MICROCAPITAL BRIEF: Controversy Brews as For-Profit Fintech Provider MyBucks Buys 6 African Microfinance Organizations from Nonprofit Opportunity International

The sale of microfinance institutions (MFIs) in Ghana, Kenya, Malawi, Mozambique, Tanzania and Uganda over the first half of 2016 by US-based NGO Opportunity International to Luxembourg-based financial technology company MyBucks has raised concerns both that these MFIs’ clients could be negatively impacted and that these transactions signal that the sector’s overall direction has shifted toward profit-making.

In the article “Opportunity International and MyBucks: The Future of Digital Microfinance,” Daniel Rozas and Gabriela Erice Garcia of the Luxembourg-based European Microfinance Platform (e-MFP) argue that the deals should have gotten more attention because of the contrast between the larger, more established Opportunity International and the newness of MyBucks [2]. Mr Rozas and Ms Erice state that “In principle, the potential presented in the deal between MyBucks and Opportunity International is immense. If successful, it could well herald a new era of microfinance and shift financial inclusion into a new phase that can reach hundreds of millions faster and more efficiently than has been done before” [2].

On the other hand, Mr Rozas and Ms Erice caution that “MyBucks’ current business model of high interest rates, costly funding and high profits does not align with traditional microfinance.” Despite this concern, the authors are optimistic: “Much of the publicly available data from MyBucks suggests that the company is indeed pursuing financial inclusion that is far broader than the simple payday lending its website at first seems to suggest” [2]. In support of its stated intent, one page on its website advertises that MyBucks is “breaking the cycle of poverty.”

Chuck Waterfield, the CEO of US-based consultancy MFI Solutions, believes the transactions are bad for clients. He cites data from the Microfinance Information Exchange for 2014, the most recent available year, showing losses incurred by all of the six banks that were sold. He argues that this means that the USD 67 million in deposits these banks hold for 1.4 million Africans could be at risk [3]. The CEO of Opportunity International, Vicki Escarra, replies that “today all the institutions meet or exceed the required levels of regulatory capital and liquidity, which are better measures of safety and soundness for depositors” [4].

Ms Escarra also states that “MyBucks’ prices will be below market, and they are committed to receiving Smart Certification” [5]. In response, Mr Waterfield asks “why did Opportunity choose a partner with such a clear past and present record of extremely high pricing?”. In particular, he cites a screenshot from MyBucks’ website offering a loan with a price of 30 percent for one month [3]. Ms Escarra replies that: “In Malawi, for example, MyBucks funds itself with higher cost debt versus Opportunity Bank Malawi, which benefits from a large deposit base. From an operating cost perspective, however, MyBucks benefits from a lower cost infrastructure than Opportunity Bank Malawi, which has significant brick and mortar and manual processes. Rather than giving MyBucks access to a deposit base of inexpensive savings which it can lend out at high interest, as [Mr Waterfield] suggests, this partnership will have the opposite effect: It will allow MyBucks to offer lower interest rates to clients by combining the best of both organizations” [4].

By Kevin van den Brink, Research Associate

About Opportunity International

Founded in 1971, Opportunity International is a nonprofit organization that provides loans, savings, insurance and training to 14.3 million individuals in 24 countries in Africa, Asia, Europe and Latin America. Based in the US city of Chicago, Opportunity International also has administrative offices in Australia, Canada, Germany, Hong Kong, Singapore, Switzerland and the UK. As of 2015, the organization has provided USD 9 billion in loans with 95 percent of these loans disbursed to women.

About MyBucks

MyBucks is a for-profit financial technology company that is based in Luxembourg and operates in Botswana, Kenya, Malawi, Namibia, Poland, South Africa, Spain, Swaziland, Zambia and Zimbabwe as of 2015. MyBucks’ services are marketed under the brand names of GetBucks, GetSure and GetBanked. As of 2016, the firm is in the process of acquiring the operations in 6 additional African countries from US-based NGO Opportunity International. Financial information on the organization is unavailable.

Sources and Additional Resources

[1] MicroCapital, “MicroCapital Brief Opportunity International Selling 6 Banks in Sub Saharan Africa to Financial Technology Company MyBucks

[2] Next Billion, “Opportunity International and MyBucks In The Future Of Digital Microfinance

[3] Next Billion, “Opportunity International and MyBucks A Dangerous Partnership Decision

[4] Next Billion, “Opportunity International and MyBucks: ‘A Powerful Partnership to Improve More Lives’

[5] Next Billion, “Opportunity Internationals Shifting Microfinance Strategy a Podcast with CEO Vicki Escarra

MicroCapital Universe Profile: Opportunity International

MicroCapital Universe Profile: MyBucks

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