--BY MANISHA BALAMI
One of the biggest problems for owners of micro enterprises in Nepal has been access to finance. Mostly, these are people from weaker financial backgrounds who find it difficult to avail modern banking services. For many, it is difficult even to get loans and other financial services from microfinance institutions (MFIs) due to the lengthy documentation process. Also, such financial institutions find it hard to track and monitor the activities of the borrowers to see if the borrowings have been used for the intended purpose.
“The problems in lending are not because of lack of skills of microfinance institutions and their debtors. Basically, there exists a deficit of trust between the two sides,” says Sonika Manandhar, co-founder of Aeloi Technologies. According to her, one of the reasons for the trust deficit is that many microenterprises are operating informally without registering at government agencies which creates difficulties for financial institutions to do transactions with such businesses. “This lack of trust is a big challenge for microenterprise owners to scale up their business,” she says.
In order to narrow the trust deficit between financial institutions and micro entrepreneurs, Manandhar and her friend Tiffany Tong established the company Aeloi Technologies that works as a connector between financial institutions and their borrowers. The startup helps microfinance institutions to bring the costs related to debt monitoring.
Aeloi Technologies was started in March 19, 2019 by Manandhar and Tong who is a Canadian national. Currently, Tong and Manandhar are CEO chief technical officer (CTO) of the company, respectively.
A computer engineer and impact entrepreneur, Manandhar had worked in the tech industry for seven years before starting the company. After working in various organisations in the capacities of programmer and project manager, and organising tech events and programmes such as hackathons, she went to the Santa Clara (California) based Singularity University for Global Solutions Programs (GSP) in 2017 where she met Tong. After returning to Nepal in 2018, she worked as a CEO of a savings cooperative institution for a year. Working at the cooperative, she learned about the existing deficiencies in the digital financial services of cooperatives and other financial institutions that deal with small depositors and lenders. She then thought of bringing inclusive fintech products for users regardless of their literacy levels.
“Mostly women entrepreneurs in the informal sector face difficulties in gaining access to finance which ultimately leads them to get trapped in debt spiral or they quit the business,” says Manandhar, adding, “This is where we saw an opportunity to promote affordable financing for last-mile micro-entrepreneurs.”
The company mostly works with women micro-entrepreneurs in the agriculture and transportation sectors in Nepal. She gives the example of safa tempos (electric three-wheelers) transport which had a significant involvement of women for the past 25 years and yet the business never grew and is dying a slow death with lots of tempos currently rusting in the garages. Manandhar says that there is a need to channel investment into grassroots local innovation such as the safa tempo transport business which can also help to tackle the issue of air pollution.
Keeping micro entrepreneurs like the safa tempo owners in mind, Aeloi Technologies came up with digital tokens that are backed up by the funds from financial institutions. The tokens are transferable through SMS to the borrower’s mobile number. The SMS platform does not require smartphone or internet connectivity thus, it helps entrepreneurs to access to the services easily.
According to Manandhar, digital tokens are used within an ecosystem which is comprised of microfinance institutions that issue microloans to borrowers in the form of digital tokens and accredited vendors from whom the entrepreneurs can get goods and services. The entrepreneurs can get the tokens from partner financial institutions. “Similar to mobile money, digital tokens help users to purchase goods or services without the direct use of cash,” says Manandhar, adding, “The vendors redeem the received tokens into cash from our partner microfinance institutions once the goods and services are delivered.”
So far, Aleoi Technologies works with one battery and four garage vendors in Kathmandu from whom owners of safa tempos can purchase necessary goods and services.
The company has been observing growing participation of people from the agriculture sector. By the end of 2019, the company had 40 vendors in the agriculture sector. “We are also working for the participation of insurance companies in our system,” she says.
Part of the borrowing ecosystem is a loan insight system developed by the Aeloi Technologies which enables financial institutions to track the credit and its impact in real-time. Currently, the company has two products for digital lending; Regrow and Green Energy Mobility (GEM).
Regrow is an agriculture sector-focused product which is designed for first time users of digital financial services. It is a pilot project which the company has been running in Nuwakot district and has been working to expand it in Kavre. The company has partnered with the Mahila Shayatra Laghubitta Bittiya Sanstha and Laxmi Mahila Savings and Credit Cooperative for the purpose. Similarly, GEM is for entrepreneurs of electric transport.
Moreover, the company has launched a separate web platform called BijuliPower.com to help safa tempo owners to earn additional income. Under this, people can hire the electric three-wheelers for various purposes including events, day trips, tourism and deliveries.
Aeloi Technologies, which provides its services in the software-as-a-service (SAAS) modality, generates revenue through three main streams – financial institution subscription, vendor commission and commission for channeling funds through their platform.
According to Manandhar, convincing people about the business concept of Aeloi was difficult in the beginning as social entrepreneurship is not common in Nepal. Many people thought the company was an NGO. However, they keep on working to make people understand the company’s objectives and its vision to empower self-employed women.
Over time, they received national and international recognition for their work. In 2019, Manandhar won the Young Champions of the Earth Prize for Asia-Pacific for her work in big data to make electric transport more efficient and accessible and women empowerment.
Aeloi Technologies was also the national winner of She Loves Tech, the world’s largest startup competition for women and technology in the same year.
Manandhar says that their services are often mistaken as digital wallets or vouchers. But unlike the transaction-focused wallets, the system developed by Aeloi Technologies is mostly about easy access to funds for borrowers and ease of tracing of credit to the borrowers. “Meanwhile, our platform also offers more flexibility to the customers by making sure there are many choices of vendors allowing the customers to negotiate to get better goods and services at right price points,” mentions Manandhar.
The company was started with an initial capital of Rs 500,000. According to Manandhar, they started their first pilot project with the funds provided by a German INGO in 2019. In the first batch of projects, there was 18 borrowers and 40 vendors for chicken and cauliflower farming.
Currently, Aeloi Technologies is receiving support from different UN organisations such as United Nations Capital Development Fund (UNCDF), UN Economic and Social Commission for Asia and the Pacific (UNESCAP), UN Environment Programme (UNEP), GIZ, German INGO Welthungerhilfe, Standard Chartered Bank, Civil Society Academy, One Young World and National Geographic Society.