 2017, Matt Flannery detailed the process of founding two different fintech organisations servicing sub-Saharan Africa.

Matt Flannery didn’t begin his career in sub-Saharan Africa. After graduating with a degree in computer science and philosophy, he began working as a computer programmer at TiVo, where he programmed a device to help people pause live TV.

He quickly became “jaded” with that mission and generally tired of his job, so he decided he needed to find something more fulfilling.

“I was really interested in existential issues, really restless and wondering what was my purpose in life. I went on this long volunteering trip in Uganda to document stories about people that had taken microfinance loans,” he said, speaking of the practice of loaning to low-income people from around the world started by Nobel Prize winner Muhammad Yunus from Bangladesh.

When setting out on his travels, Flannery braced himself and anticipated that he would witness “a lot of sadness, and poverty and starvation”. He connected with a lot of people who shared his own entrepreneurial spirit; who had small businesses and dreams of growing these businesses.

“In sub-Saharan Africa, there’s a lot of individual small business – everyone works for themselves.”

It was here that Flannery encountered an issue he felt inspired to try and solve: many of the small business owners had good ideas and stable business models, but didn’t have access to the capital they needed to scale.

The things they were looking for weren’t especially cost-intensive either – the first entrepreneurs Flannery encountered really only needed between $300 and $500.

“These are the stories of entrepreneurship and microfinance all around the world where people just need a little bit of money to make a non-incremental improvement in their business that can really increase their profit margin and help them break the cycle of poverty.”

It was from this that Kiva – which claims to be the world’s first person-to-person lending website – came to be in 2005. Its business model would now be considered under the crowdfunding rubric, but the word ‘crowdfunding’ didn’t really exist at the time.

People who have good business ideas, Flannery explained, generally pay back their loans on time; they just lack access to capital because the process of getting money to difficult parts of the world is very time-consuming and costly.

“There’s a distribution problem. We felt like the internet could help address that because, at that time, there were web internet cafés popping up all over rural Africa and small towns, and we could use them as an interface.”

Kiva started to expand to different parts of the world by reaching out to NGOS and community-based organisations, “basically using them as distribution channels for cash”.

The NGOs would post up profiles of local entrepreneurs and use Kiva to raise the funds.

10 years on, Kiva works in 80 countries and has officially passed the milestone of raising $1bn for small businesses in rural areas in developing countries.

Branching out

Nevertheless, Flannery needed to move on to bring his vision to life even further. “I felt like I had all these ideas that I couldn’t raise money for at a non-profit.”

He wanted to create a bank to expand the liquidity-granting capabilities, but he needed a lot of funds to capitalise a bank. It was this that inspired him to found a for-profit socially conscious company called Branch.

Flannery observed in sub-Saharan Africa that the bank branches always had incredibly long queues outside them, leaving people waiting hours to deposit cash and pick up their paycheques.

He also realised that these places were “starved for liquidity”, to the point that there would be traffic jams at the beginning of the month when everyone got paid, and economic slowdown at the end of the month due to people’s lack of access to credit.

Flannery observed the mass migration over smartphones, which only seemed to be growing year upon year, and this made it abundantly clear that there now existed new avenues to deliver financial services to these people.

“There’s this big opportunity to serve them with fintech financial solutions directly, and cut out a lot of the middlemen, essentially; a lot of banks that have old-fashioned practices, that still use cash, that still have lengthy applications, that still qualify people [and] make them wait three to six months to get access to financial services or banking.”

Calling upon his computer science background, Flannery built a system that used AI to examine the reams of data that these people were producing by using the internet. Through this, the AI could instantly approve or reject loans, freeing up more capital for people to use.

This use of data is designed to replicate the credit score system utilised in a lot of developed countries, allowing people to access loans from the likes of Visa.

Nevertheless, there is a huge demand and appetite for modern financial services in these areas – an appetite that Flannery is trying to sate.

“The rise of big data really enables this kind of access to financial services that wasn’t available even three years ago.”

Matt Flannery’s interview on Inspirefest: The Podcast goes live on Monday 27 November.

Inspirefest is Silicon Republic’s international event connecting sci-tech professionals passionate about the future of STEM. Super Early Bird Tickets for Inspirefest 2018 are on sale now!  

Eva Short was a journalist at Silicon Republic