MYC4 addresses the problem of financial inclusion and funding of micro and small businesses in Africa.
Focus: small and medium enterprise development, financial inclusion
Geographic Area of Impact: Kenya, Tanzania, Uganda
Model: Social Business
Number of Direct Beneficiaries: 3,720 (2012)
Annual Budget: US$ 450,000 (2012)
Percent Earned Revenue: 82%
Recognition: Social Entrepreneur of the Year 2013
Microfinance in Africa is growing rapidly and offers significant potential for African businesses. However, many MFIs have low lending capacity due to lack of appropriate mix of funding. For those who do not have access to fair microfinance, loan sharks are a common source of funding, often charging exorbitant rates of interest (10% flat per month in some markets), triggering a new cycle of poverty driven by perpetual debt. In Africa, more than 380 million adults have no access to funding, which is a challenge for Africa’s growth and prosperity because micro and small and medium sized enterprises (SMEs) require capital to develop business, create jobs, and formalize. For the few that are able to grow their businesses beyond the start-up phase, no real financing options exist to scale their business to the next level. Microfinance institutions average loan amount in Africa is €150 and many usually cap their maximum loan sizes to €5,000. Even the largest MFIs rarely lend more than €10,000 for a single borrower, leaving most small entrepreneurs and SMEs with no way to fund their growth also known as the ‘missing middle’.
Innovation and Activities
MYC4 is an online crowdfunding marketplace that was launched in October 2007 based on the vision to create long-term and sustainable economic growth through igniting business development and entrepreneurship. MYC4 wants to remove the financial barrier that significantly contributes to underdevelopment of businesses in Africa, by enabling people from all over the world to connect directly with African entrepreneurs who lack capital to develop their businesses. MYC4 has built an online marketplace for loans to un-bankable entrepreneurs under free market forces. MYC4 is providing businesses in Africa with direct access to capital on fair and transparent terms as well as providing investors with access to risk/return-adjusted. MYC4 presents an opportunity to make a difference as well as the potential for investors to make a profit.
The marketplace is built around a network of African Providers (MFIs) who screen the entrepreneurs looking for a loan. When an entrepreneur passes due diligence, the Provider uploads a profile to the marketplace and handles the financial transactions, repayments, and reporting when a loan is funded. A very important aspect of MYC4’s vision is to build online creditworthiness for the entrepreneurs, so that in the future they have increased opportunities to access capital. Transparency and online information as to the entrepreneur’s track record is a key aspect to achieve this.
An average loan on MYC4 is €1,700 funded by 50 online Investors and repaid over 12 months. The smallest loan amount is €100 for 4 months and highest is €50,000 for 36 months (grace is offered up to 12 months). The investment process is based on a Dutch auction principle, which means that the more investors interested in investing in a specific African business, the more favorable the interest rate is for this entrepreneur. Loan products are in APR (Annual Percentage Rate) and based on declining balance (not flat fee). To date 19,500 investors from117 countries have lent €18,275,111 (USD 25m) to 11,900 small businesses in 7 African countries.
Mads Kjaer is the CEO & Co-Founder of MYC4 and has been working in Kjaer Group A/S since 1984, serving 20 years as CEO and from August 2006 as the Chairman. Mads believes in the idea that “businesses must be for-profit, but profit must be for a purpose.” Mads has 30 years market experience from Africa and lived in Zimbabwe, Uganda, South Africa and is the Honorary Consul for Ethiopia in Denmark.
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