Why that Facebook post may give or deny you a loan

Each time you browse the internet, connect with friends, pay power bills, make purchases or check your bank account using your smartphone, it is collecting mountains of data about you. Silicon Valley-based company InVenture is using this data to determine if you’re creditworthy.

Shivani Siroya CEO and founder Mkopo Rahisi App. [PHOTO:WILBERFORCE OKWIRI/STANDARD]

By glancing through someone’s phone, InVenture’s app accesses data to uncover behaviour that correlates with the likelihood that a borrower will repay or default on a loan. The app analyses information stored on the mobile phone, including the content of their text messages, emails, facebook or twitter updates and even the frequency of calls.

In an interview with Weekend Business, InVenture founder Shivani Siroya said through her previous experience in microfinance and working at the United Nations, she saw first-hand that hardworking creditworthy individuals weren’t getting access to the credit that they deserved. "This is because they didn’t have a credit score or a credit history to show banks or other financial institutions. Because on this they were stuck," she said.

Prior to founding InVenture, Siroya worked in equity research, and mergers and acquisitions, at UBS and Citigroup/Healthnet, and formerly at the United Nations Population Fund. "I interviewed more than 3,000 individuals across eight countries in Africa and found out that these individuals that were successful, hardworking and creditworthy - we just needed to prove it with data."

Her company puts InVenture’s science into practice with its app Mkopo Rahisi, which launched in Kenya and has already given out 200,000 loans to businesses and individuals. The app gathers data in real-time from a person’s smartphone and provide them with credit in less than five minutes. The app is also available in Tanzania with plans to expand to Nigeria and Ghana this year. For people looking for a loan can install the Mkopo Rahisi app, which then tracks how they use their phones. For instance someone who sends too many messages or a low battery may be a sign that an applicant is a credit risk.

However, for those who make more calls at night or use gambling sites may be more credit worthy. This means that calling at night—you’re price sensitive since at night calling rates are lower. And for gamblers, it shows the ability to pay debts.

From this, it works out the terms of loans and delivers the money instantly to mobile phones. It disburses a maximum of Sh50,000 at interest rates of between 5 and 15 per cent. "We specifically looked at the prevalence of smartphones and mobile money users. Kenya is a country of early adopters and because of this we wanted to test our product here first. We also see that Kenya’s regulatory environment is very open to innovation which made it an ideal place for a technology startup,” she told Weekend Business. There are more than 36 million mobile phone users in Kenya, presenting a large market for financial solutions.

Founded in 2012, InVenture is based in New York and has offices in Santa Monica, New York and Nairobi.
Mkopo Rahisi’s key competitor is Branch app that uses nearly similar concept. Other rival products are Safaricom’s MShwari, which is a partnership between Commercial Bank of Africa (CBA) and Safaricom and KCB’s M-Benki.

In the next five years, Siroya sees the app as the universal product in Kenya and African markets. "Our focus is and will continue to be on improving our product for our customers by helping them get access to the products and services they want and need."

The capital required to get Mkopo Rahisi off the ground was injected by InVenture and other institutional capital providers. Since then, the app has built its financial muscle through Google Ventures, Lowercase Capital, Data Collective and Collaborative Fund.