Malako is about providing a credit facility to enable Pay-as-you-go (PayGo) solar users be able to meet their daily/weekly/monthly required payments so that they can keep their lights on. The PayGo solar model works in such a way that a person has to make payments broken down to the daily, whenever a person does not make the payment, their power is remotely switched off by their solar provider.
However, as most solar users are in rural areas and rely on subsistence farming for a living, their cash flow is very volatile. They could comfortably afford to make their payments during the harvest season but they are usually short of cash when it is not time for harvest.
Also the distance involved in getting to the nearest mobile money agent makes it hard for them to make their payments as some even have to wait for market days to be in position to make their solar payments. This leads to over 40% of the existing PayGo solar users making a late payment at least once a month. This in turn also affects the solar companies’ cash flow as it gets tired up in these late payments.
How does it work?
A PayGo solar user just dials our short code, *270*222#, selects the option for borrowing and then their solar company. We then verify if they are an active user with that Solar company and what their solar package is. (smallest package hence cheapest is the 2-light system). We then assign them credit based on our assessment of their previous payment records and the size of their solar system.
Kalule, a student at the University of Notre Dame in Indiana, USA who later decided to take a gap year (dead year in Uganda) to focus efforts on Malako explains that; While he was still at Notre Dame,
I and Hilda were able to save up up to $15,000 dollars between the summer of 2015 and the summer of 2016. We used that money to start up Malako once we returned to Uganda. I attended the inaugural Caribou Digital Financial Services (DFS) Innovation Lab in Dar es Salaam, Tanzania which aims to support early stage FinTech start-ups in Sub-Saharan Africa and South East Asia. We were the only African team selected to get 6 month mentorship and a $100,000 grant. – Founder & CEO Malako, Kalule Raymond
Malako was recently crowned the national champions of the Demo Africa pitching competition in Uganda where they get to compete with the East African regional winners for a guaranteed spot at Africa Demo Day in Johannesburg, South Africa which comes with $150,000 in funding and support over 3 years as well as pitching to high profile investors.
The team is going to be lending solar energy units to people who have not previously had a formal history in borrowing. Through using Malako, they will create a credit history and a credit score for users that will unlock access to other financial services for them. One of the biggest reasons why credit is so expensive in terms of interest rates is because financial institutions do not have sufficient data to gauge the risk associated with various borrowers. However, with the credit history that a user will have with Malako, it will be a big first step in determining the risk attached to lending to such a person.
Kalule attended high school at the African Leadership Academy in Johannesburg, South Africa and studied Entrepreneurial Leadership, where they had a great focus on Africa and they could actually transform the continent through entrepreneurship because at the moment, over 40% of the African population is below the age of 15. (Uganda’s is close to 50%).
It is mostly regulatory, as a fintech company in Uganda doing finance for alternative energy, the team has had a lot of trouble defining Malako legally. In the current law, They were being defined as a money lending institution which did not go down well with Kalule. He has heard stories of how these money lenders exploit people and did not want anything to do with that.
Getting accepted to the DFS Lab accelerator program is probably Malako‘s greatest achievement so far. Besides winning the $100,000 grant, the team also got 6 month of mentor-ship and access to a network of fintech experts from reputable institutions like the World Bank and people who have successfully launched companies in Africa, for example Nick Hughes, the founder of M-pesa and Mkopa and Ben Lyon, the founder of Kopo Kopo, the largest merchant acquisition platform in the mobile money business.
Uganda is the most entrepreneurial country in the whole world. Some of the things we are lacking as a country is lack of support from the government to smoothen the process of beginning up a startup for example, using USSD as a channel for one’s service is extremely expensive at almost $15,000 (over 54 million shillings) which only leaves the huge players who can pay this to take their innovations to the market. Another serious is lack of access to funding for most startups in the country, however, with increasing exposure of Uganda to the world, the investor eco-system will soon start paying the necessary attention to Uganda like it does to our neighbour, Kenya. – Kalule adds
Raymond Kalule is the lead at Malako, mainly responsible for seeking funds to keep Malako running as well as everyday administrative work. Hilda, a student at Smith College in the US is responsible for making strategic relationships. Solomon Kitumba is both a developer and a business development person while Philip Simbwa is the main software development consultant.