The number of users of the association’s two applications increased by 700% and Money Fellows by 300%. Mahmoud stresses that the Corona pandemic helped achieve this success because many have become accustomed to digital transactions.
“Easier and safer”, this is how Menna Shaarawy described her experience with the digital associations spread in Egypt, which allow individuals to borrow from each other without the need to bear bank interest.
Shaarawy, 31, says, “I receive money on my bank account without delay, and I do not need to run after people to collect my dues. This is great.”
digital financial associations
At least since the beginning of the 20th century, Egyptians have become accustomed to associations in which individuals with strong personal relationships, such as neighbors, co-workers, or relatives, contribute monthly a certain amount of money for a period often ranging from 5 to 20 months.
The total amount is allocated each month to one of the shareholders, and is often the most needy, perhaps due to a health problem, the approaching date of his marriage, or any other urgent need, according to what the economic expert Dina Rabie told AFP.
In recent years, several entrepreneurs have decided to use digital technology to organize similar associations. Ashraf Salah says, “At first I was afraid of these online associations, but I went through the experience and collected money that enabled me to complete the internal works of our house in Upper Egypt, and now I hope to buy a car to use in a small project there.”
Salah has been residing in the Egyptian capital, Cairo, for 4 years, and he uses the Moneyfellows application, one of the first applications in this field, in addition to traditional associations.
The head of the family, who hails from Qena (445 km south of Cairo), explains that in traditional associations, “everyone knows how much you pay monthly and the value of what you get in total, but in online associations the issue is embarrassing, I prefer confidentiality.” He asserts that this service is “worth” what he pays for it.
Ahmed Mahmoud, 28, founder of the association’s application, which began work in 2019, explains, “Through 3 steps on the application, we rid our users of the logistical burdens of traditional associations.”
Ahmed Wadi, founder of Money Fellows, considers that one of the most important features of his application, which dominates the market, is that it has put in place a “strong system” that guarantees users to get their money if one of the participants defaults or fails to pay.
This application has been downloaded more than 1.6 million times, and is used by 173,000 people who have a contract with the company and contribute monthly amounts ranging from 500 pounds (more than $30) to tens of thousands of pounds.
The app only requires users to upload a photo of their ID. As for the payment methods, they are diverse: transfers, cash deposit or electronic payment via mobile phone, which is a widespread method in Egypt.
This is an ideal system for a country in which 63.8% of its population works in the informal economy, according to the World Bank, and only about a third of its population has bank accounts, according to indicators developed by the Group of 20 in 2017.
Mahmoud asserts that its application contributes to “financial inclusion”, a goal that the Egyptian authorities set in mind a few years ago, which is to work to integrate the largest number of Egyptians and economic activities into the banking system.
The Central Bank of Egypt is already cooperating with the two applications in order to integrate them into the official economy, especially that Money Fellows succeeded in obtaining funding of 4 million dollars in the year 2020.
The financing was obtained thanks to an accurate verification system. The user’s credit rating rises as he submits more papers that confirm his ability to pay, which raises his credit limit.
These applications are highly successful. In one year, the number of users of the association’s applications increased by 700% and Money Fellows by 300%. Mahmoud stresses that the Corona pandemic helped achieve this success because many have become accustomed to digital transactions.
With 30,000 users, about a third of whom are in Upper Egypt, the application attracts especially “those who want to get married or pay for private school expenses,” according to him. This means, according to Dina Rabie, that the users of these digital applications are young people who are willing to “take a risk” more than the audience of traditional associations who fear it.
For “tens of millions of Egyptians”, associations are part of their normal lives, according to Rabea, who confirms that such applications are also used by higher levels of professionals.
According to a study conducted by the American University in Cairo in 2018, 43% of the 102 million Egyptians who have savings participate in associations. But many still prefer traditional associations.
Ragab Farghali, 50, says, “Why do I pay interest every month? We help each other, and the whole issue depends on trust (..) That’s why I don’t like online associations.”
He continues, “The people with whom I participate in an association I know, I know where they live and where their families reside. If one of them does not pay what he owes, I go to his brother or his mother to give me money instead.”
On the other hand, the significant growth achieved by the association’s and Money Fellows applications pushed it to expand in Africa and the Gulf countries.