It all started last Spring on my day-long visit to Khayelitsha, a township located just outside Cape Town in South Africa. I was there on a study trip along with a few other business school students from US, Turkey, China and South Korea. Our day was packed with visits to local families in the township, meetings with small business entrepreneurs and a traditional South African lunch at a locally run bed and breakfast.
While most people I met and spoke to in Khayelitsha were seen fighting adversity of some magnitude, one story that left a profound impact on me was that of Bonga Mubaya. Bonga is a remarkably talented and ambitious entrepreneur, who started his carpentry business in 2012. With sheer hard-work and grit, he has grown to a point where he earns an average annual income of R84,000 (~$6,000) from furniture sale. He has a vision to not only scale up his business, but through that generate employment for people in his community. He aspires to elevate the socio-economic condition of Khayelitsha, which today is one of the poorest areas in Cape Town with a median annual family income of R20,000 (~$1,500), against a city median of R40,000 (~$3,000).
Our picture with Bonga (in white T-shirt), taken outside his furniture workshop in Khayelitsha
So, what could possibly be keeping Bonga from pursuing his dreams and living his potential? Surprisingly, considering he is making twice the country’s median income, it was lack of credit. On questioning further, I learnt that Bonga had been denied loans from all banks because he could not provide account statements as evidence of his cash flows. Even though he was well over the minimum salary requirement (R3,500 per month) for small size loans, he could not avail of credit finance because his business transactions happened largely in cash. More importantly, Bonga knew how to make good use of the money he was asking for. He needed funds to purchase a vehicle for transporting materials and finished furniture goods, a move that would make his business more profitable. Sadly, he was left with no choice but to use public or rented facilities which added significantly to his transport cost.
Deeply moved by his story, the first thing I did when I got back to my hotel was tried to find out how many people like Bonga existed in the world. The closest I could get to that was by looking up figures for number of underbanked people worldwide. The numbers were alarming, to say the least. Globally, 1.7 billion adults do not have a bank account, and about a fifth of account owners have reported making no deposit or withdrawal in the last 12 months. I learned that about 3 billion people worldwide today remain excluded from the formal financial system. Over the days that followed, I became obsessed with looking for alternate lending solutions that could be scaled worldwide to address the needs of this underserved segment.
My search ended at PayJoy – a Silicon Valley based fintech startup founded in 2015. The firm uses its proprietary data science capability to identify credit worthy customers from amongst those who are underbanked and routinely turned down by financial institutions. Its unique phone locking technology brings payment discipline amongst the customers by locking them out of their phones if they miss to pay an installment. PayJoy looks at smartphone financing as an entry point into the lives of one billion target people worldwide who frequently need small size loans, and have both the willingness and ability to pay back. Through intelligent use of its technology and strategic partnerships, the firm has proven that lending to the underbanked segment can indeed be a profitable business.
I feel fortunate to have joined PayJoy at a time when it is rapidly expanding internationally into Africa, South Asia, and Indonesia, having demonstrated its success in US and Mexico over the last 3 years. I started my summer internship at the firm’s headquarters located in San Francisco. After finishing a week-long orientation, I chose India as the focus of my summer project for it is the second largest and fastest growing smartphone market in the world, with over 190 million under-banked adults. Notably, it is also my home country.
My primary responsibility is to understand the mobile and consumer finance markets in India and the role PayJoy can play in expanding both markets. The startup environment has allowed for ample use of my creativity in thinking about innovative applications for our technology and the revenue models that would work with them. I also had the opportunity to observe the operational complexity of an ongoing pilot project with a large handset manufacturer, our existing partner in India, and propose ideas for product and process enhancements.
During my time in India, I visited a couple of stores to observe live sales of smartphones financed with PayJoy technology. I interacted with store promoters who were delighted with our product as it had enabled paperless checkout of financed phones and had increased store sales which are a factor in their commissions. On one of my visits, I happened to interact with an existing customer, Lalit, who candidly shared with me how the full-featured Android smartphone financed through PayJoy helped him transition from his earlier low-paying sales job to launching his own business of supplying Reverse Osmosis (RO) water purifiers.
Meeting our customer, Lalit, at one of PayJoy’s live stores in Delhi
Lalit is a college dropout and used to make INR 20K/month (∼$300) on his previous job, that was inadequate to provide for his family of two dependents. He could not have afforded the INR 14K (∼$200) smartphone, nor did he have a healthy credit score to prove his creditworthiness. PayJoy enabled him to finance a smartphone with high-end specifications, which empowered him to promote his business on online advertising platforms, respond to sales queries from within a 10 km radius in real-time, learn about accounting and tax practices through e-tutorials, make and receive digital payments using NFC technology, and keep a tab on e-commerce flash sales. The new business has not only doubled Lalit’s earning potential, but with regular payment of EMIs he is building his credit score that would gradually get him included into the regular financial system. It is personally fulfilling to have the opportunity to work on a project that has the potential to impact millions of people like Lalit.
I am ever grateful to PayJoy’s leadership, business heads and the team in India for their constant support and encouragement in making this happen. I am confident that with such a motivated team and a technologically differentiated product, it would not be long before PayJoy realizes its global vision of onboarding the next billion. And, as technology and funds make their way into previously inaccessible corners of the world, millions like Bonga and Lalit, will begin to fuel their dreams.
I cannot believe that it’s been only two months of working with PayJoy, and I already have a bunch of incredible stories to share with my classmates once I am back at Yale to finish the rest of my MBA. I am glad that through my internship, I could not only channel my personal aspirations and business skills, but also uphold Yale School of Management’s mission: educating leaders for business and society.
