Aeloi Technologies

Affordable financing is one of the largest barriers for informal sector enterprises. 2 billion people make their living in the informal economy and have an estimated US$8 trillion credit gap for loans. Microentrepreneurs borrow at high interest rates due to the lack of income proof, collateral or credit history. Most use expensive personal loans to finance their business expansions. The main problem is a trust gap between the funders and the funded.

Aeloi Technologies is pioneering a way to monitor the usage of microfinance business loans for last-mile entrepreneurs using digital tokens. We automate the costly process of fund monitoring for grassroots investments. Aeloi is similar to a Fitbit for tracking the financial health of informal sector entrepreneurs. 

We help foster trust for impact funders to invest with assurance in the grassroots economy. Thus unleashing the entrepreneurial potential of 400 million informal sector businesses to create local solutions.

Using financial big data for the majority of lending decisions will be the norm in the future. Informal sector workers and entrepreneurs, who form 61% of the global employed workforce, are increasingly disadvantaged because they are invisible to formal systems for a lack of income proof and credit histories.

Women microentrepreneurs face the same problem because of cultural reasons, lack of asset ownership, and low formal employment rates. In Nepal, 90.5% of women in employment are in informal sectors; 79.5% of households do not have a single female member who owns fixed assets. In South Asia, 80% of women in non-agricultural jobs are in informal employment. The gender gap in mobile internet usage is 70%, which means internet-based digital banking solutions to increase financial inclusion still face many uphill battles.

On the other hand, impact sector funding, such as development funding, and impact investing, totalled US$650 billion. Yet, little data indicates how much of this financing directly reached the hands of marginalized grassroots entrepreneurs, such as women and informal sector workers. The main problem is the lack of trust, which, in turn, requires many levels of fund management and monitoring, making small ticket size, direct investments unfeasible.

We are pioneering a way to monitor the usage of microfinance business loans for last-mile entrepreneurs. At the same time, we automate the costly process of fund monitoring for grassroots investments. Investments are locked in to the system, making sure all funding is for assets critical for small businesses. 

We partner with microfinance organizations to issue business loans for microentrepreneurs using digital tokens. These digital token loans can only be used at pre-approved vendors. For example, an agriculture loan can only be used at agriculture vendors. In addition, impact funders looking to incentivize certain businesses, such as women-owned enterprises, can use our platform to subsidize the loan interest rates for women entrepreneurs. 

Our SMS platform doesn’t require smartphones or mobile data to be as inclusive as possible. Our data helps build tailored loan products, increase business income, and automate personalized services, such as business skills support.

We provide an assured digital link from the funding source - private sector, development partners, and governments - to the end investment in real-time. We believe our system can help make sure each $1 of investment has traceable impact in building the grassroots economy. 

We aim to serve informal sector microentrepreneurs in emerging markets. Our long term goal is to help channel a part of the US$650 billion impact financing market to an estimated 400 million micro-enterprises globally. We acquire new customers by partnering with financial institutions, especially microfinance institutions, and offering digital token loan products to their members. 

Aeloi’s technology is building a mutually beneficial agreement: microentrepreneurs gain lower interest rates by increasing their visibility to formal systems; funders gain more loan end-use tracking ability. Funders, including microfinance institutions, have lower monitoring and compliance costs. They are assured loans will be used towards business expenses. Borrowers without collateral can access affordable finance and have the flexibility to control where, when, and how to spend their loan. The probability of repayment is higher because the tokens help borrowers avoid luxury purchases or family financial requests.

5 main impacts:

• Access to affordable finance, increase in business assets, and growing income from expansion;

• Growing economies of scale, such as vendor discounts, coordinated marketing, and advocacy;

• Increasingly detailed digital footprint, to move to formal financial services and gain bargaining power for financial decision making in their lives;

• Personalized services, such as business or financial support, at bottlenecks.

We aim to accelerate growing an inclusive economy by enabling access to affordable finance. One main problem is a lack of trust between two parties: 1) those who want to invest to create impact and 2) those in the informal sector who cannot prove their business acumen through traditional credit assessments. 

Therefore, we use technology to foster a trustworthy transaction record and binding agreement by:

1. ensuring funding is only used for business purposes; and

2. monitoring behavioural data in real time.

Through building a last-mile borrower and vendor ecosystem, we aim to become the premier investment platform for grassroots enterprises.

Microfinance business loans and personal loans often have the same interest rate as there is no option to make sure the financing is spent on productive assets. Audits on microentreprises are nearly impossible. 

With Aeloi, the microfinance is assured the loan is used towards business expenses. The repayment probability is higher and thus interest rates can be lower. We help solve the problem of trust between funders and borrowers. We have designed our business model and technology to have strong value propositions for each stakeholder. 

Compared to traditional international development projects, we are ensuring impact finance is used to stimulate building sustainable local business ecosystems. Our model is less affected by project funding cycles or by change in political priorities. We can seamlessly combine public and private funds that are targeted at impact. 

For example, if the government is interested in subsidizing microfinance loans for organic agriculture, using digital tokens, public funds can be combined with private sector credit to be channelled directly to specific entrepreneurs who meet the criteria. In addition, behavioural economic nudges can be built into the system. For example, women microentrepreneurs starting new businesses can receive bonus tokens if they are willing to participate in business skills training and receive a good score. 

Aeloi is also highly scalable regionally and globally because our technology is user-friendly and replicable at low-cost. Our platform is also flexible to power wide-ranging products such as insurance or skills training in many sectors, for example, education, health, transportation, or agriculture.

Our technology is a type of shop credit we call digital tokens. Digital tokens can only be spent at pre-approved vendors. Similar to mobile money, digital tokens help users access goods or services without the direct use of cash. Unlike mobile money, tokens are kept within a network of vetted vendors. For example, microentrepreneurs receive digital token loans and can choose where, when, and how much to spend their loan. They are in control of their resources. 

We currently use SMS instead of an app because we are targeting grassroots users who are not comfortable with smartphones. Aeloi is highly scalable regionally and globally because our technology is user-friendly and replicable at low-cost. Our platform is adaptable to power products from many sectors, such as remittances or subsidized health care visits. A trustworthy transaction record is automatically generated without the need of detailed manual monitoring and evaluation. 

Our main competitors are: 1) digital or mobile money wallets: wallets aim to facilitate faster transactions. We ensure productive spending. 2) Electronic voucher programs for development: our platform is similar but integrated because we build a direct connection to local financial institutions and grow the amount and type of vendors

In the future, blockchain technology will further secure the database and machine learning will be used to analyse behaviour data. This will help flag any problems or needs for improvement faster than traditional analysis.

Our pilot has shown that there is a strong value proposition for all stakeholders:

1. Informal sector microentrepreneurs, especially women, who usually do not have any collateral or credit history, so they borrow at high interest rates. They can assess more affordable loans. 

2. Financial institutions use us as a digital fund management system because they can be sure the financing was used on business assets. 

3. Impact sector funders will have a scalable platform to deliver investments while cutting management and monitoring costs considerably. 

4. Vendors will be connected to customers who have assured financing. 

In addition, cash transfers and voucher programs have been shown to have significant impact on livelihoods and living standards. A literature review on cash transfers over the past 15 years, conducted by the Overseas Development Institute (ODI), suggests that 130 low- and middle-income countries have an unconditional cash transfer program, and 63 have a conditional cash transfer program.  The vast majority of studies reported statistically significant results that cash transfers were successful in delivering intended outcomes. Strong evidence indicates that cash transfers are correlated with reductions in monetary poverty, while also increase beneficiaries’ savings, investment in livestock and agricultural assets. There is evidence that cash transfers can foster greater economic autonomy and self-sufficiency. Aeloi’s technology is an evolution of cash transfer and voucher programs, using technology to build  a more sustainable business model.

Aeloi was born from 20 years of frustrations with development work in Africa and Asia. We especially disliked 3 aspects of development: 1) the “beneficiary” power dynamic where donors had the most power, 2) tracking impact required a lot of money and time, and 3) technology designed for men then adapted for women. Aeloi is our hypothesis about how to put grassroots users, especially women, at the centre of development.

Activities: 

• Build technology platform and onboard vendors, borrowers, and microfinance organizations. 

• Provide digital token loans to microentrepreneurs who would normally not be able to access enough loans for their businesses.

• Track data related to transactions and financial health of borrowers.

• Promote our ecosystem to impact funders as a platform for investment and impact. 

Outputs

• More microentrepreneurs can access loans for business expansion

• Real time monitoring of loan end-use

• Vendor ratings by borrowers

• Increased digital footprints of informal sector entrepreneurs

Short term outcomes

• Generate a credit score and profile of each individual user and, with their consent, share to other financial institutions that are able to provide larger amount loans at lower interest rates.

• Increased investment into the last-mile entrepreneurship ecosystem leading to more tailored local services for more customers

• Increased livelihoods and diversified businesses for microentrepreneurs.  

Long term outcomes

• Empowerment of marginalized informal sector microentrepreneurs through increased visibility within formal financial systems

• Increased impact investments leading to positive social outcomes, such as more women-led businesses, more small businesses tackling climate change, and more entrepreneurs targeting the bottom of the pyramid customers. 

For many informal sector business communities we work with, long term impact is more important than short term assistance. Often, it feels like countless development projects have come and gone, for decades, but the impacts rarely linger after a project cycle. Financial sustainability is a constraint to ensure we are setting up structures that have a strong value proposition for each stakeholder. Aligned incentives means funding will be less dependent on external politics or trends.

Currently, we are piloting two products: 1) Green Energy Mobility (GEM) and 2) ReGrow. 

GEM is our product for electric minibuses drivers and owners in Kathmandu. Our GEM pilot targets 50 microentrepreneurs and was launched in February 2020, in partnership with Mahila Sahayatra Microfinance. 

For our agribusiness product, ReGrow, we launched our first pilot in July 2019 by partnering with Laxmi Mahila Savings and Credit Cooperative in Kavre district, Nepal. Our second pilot was launched in March 2020 together also with Mahila Sahayatra Microfinance, which has 35,000 members.

Currently we are serving:

• Borrowers: 18

• Microfinance institution: 2

• Vendors: 25

• Impact funder: 1

After the covid lockdown is lifted, we’ll be serving:

• Borrowers: 150

• Microfinance institutions: 2

• Vendors: 100

• Impact funders: 1

In 5 years, we’ll be serving:

• Borrowers: 20,000

• Microfinance institutions: 20

• Vendors: 5000

• Impact funders: 5

• As each microenterprise employs between 1 to 10 employees, we estimate that our solution will help approximately 75,000 people indirectly through employment or vendor services.

Last-mile financing for small businesses is our aim. With your support, we’ll be able to partner with 2 new microfinance institutions and expand to 1200 borrowers and vendors next year. We will build the following components of our technology platform:

1. Automate the vendor onboarding process through peer ratings, machine learning data analysis, and an accreditation process.

2. Customize our system to provide data analysis to design support services, such as marketing, advocacy, and integrated supply chains.

3. Build training materials and interfaces that ensure smooth onboarding of borrowers.

4. Pilot and test a distributed incubation model for entrepreneurs: following up with entrepreneurs where and when they need advice, instead of a traditional incubator model

Our goals for the next 5 years: 

• Scale to 20,000 borrowers, 5000 vendors, 20 microfinance partners, and 5 institutional impact funders

• Grow our team from 12 to 50, especially expanding the operations and business development teams

• Raise US$507,000 in financing with projected breakeven at year 3. 

• Developing a vendor rating system where vendor service quality information is shared with entrepreneurs.

• Expand to another country in South East Asia or East Africa

• Blockchain migration for our database and security features

• Become a trusted provider of digital fund management services for grassroots users.

• Expand our partnership products to include public and private sector impact financing

Next year:

1. Borrower onboarding: one of our more human resource intensive processes is to teach microentrepreneurs how to use our technology. In order to be able to expand to thousands of users across different geographies, we’ll need to design a very user-friendly experience.

2. Vendor vetting: the quality of vendors on our platform will define our service quality. Therefore we must develop methods to vet, promote, and discipline vendors. Using aggregated quantitative data and qualitative surveys, we’ll develop more automatic methods to monitor vendors. 

Next five years:

1. Ensuring compliance to different legal systems as we expand internationally: we will need to make sure we have the correct partnerships before launching our products in different countries. While we are a software company that only partners with financial institutions that have the proper regulatory status, we are still a new kind of financial technology concept where governments may define us differently in different jurisdictions.

2. Building trust with impact funders to channel funding through our platform to microentrepreneurs. We are a young startup, so becoming a trusted partner will take a long time and good evidence, especially for larger institutional funders that already have established ways to disburse funds.

1. Currently, our vendor application and onboarding is a manual process where vendors are suggested by borrowers. As we see this manual process as a bottleneck for our operations in the future, we aim to automate most parts of the vendor application and onboarding process, e.g. through digital application forms (e.g. IVR technology over phone), and peer/customer ratings. We are testing out different methods and technologies with a lean startup approach. 

2. We are researching different approaches to this barrier, such as using a peer confirmation method of vendors. For example, when a vendor is suggested by a borrower or applies to become part of our system, their basic information would be sent out to 3 people geographically close by who are already in our system to verify the information the vendor provided. 

3. When we have the chance, we always ask questions about the legality of our technology in different countries. During our preparation for international expansion, we will also be engaging with legal professionals to make sure we are in compliance with all local laws. 

4. To ensure more financial sustainability and foster trust, we want to launch a Corporate Social Responsibility (CSR) revolving fund. The fund generates interest from fixed deposits to subsidize loans for micro entrepreneurs. As such, different investments will be able to pooled and managed together, hopefully increasing investment confidence.

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Our front-end and back-end computer programming team with 4 members has more than 60 years of combined experience in programming financial technology software. They are experienced in developing software at international standards. We also have 6 talented project managers and assistants. In addition, we work closely with mentors from UNCDF, UNESCAP, UNEP, and Civil Society Academy (Welthungerhilfe).

In summary:

• 2 full time co-founders
• 4 full time managers and assistants 
• 1 part time manager
• 4 part time members of the development team
• 1 part time volunteer

Aeloi’s co-founders, Tiffany Tong and Sonika Manandhar, bring a combined 20 years of fintech, international development and computer engineering experience. While working with the World Bank and the Microsoft Innovation Center, they  graduated from the Singularity University Global Solutions Program based in Silicon Valley. Our company was recently introduced as the only fintech startup led by women in Nepal.

Tiffany (CEO) is mainly in charge of business modelling, fundraising, and liaising with international stakeholders. In the last 10 years, Tiffany has implemented projects and statistical surveys totalling US$7 million in Africa for governments, NGOs, and the World Bank. She also co-founded a technology platform for job matching in Tanzania which raised US$175,000. The company was a finalist for Demo Africa 2014, Pivot East 2015, the ALN Ventures program 2015, and received an USAID seed grant. 

Sonika (CTO) manages our tech platform design and development and partnering with local organizations. Sonika has spent the last decade as a software engineer and project manager. She was the CEO of a fintech platform and financial cooperative in Kathmandu. She oversaw teams of more than 20 software developers at the Microsoft Innovation Center in Nepal. 

Microfinance institution partners:

1. Laxmi Mahila Savings and Credit Cooperative - first pilot in Kavre district, Nepal

2. Mahila Sahayatra Microfinance - second and third pilot in Kathmandu and Nuwakot district, Nepal

Funding and mentorship partners:

1. Standard Chartered - mentorship and funding from One Young World’s Lead2030 Innovation Challenge in 2020

2. UNCDF and UNESCAP - mentorship and funding from the Women MSME FinTech Innovation Fund 2019

3. UNEP - mentorship and funding from the Young Champion of the Earth 2019 award

4. Civil Society Academy (Welthungerhilfe) - mentorship and funding from the Social Innovation Challenge 2019

We are a Software as a Service (SaaS) model for financial institutions and impact sector funders. We have 4 main revenue streams: 

1) Our main revenue will be from charging a service fee, as a percentage of digital tokens disbursed through Aeloi’s system, from all of funders or investors who would like to use our system to monitor their investments; 

2) Our second revenue stream is a subscription fee from microfinance partners and vendors using our platform. Microfinance institutions would use our software to monitor loans and maintain financial discipline. Vendors would use us as a marketing platform to bring in customers who already have financing. Traditionally, many vendors give them goods as credit themselves as financing is a problem within many communities;

3) Our third revenue stream is to provide customization of our platform for specific projects or industries. For example, we have been approached to discuss about how to use our technology platform to design a system to monitor financing and sales of solar panels through agents and to provide business stimulus loans for covid recovery response; and

4) Our fourth revenue stream is from providing data analysis services to the private and public sector. This would include information such as alternative credit scores, vendor ratings, demographic information, and business activity levels. 

We continuously make sure that our business model has strong value propositions for each stakeholder.

According to our business modeling, the investment needed for Aeloi is estimated at US$507,247 over 4 years. With 2019 as our Year 0, we project we will break even in Year 3 and grow to a net income of US$ $655,268 in Year 5. This investment will be mainly used to enhance the technology platform (30%), business development (15%), and operations costs (25%). 

Our model, especially in the first few years, is to be partially funded by grants through development partners and startup competitions. Our revenue will come from charging our customers, which include financial institutions, impact investment funds, governments, and development projects. Further expansion would require injections of capital. Eventually, we will raise investment capital, possibly at a series A level, by-passing the pre-seed and seed round dilutive investments.

With Solve’s funding, we’ll be able to partner with 2 new microfinance partners and expand to 1000 borrowers next year. We want to further validate our impact investment model and improve our technology. In particular, we want to automate vendor vetting and training borrowers. In year 2, we plan to scale to 3000 borrowers (with 5 different microfinance partners) and use machine learning to generate behavioural analysis and alternative credit scores. We will start moving our data into the blockchain. We will grow our team from 12 to 30 in two years, especially expanding operations and business development.

More importantly, through Solve, we would like to gain inspiration, mentorship, and connections through your network. Being able to access mentorship and personalized support through your 9 month program would be tremendous support for our team. In particular, we would also like to increase our exposure and connections at social impact events and find collaboration opportunities through a class of unconventional Solvers and MIT’s extensive network. 

To consistently improve Aeloi, we want to soak up strategic advice from your experts in order to test out in the field. In addition, we want to be able to showcase our improved product to investors and cross-sector leaders around the world so that we can gain partnerships and financial backing to scale our solution at the right stages.

1. Funding and revenue model: we would need to continue to raise funding  to cover our pilots until we can earn enough revenue to breakeven. We are looking for ways to further validate our revenue model also, especially with regards to impact funders.  

2. Board members or advisors: we have not yet established a board of directors for our company, although that is a goal we have for the next 12 months. We are also seeking advisors for topics such as legal, international business expansion preparations, fundraising, and business development. 

3. Legal or regulatory matters: we want to make sure that our technology and business model is implementable in many emerging markets, so we are seeking advice on how best to set up our company structure. Would it be through licensing? Or software subscription? 

4. Marketing, media, and exposure: we are seeking ways to raise our company’s profile within the impact funding industry.

We would like to partner with organizations for the following purposes: 

1. Digital financial services researchers and practitioners: for example CGAP (the Consultative Group to Assist the Poor is an independent think tank dedicated to financial inclusion) and the Better Than Cash Alliance (a global partnership of governments, companies, and international organizations that accelerates the transition from cash to digital payments in order to reduce poverty and drive inclusive growth.)

2. Development partners: for example the Development Impact Evaluation (DIME) Group (World Bank), Sakchyam Access to Finance for the Poor Programme (Sakchyam) (UKaid)

3. Private sector: remittance networks, microfinance networks, and mobile money/telecommunications companies.

The financial, and especially fintech, industry is mostly designed for men and adapted for women, as we have felt deeply in our previous work. As a company with female co-founders and a majority female team, we are especially driven to design first and foremost for women entrepreneurs in informal sectors to increase economic equity. Due to our values, we are piloting with women-only microfinance organizations. 

We strive to never cause any of our users embarrassment through difficult language, technology, or unfriendly staff. We have designed our training materials using videos so that low-literacy is welcomed.

If we win the Innovation for Women Prize, we have three goals: 1) further develop interactive training materials for any literacy level; 2) use machine learning to monitor each user’s customer journey; and 3) crowdfund a shared “collateral” for women who do not own any immovable assets.

For 1, we want to make the application process completely words-free. Women borrowers don’t need to depend on a literate relative to help them. This includes video recorded contracts with signing completed with photos and fingerprints. In addition, any financial literacy training materials will also be customized and through audio format. For 2, we will build a machine learning team to dig deep into our data to build an alternative credit score and to follow up immediately if there are any bottlenecks. For 3, we want to test a new form of collateral, which is shared by all our women borrowers, similar to an insurance fund for borrowers.

One of our main goals is to ensure contribution to the green economy includes underrepresented communities. The green economy needs to be grassroots because the majority of natural resources, such as farmland and forests are under management by small communities. Access to affordable finance means that green microentrepreneurs can build their businesses from the ground up, targeting opportunities and needs in their communities. 

If we win the GM Prize on GM Prize on Good Jobs and Inclusive Entrepreneurship, we will use the money to fund pilots for a more “risky” selection of borrowers. To do this, we would create a “default prevention insurance” so that microfinance and savings cooperatives are more interested in loaning money to riskier groups. The goal is to test out “nano-loans” in the range of US$50 to US$100 using digital tokens so that borrowers can gradually build up an alternative credit score. We would also be able to see what borrowers would prioritize, what their preferences and requirements are. 

On the customer side, we want to start building and marketing a community that wants to buy directly from microentrepreneurs with assured impacts. For example, customers would like to buy organic products from small scale farmers. Through our token system, we would be able to track the inputs the farmer bought and used and connect farmers directly with customers. Customers would pay farmers with digital tokens and the farmers would use the tokens to directly repay their loans, buy inputs from vendors, or redeem for cash.