Modernizing Motorcycle Taxis in Africa

Motorcycle taxis (“bodas”) are a permanent fixture in African societies because they are the only way to beat traffic jams. Yet, boda accidents comprise up to 75% of trauma cases at Uganda’s biggest hospital.

Asaak is a fintech company providing asset financing to African SME’s. We partner with SafeBoda, a well-known ride hailing app, to give new motorcycles to reputable boda drivers based on their earnings, passenger ratings, and safety records. SafeBoda provides intensive safety training and closely monitors adherence to traffic laws, so accidents are remarkably rare.

Most boda drivers don’t own motorcycles and would love to, but lenders ignore them for lack of verifiable income. We are solving this problem by using machine learning on SafeBoda’s data to underwrite drivers in real-time, thus building a fleet of trained and productive clients. There are over 10 million bodas in Africa that we can modernize with both financing and education.

Motorcycle taxis (“bodas”) are a staple in the transportation ecosystems of Sub-Saharan African cities with at least 10 million in Uganda, Kenya, Rwanda, Tanzania, and Nigeria alone. They pass easily between cars in traffic jams and are quite popular for timely transportation. African governments have not tried to curb traffic by building subways due to the costs of such infrastructure, and so the demand for bodas is increasing.

Bodas often drive erratically, without licenses, and at high risk of accidents. A UN report found that 10 people in Kampala die every day from boda accidents, per 300,000 active drivers; extrapolating, we estimate that 333 people die daily in just the 5 aforementioned countries. SafeBoda was the first company to modernize this industry by introducing an Uber-like app with passenger ratings of drivers. Through stringent training and penalties for bad driving, SafeBoda maintains accident rates significantly below the industry average.

Switching from renting to owning a motorcycle can double a driver’s income, so it is a highly prized goal by drivers. By offering motorcycle financing to vetted SafeBoda drivers, Asaak’s loan product makes it highly attractive for drivers to join SafeBoda and thus improve road safety in Uganda and beyond.

Our solution reduces the risk of mortality for anyone living in an African city where bodas are popular. Many urban residents ride bodas, but even those who don’t are still exposed to risk whenever they walk on a main road or even drive a vehicle; bodas are the most commonly involved parties in road accidents.

The skyrocketing popularity of SafeBoda and similar apps (Max, Gokada) demonstrates that consumers want a safer alternative to the regular street bodas that are often unlicensed and unorganized. By conducting background checks on all drivers and removing those who break the law, SafeBoda has brought accountability and order to a highly unregulated industry. This has vastly improved trust levels between drivers and passengers.

Boda drivers can be incentivized to drive safely and work with tech companies by the prospect of owning a bike, which is a guaranteed pathway out of poverty for uneducated young men. Tugende has made this asset class highly successful in Uganda and is now expanding. Asaak’s innovation is the first fintech approach in the field. By partnering with a boda app, we automate underwriting, reduce overhead, and spread our impact faster. Our digital lending platform allows for faster loan disbursals and happier customers.

Asaak was the first collateralized fintech lender in Africa. Over the past 3 years, we have built a digital lending platform that allows us to analyze the cash flows, character, and collateral of a client and approve them for a secured business loan in 1/6th of the time of a traditional bank. We are leveraging our expertise in credit risk scoring to intake SafeBoda’s data and automatically qualify drivers for motorcycle loans based on their financial health and passenger satisfaction. We use machine learning models for classification such as Random Forests and Support Vector Machines to predict which drivers will default on a loan.

By providing feedback in real-time through our plugins to ride hailing apps, we keep drivers motivated to continue driving safely so they can one day qualify for a bike loan. We are currently building a suite of software to support this program at scale as we plan to do 2,000 boda loans by the end of 2019. These 2,000 drivers will have more questions than our customer support staff can handle in a timely fashion, and so we shall need a chatbot. The challenge with boda drivers is that while they have basic smartphone literacy, they are usually not fluent in typing English and instead prefer Luganda, Swahili, and other regional languages. We are thus employing data scientists with background in natural language processing to build a Luganda chatbot in tandem with our Kampala launch. Drivers will be able to quickly resolve questions about their loan schedule and repayment terms through our automated interface.

We also install tracking devices on our borrowers’ motorcycles to mitigate the risk of theft. In conjunction with continuous updates from SafeBoda, this gives us the means to assess a driver’s ongoing commitment to safety. To engage with our customers, we send automated SMS notifications to remind them of upcoming payment dates. To facilitate collections, we allow borrowers to conveniently repay using mobile money rather than having to queue at banks. Drivers can easily check their loan balance through our Android app or through an SMS interface.

We are the first fintech lender to partner with a boda app to use automated underwriting to provide motorcycle loans. This allows us to offer boda loans faster and cheaper than any other financial institution. Removing old motorcycles from the streets and replacing them with new, insured vehicles dramatically lowers the risk of accidents and reduces total healthcare spending in emergency situations. Owning a new motorcycle is a powerful motivator for boda drivers to drive with SafeBoda and other such apps that strictly enforce safety regulations, thus making streets safer in major African cities.

We use a suite of software and hardware solutions to ensure that our motorcycle fleet is the safest in Africa. Our machine learning algorithms select boda drivers based on how safely they have transported passengers in the past and their income or ability to repay a loan. Our consumer-facing Android app and in-house, web-based core banking system enable us to efficiently manage a growing loan portfolio without much overhead. Boda drivers can easily login to their account and see their loan details. Borrowers can repay their loan through mobile money transfers to Asaak instead of having to wait in line at the bank. Tracking devices in our motorcycles allow us to assess the boda drivers’ adherence to traffic laws and locate the bikes in case of theft. We are looking for ways to partner with municipal authorities to leverage this traffic data and create safer routes throughout Kampala.

Demand for boda rides is high by residents of African cities, yet there has been a chronic undersupply of new motorcycles in these markets because of the lack of credit facilities to purchase them. The result is that most motorcycles on the streets are outdated and need constant repairs, which makes them prone to accidents. Asaak’s technology makes it easier to underwrite and service motorcycle loans, thus increasing the supply of new, safer vehicles on African streets.

Boda drivers would love to own their own motorcycles because it ultimately leads to doubling their daily earnings. They are also increasingly joining ride hailing apps because they provide a constant stream of customers throughout the day. There are well established ride hailing apps like SafeBoda, Taxify (Bolt), and Uber. There are also commercially successful lenders like Tugende providing motorcycle loans to boda drivers.

Asaak is the first to connect the two methods using a collateralized, fintech lending model in which we have built expertise for the past 3 years. This allows us to provide productive assets to a growing fleet of entrepreneurs faster and cheaper than anyone else in the market. Our turnaround time for providing a new motorcycle is 2 days rather than 2 weeks and we are able to manage more bikes per loan officer than our competitors. With our analytical capabilities, we can monitor our drivers’ safety and performance in real time and ensure the growth of a new, safer fleet of motorcycles across Africa.

We have already launched a pilot program of 20 boda loans this month. We project to do 2,000 loans by the end of 2019 in Uganda alone and in 2020 we project to do an additional 3,000-4,000 loans across 3 markets by expanding to Kenya and Rwanda. In 5 years, we will expand to at least 15 African markets and will be originating 30,000 loans every year. Each new motorcycle on the streets has the potential to prevent dozens of deaths or injuries because the vehicles require fewer repairs. By partnering with boda drivers who use ride hailing apps, we can enforce a higher level of safety standards and professional conduct in a market that’s typically unregulated and dangerous. Drivers with ride hailing apps have an incentive to transport passengers safely and avoid accidents, and they are motivated to join these apps because of Asaak’s lending partnership with them.

Within the next year, we hope to expand our product to Kenya and Rwanda. Within 5 years we will expand to 15 African markets. As of today there are at least 10 million commercial boda drivers in Uganda, Kenya, Rwanda, Tanzania, and Nigeria alone. Our vision is to enable easy credit access for reputable boda drivers and to ensure their continuous high safety performance through financial incentives.

Every commercial boda driver carries up to 25 passengers daily. Every new motorcycle on the streets reduces the risk of accidents for those 25 passengers plus all the other pedestrians and vehicles they pass by on the streets, which could number 500 per day. New motorcycles have dramatically lower accident rates, and coupled with the driver incentives to carry passengers safely through Asaak and its ride hailing app partners, our product will create safer streets all throughout Africa.

Through the above mechanisms, we can estimate that 1,000 new motorcycles reduce the risk of accidents to 500 people per day or 150,000 per year. Thus a fleet of just 1,000 motorcycles can create 150,000,000 safer commutes per year.

Technology: We need grant funding to further automate our lending platform so we can handle larger volumes of clients. In particular, with this funding we want to refine our machine learning algorithms so that we better screen risk in loan applicants. We will also be able to develop a chatbot in the local Luganda language thus enabling us to support thousands of active clients without having to hire more customer support staff.

Growth Capital: After building an initial track record and the technological capability to originate and service hundreds of new loans per month, we can raise debt financing from impact investors to grow the portfolio across different countries. From time to time we shall need grant or equity funding to support our growth to additional markets in terms of initial hiring, marketing, and legal work.

Legal: To date, regulation of boda bodas across Africa has been quite lax. However, this may change and we should be proactive in dealing with potential new laws in this industry. We are taking all possible measures to ensure the physical safety and manage the financial risk of our growing motorcycle fleet.

Competition: We will face increased competition from other lenders as established players are waking up to the opportunity of boda financing.

Technology: We are applying for grants to speed up our software development to enable this program at scale.

Growth Capital: We are in conversations with both equity and debt investors to fund this program. They are very interested in the idea and would just like to see an initial track record before investing.

Legal: We can be proactive in this regard by reaching out to regulators to let them know of our plans. We could sponsor a panel discussion with the public to encourage discourse on the topic of safety in the boda industry, thus building our reputation for being a thought leader in the field.

Competition: With our unique technology that processes loans cheaper and faster than any other lender in the market, we will ultimately stand out and have better customer retention.

We have 14 full-time staff and 4 part-time staff. These include software developers, data scientists, financial analysts, salespeople, loan underwriters, in addition to external contractors like accountants and lawyers.

Our diverse backgrounds in fintech, engineering, international development, and microfinance enabled us to build a boda financing product that is unmatched in the market in terms of turnaround time (48 hours) and cost. Backgrounds of management team:

Kaivan, CEO: Data scientist at fintech company LendingHome in San Francisco. Formerly a quant at the New York Fed managing a $2T portfolio.

Edward Egwalu, COO: Former Head of IT at Pilgrim Africa, an international NGO in Eastern Uganda impacting 10,000+ small businesses and farmers.

Anthony Leontiev, CTO: Founding engineer at AltSchool, a well-known edtech startup building software to digitize schools.

Dylan Terrill, CBO: Loan servicing at LendingHome and prior experience working in emerging markets including microfinance.

Together, the 4 of us built Africa’s first collateralized fintech lender. Over time we have assembled a team of 18 staff across Uganda, America, and Europe including software developers, data scientists, salespeople, and credit analysts in addition to contractual support staff like accountants and lawyers. Our results speak for themselves: Asaak raised Uganda’s largest ever seed round of $1.5M, qualified for a $1M debt term sheet from a well-known debt financier, and originated 610 loans worth over $1.3M+ in just 3 years of operations.

We raised a $1.5M seed round last year with the participation of 5 venture capital funds, both American and African. They have provided invaluable support in terms of business and technical advice as well as connections to potential partners and other investors.

We are partnering with SafeBoda to offer motorcycle loans to their drivers. We are working on similar partnerships with other ride hailing apps, particularly those with existing operations throughout East Africa, which would allow us to quickly scale our program.

We have also partnered with impact investment funds such as Microlumbia at Columbia University and high net worth individuals to grow our loan portfolio. As we build our technological capacity, we will be able to manage a larger portfolio and thus attract bigger ticket debt investors.

We raise debt financing from fixed income investors around the world, lend this to African small businesses, and profit on the difference in interest rates. Asaak is a direct lender that originates loans and holds them as assets on its own balance sheet. Our liabilities are debt investments that we have raised from institutions and individuals. The fundamental problem we are solving is that African businesses often borrow at 100%+ annual interest while fixed income investors earn less than 10% annual interest - there is a huge pricing mismatch in global credit markets. With risk algorithms and an advanced lending platform, our underwriting is more accurate and faster than traditional methods. This allows us to lower the cost of credit in Africa while giving investors access to socially impactful and above average returns.

Our loans are already profitable on a unit basis. We are not yet profitable as a company because of our big investments in tech and data, but we will break even by the end of 2019 by growing the loan portfolio. Our goal is to build a loan product lean enough that its revenues alone can support the company’s growth and profitability. With that financial sustainability in place, we will then selectively raise equity financing whenever we see an opportunity to grow quickly in new markets.

We are applying to Solve to connect with a community of machine learning and natural language processing experts, particularly those motivated by social impact, to advise us on developing the world’s first Luganda chatbot. We also seek advice on our ever evolving machine learning algorithms that parse risk for thousands of loan applicants and help us to work with the most dedicated and trustworthy boda drivers. We welcome collaboration with academics and have in the past shared data with researchers at Stanford University studying the effects of messaging and incentives on microloan performance.

Specifically, joining the Solve community would help us connect with renowned experts in AI who could help us build state-of-the-art systems to efficiently scale our boda program across Africa.

Connecting with machine learning and natural language processing experts would be very helpful, as well as investors and grantmakers in this space.

AI/ML/NLP practitioners can help us accelerate tech development and bring our product to more boda drivers.

Equity/debt/grant investors can give us the resources to impact thousands of boda drivers with new motorcycles, with positive spillovers on all residents of African cities who benefit from safer roads.

Partnerships with ride hailing apps such as Uber and Bolt (Taxify) around the world would give us access to tech-savvy, ambitious drivers who prioritize safe customer service and want new vehicles.

As Uganda’s first digital lender, Asaak’s vision is to use technology to eliminate human bias from the lending process as much as possible and enable credit access for the masses through intelligent algorithms to pick promising loan applicants. Traditional lending in Sub-Saharan Africa is plagued by corruption - loan officers are often bribed to approve clients who don’t meet risk criteria, which leads to defaults and ultimately financial crises. Automated risk models can avoid these biases by extending credit access to those who can make responsible use of it and realize an increase in income.

With hundreds of data points from ride hailing apps for every single loan applicant, we have the opportunity to use alternative data to manage risk in the rapidly growing asset class of boda financing. Although these entrepreneurs have been rejected from other financial institutions or lack of traditional data, with our unique software we are still able to sort out the un-creditworthy. Machine learning algorithms for classification already help us choose the least risky applicants to lend to.

Artificial intelligence and natural language processing will be heavily used in our chatbot. Ugandans are increasingly tech savvy and given our ambitious growth targets, we will need such self-serve features for our clients if we are to scale our product to 15 African markets and 50,000+ users. The AI Innovations Prize will help us hire the best data scientists for our unique problem of building the world’s first Luganda chatbot.