The world of lending is undergoing a seismic shift, with innovators like Eshandi redefining what it means to deliver financial services in Africa. In this episode, “Eshandi’s Alternative Lending is Redefining Financial Inclusion in South Africa” of Talking Success, the Best Fintech Podcast, Darren chats with Mike Adamson, CEO of Eshandi. Mike shares the journey of this rebranded challenger bank and its mission to address unmet needs in the lending ecosystem across Africa. Let’s delve into how Eshandi is leveraging technology, trust, and innovative products to drive financial inclusion.
Eshandi’s roots trace back to 2019 in Zambia, where it began as Supreme Accredit, focusing on small-scale micro-lending. It rapidly gained traction, addressing the financing needs of underserved groups such as SMEs and women-owned businesses. The success in Zambia laid the foundation for an ambitious expansion strategy, targeting Zimbabwe, Kenya, and South Africa.
Unlike traditional financial institutions, Eshandi avoids a “copy-and-paste” approach across markets. Adamson explained, “Each country is its own Africa,” highlighting the unique challenges and opportunities in each market. For example, in South Africa, Eshandi carefully assessed the already saturated micro-lending space and adapted its product offerings to target niche segments that traditional lenders overlook.
The term “financial inclusion” is often used broadly, but Eshandi takes a nuanced approach to the concept. While many players focus on reducing costs or improving accessibility, Eshandi tackles the underlying reasons why people remain excluded from formal financial systems.
Traditional lenders often deem individuals without formal payslips or utility bills as high-risk clients. Eshandi challenges this by using alternative data sources to build comprehensive digital profiles. For example, transaction data from loyalty cards such as Smart Shopper is analysed to assess spending patterns.
This approach allows Eshandi to serve customers who may lack traditional credit history but are reliable payers. As Adamson put it, “We don’t want high-risk clients; we want good clients who don’t meet traditional checkboxes.”
For many Africans, distrust in financial institutions remains a significant barrier. Adamson emphasised the psychological aspect of financial services, noting that cash is still king because people feel safer controlling their money physically. Eshandi’s response is to empower users with tools like wallets and cards that offer complete control over their funds.
Users can allocate funds for specific purposes, such as loan repayments, ensuring they retain a sense of ownership and security. Transparency is key, and Eshandi aims to build trust one transaction at a time.
Eshandi’s products focus on purpose-driven lending, offering solutions tailored to the needs of underserved populations.
Eshandi’s model includes small-value loans starting as low as R250, enabling users to build credit histories over time. These loans are not just about access to funds but about empowering individuals to meet specific needs, such as groceries or emergency expenses.
Rather than disbursing cash, Eshandi often provides vouchers for essential items. This not only ensures that funds are spent as intended but also reduces the risk of misuse. For instance, vouchers for groceries or airtime can be stored in Eshandi wallets, offering users a financial safety net without immediate capital outlay.
Gamification is an emerging trend in FinTech, and Eshandi has embraced it to encourage positive financial habits. Rewards such as bus tickets or holiday vouchers incentivise timely loan repayments and responsible financial behaviour. This approach not only benefits users but also strengthens their trust in Eshandi’s platform.
Adamson illustrated this concept with an example: “If you pre-qualify for a Checkers voucher and leave it in your wallet, it serves as a backup for emergencies. It’s a clever way to provide a loan without disbursing cash until it’s needed.”
Debt often carries a negative connotation, but Ishandi is working to change that narrative. By providing tools to build credit histories responsibly, Ishandi helps users see borrowing as a pathway to future financial opportunities.
For example, a young professional earning R15,000 a month might struggle to access traditional credit products. Eshandi bridges this gap by offering manageable loans that help users build a financial profile, paving the way for future access to larger credit facilities such as car loans or mortgages.
One of Eshandi’s most innovative offerings is its peer-to-peer-inspired lending model. In Zambia, this takes the form of direct peer-to-peer loans, while in South Africa, a community member can stand surety for another. This mitigates risk while fostering trust within communities.
Adamson explained, “If a father stands surety for his child’s loan, it’s not just about financial backing; it’s about introducing the younger generation to formal credit systems under the umbrella of community trust.”
A crucial part of Eshandi’s mission is to differentiate between financial education and financial literacy. While literacy involves understanding financial concepts, education focuses on building habits and trust in financial systems.
For instance, Eshandi educates users on the importance of credit scores and responsible borrowing, demystifying financial services and empowering users to make informed decisions.
Eshandi’s name, meaning “mine” in a local Zambian language, reflects its core philosophy: empowering users to take ownership of their financial journeys. By blending technology, community-driven solutions, and purpose-based lending, Eshandi is reshaping the financial landscape in Africa.
As Adamson aptly concluded, “It’s about transparency, trust, and giving people the tools to succeed. We’re not just offering loans; we’re offering a way into the financial system.”
Revolutionising Financial Literacy with a Consumer-First Approach
One of Eshandi’s standout initiatives is integrating financial literacy into its products. While financial education often focuses on concepts such as budgeting and interest rates, Eshandi extends the conversation to demonstrate the tangible benefits of saving and borrowing responsibly.
Mike shared a compelling example: “If a nine-year-old with a savings account can grasp the concept of earning interest, imagine the potential for adults in underserved communities who have never encountered such financial tools.” Eshandi aims to simplify these concepts, showing users that keeping funds in a digital wallet can generate value, unlike cash hidden under a mattress.
Eshandi’s model encourages users to view savings and loans not just as financial transactions but as opportunities to build wealth. By offering small but meaningful incentives, such as interest on unspent loan amounts or loyalty rewards, Eshandi educates users on how to maximise their financial potential.
For instance, Eshandi’s platform may offer an airtime voucher for R100 with the option to hold onto it. In two months, the voucher could increase in value to R110, demonstrating the benefits of delayed consumption.
In markets where financial literacy is low, access alone is not enough to drive financial inclusion. Eshandi combines education with practical tools, ensuring users have the resources and knowledge to make informed decisions.
Mike highlighted the effectiveness of WhatsApp as a primary channel for customer engagement. Unlike apps that demand significant storage space and data, WhatsApp offers a low-barrier alternative, enabling Eshandi to deliver full-service functionality.
Through WhatsApp, users can perform key financial tasks such as Know Your Customer (KYC) verification, transactions, and account management. This strategy leverages a platform that is already deeply integrated into users’ lives, ensuring convenience and accessibility.
Eshandi complements its digital strategies with physical outreach. Setting up gazebos and teardrop banners in local communities allows Eshandi to connect directly with potential users. This face-to-face engagement fosters trust and word-of-mouth marketing, which remain powerful tools in underserved markets.
Trust is a recurring theme in Eshandi’s mission. Many individuals in underserved communities remain wary of digital platforms due to concerns about losing control over their money. Eshandi addresses these fears by prioritising user control and transparency.
Unlike traditional banking systems that rely on automatic debit orders, Eshandi empowers users to decide when and how funds are transferred. For example, users can move money into a dedicated collection wallet to repay loans, ensuring they retain control over their finances.
Eshandi’s lending model focuses on purpose-based loans, such as vouchers for groceries or airtime, rather than unrestricted cash. This approach not only helps users meet immediate needs but also encourages responsible borrowing habits.
Eshandi’s strategy of blending digital and physical infrastructure is key to its success. As Mike explained, “You don’t have to be everywhere; you just have to be in the right place to reach the right people.”
Drawing inspiration from successful FinTech models like TymeBank’s kiosks, Eshandi combines digital platforms with physical touchpoints to engage users. By strategically placing representatives in high-traffic areas and offering in-person support, Eshandi builds trust and familiarity with its brand.
One of Eshandi’s core principles is avoiding a cookie-cutter approach. Instead, the company tailors its services to the unique needs of each market.
In South Africa, Eshandi integrates with established partners such as Nedbank to handle its stored-value accounts, ensuring a seamless user experience. By using third-party solutions for non-core functions, Eshandi can focus its resources on its disruptive lending products.
Market research revealed that many South Africans use their bank accounts primarily for receiving social grants, with most transactions still conducted in cash. Eshandi’s products are designed to complement these behaviours while encouraging gradual adoption of digital services.
Gamification is a cornerstone of Eshandi’s strategy to build financial resilience. By rewarding positive behaviour, Eshandi transforms mundane financial activities into engaging experiences.
For example, users who repay loans on time might earn bus tickets or grocery vouchers. This system not only incentivises responsible borrowing but also strengthens user loyalty.
Eshandi’s success lies in its ability to collaborate with partners and communities to deliver meaningful solutions. By integrating with existing financial rails and engaging directly with users, Eshandi ensures its products are both innovative and accessible.
Peer-to-peer-inspired lending models, where family members or community leaders stand surety for borrowers, further reinforce Eshandi’s community-centric approach. These initiatives build trust within local networks while introducing users to formal credit systems.
Eshandi’s commitment to financial inclusion goes beyond profit margins. As Mike eloquently put it, “It’s not about milking the market; it’s about helping people while building a sustainable business.” By combining innovative technology, purpose-driven products, and a deep understanding of local markets, Eshandi is creating a blueprint for the future of inclusive finance.
If you’re interested in learning more about Eshandi’s products or partnering with them, visit their website at ishandi.com. With dedicated pages for each country, you can explore market-specific offerings and connect directly with their team.
Eshandi’s story is a testament to the power of innovation and empathy in transforming lives. By addressing the unique challenges of underserved populations, Eshandi is setting a new standard for financial inclusion in Africa. Stay tuned as we follow their journey and continue to uncover the impact of their groundbreaking solutions.
eShandi provides a range of financial services, including instant digital loans, mobile banking, insurance, and payment solutions, tailored to meet the needs of individuals and businesses across Africa.
The rebranding to eShandi reflects the company’s evolution from a traditional microfinance institution to a comprehensive financial technology platform, aiming to enhance financial inclusion and empower users with innovative financial solutions
eShandi operates in Zambia, Zimbabwe, South Africa, and Kenya, providing financial services tailored to the unique needs of each market.
eShandi’s services are accessible through their digital platforms, including a mobile app and a WhatsApp channel, allowing users to apply for loans, manage accounts, and perform transactions conveniently.
© Copyright by talentinthecloud pty limited (trading as titc.io) – 2024
