ReGrow - token powered finance

Aeloi is using digital tokens to power affordable finance for green microentrepreneurs in emerging markets. We help solve the problem of trust between funders and borrowers. Digital tokens are a flexible form of shop credit only usable at pre-approved vendors. Funders are assured the loans are spent on business expenses. Borrowers without collateral can access affordable finance. We aim to democratize impact investments to accelerate the growth of the grassroots green economy.

ReGrow is our product tailored for women-owned rural agribusinesses. We help agriculture microfinance organizations issue small business loans without collateral requirements and lower interest rates.

Using a simple phone, we are unlocking affordable financing such as subsidized loans, social impact bonds, or carbon offsets, for 65 million microenterprises. With behavioural data collected, we’ll build a big data platform offering products such as alternative credit scores and automated personal financial advice.

Aeloi is an evolution of the microfinance movement. There is still a US$2 trillion credit gap for micro, small, and medium enterprises (MSMEs) in emerging markets, even with the surge in microfinance services over the last decade. Accessing financing with reasonable interest rates is difficult because there remains a trust problem between lenders and borrowers. Aeloi’s platform will be able to help increase transparent records between all stakeholders. 

ReGrow is specifically targeted to help increase agriculture commercialization from the grassroots level. Agriculture contributes to 32% of Nepal's GDP and employs 76% of its population, yet has low productivity. ReGrow helps develop a pipeline to support the scaling of agriculture microenterprises by collecting more accurate data so that financial and managerial support can be provided at critical bottlenecks.

In addition, Aeloi is helping track the impact outcomes for development financing. Usually, such financing is disbursed through banks, NGOs, or government programs, and due to management costs, a small percentage actually reaches the MSMEs. Our solution provides more accurate livelihood impact analysis through the transaction data from both the loan usage and customer payments. We help meet the stringent impact evaluation requirements without many layers of middle management.

Aeloi’s mission is to help create inclusive green economic growth in the Global South through democratizing access to impact finance. In particular, for micro-entrepreneurs who are usually first time digital financial service users and are not comfortable with formal banking institutions. The target clients of our first product, ReGrow, are women who own rural microenterprises mainly involved in post-harvest value-addition or high value niche agri-products.

We believe ReGrow will help citizens and communities, especially women, create five impacts on social inclusion and shared prosperity:

• Access to affordable finance for grassroots agri-preneurs who have no collateral or credit history;

• Increased income from business expansion with skills training, inputs, and diversification of products;

• Continuous support through personalized services derived from data insights: e.g. alternative credit scores, financial literacy training, or P2P lending;

• Building data-driven communities that can coordinate marketing and advocacy and share resources. For example, if many farmers are buying one type of input, we can connect interested farmers to negotiate discounts from vendors. 

In order to ensure our product is serving microentrepreneurs’ needs accurately, we are designing and piloting with Laxmi Mahila Savings and Credit Cooperative. They are a women-owned and operated co-op with over 1800 women farmer members.

ReGrow is an SMS platform similar to a closed circuit mobile money system. An evolution of e-vouchers or cash transfers, the funding, whether in the form of loans or grants, can only be used at pre-vetted vendors.

For example, Geeta is a farmer and owns an organic vegetable microenterprise that sells dried herbs directly to shops in the capital Kathmandu. She applies for a loan from a savings co-operative with 5% interest subsidized by the government because it is for a woman-owned business. 

The loan is approved and issued in the form of digital tokens through ReGrow. Geeta can spend the tokens at an array of organic agriculture input vendors and trainers that are approved on our platform. With the tokens, Geeta purchases some organic compost and seeds. She also hires a consultant to help design and make her product packaging. The vendors who provided services to Geeta will encash the tokens into the national currency from the bank. After a few months, she harvests, processes, and sells to customers who purchase either by cash or tokens, which she also uses to repay the loan. 

Our big data platform, with detailed behavioural data collected, can design products that help address the bottlenecks women-led microenterprises face. We’ll also create alternative credit scores and personalized business financial advice to help women access affordable financial services. We can help match women entrepreneurs who are in similar geographical areas with similar business type and size, so they can share resources to enable more efficient growth. We can also design incentives and coordinate advocacy efforts to help women navigate scaling their businesses.

Our digital SMS platform helps 3 other stakeholders:

• Financial institutions and investors can use ReGrow as a digital fund management system because they will know exactly where, when, and how much was spent on the business. We are also helping microfinance institutions move towards cashless banking;

• Consumers can accurately track the impact of their purchases as we’ll be helping direct purchases in the future; and

• Governments, NGOs, and development partners will have a platform to test and deliver additional interventions using a scalable platform that can cut management and monitoring costs considerably.

We have iterated the concept for Aeloi since March 2018, consulting about 30 experts in development and digital financial services. In the last decade, our co-founders have worked in digital microfinance platforms, startups, and data. 

We measure success by inclusivity and impact. We are democratizing impact investments for anyone at any literacy level, on any phone. We design with first time digital financial services users, especially women, at the centre. 

Aeloi believes digitizing payments and services through tokens is a leapfrogging innovation to help microfinance institutions move into cashless banking. Aeloi provides a more targeted service that increases user choice and lowers project management cost. Our platform is scalable because it does not require specialized equipment nor an internet connection. We can test incentives and nudges for social with real-time data, which unlocks formal credit.  Our future vision is to have hundreds of such products in collaboration with partners which feeds into our Aeloi big data platform. 

An innovation in our business model is that we can seamlessly combine public and private funds that are targeted at impact. For example, if you are the government 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 farmers who meet the criteria. The monitoring and evaluation of public funds usage is automatic and updated in real time, thus significantly saving administration costs. 

Currently, there are no direct competitors using digital tokens for development programs on the marketplace in Nepal. Globally, we have not found similar examples either. Indirect competitors include: commercial online, mobile app-based payment gateways; humanitarian blockchain and SMS-based platform for cash transfers; vouchers programs by governments and development partners.

Our core technology is digital tokens. Digital tokens are a flexible form of shop credit only usable at pre-approved vendors. Similar to digital vouchers programs, digital tokens help users access goods or services without the direct use of cash. Unlike vouchers, however, digital tokens are more flexible in terms of the types of vendors. 

For example, a typical voucher program for farmers only give vouchers for buying fertilizer or pesticides at a specific vendor. With our digital token system, farmers receive a certain amount of digital tokens and choose where to buy the fertilizer. Farmers can even hire a trainer to help them use the fertilizers properly. This means the farmer is much more in control of how to use the resources they have. 

Another part of our technology is using machine learning to analyse behaviour data we collect from three users of our platform: borrowers, vendors, and product customers. In addition to personal data collected from traditional surveys, the digital token tracked data will be used to generate personalized services.

We currently use SMS technology because we are targeting grassroots users who are not comfortable with smartphones. We are currently not using blockchain technology because of legal restrictions in Nepal. We have built our technology with the goal of migrating into Hyperledger, an open source blockchain-based distributed ledger, in the future.

Our company aims to accelerate the transition to a greener economy for micro-entrepreneurs in emerging markets by helping them access affordable finance. Financing is a major bottleneck for scaling microenterprises, with an estimated credit gap of US$2 trillion. 

To help bridge this credit gap, our digital token system can be used to build trust between impact investors and borrowers. Trust is built because of three features of our system:

1. Ensure funding is only used for business purposes

2. Connect farmers directly with useful vendors

3. Collect detailed and accurate data behavioural in real time

The first feature means that agriculture loans will only be used for growing agriculture businesses. The loan cannot be used for other purposes, especially non-productive ones, such as buying a new TV or taken by a family member for alcohol consumption. Our theory of change is that this will help farmers grow their businesses and repay their loans more effectively.

The second feature is to help build a community ecosystem of vendors and customers. Vendors are interested in directly connecting with customers that have assured financing. Customers want better service and availability of products, which will be encouraged through a vendor rating system. 

The third feature helps meet stringent reporting requirements from impact investments to minimize monitoring and evaluation costs. Collecting consistent data means funders can make investment decisions with more accuracy and updated analysis.

Our current partner is Laxmi Mahila Savings and Credit Cooperative. As mentioned before, they  have over 1800 women members in 3 rural municipalities and recently opened a new branch. Laxmi Mahila will be providing loans totalling US$15,000 to 15 women farming micro-entrepreneurs from July 2019 to January 2020 for our pilot. There is a possibility of offering digital token loans through ReGrow to all their members next year.

In addition, we aim to add 1-2 more microfinance institutions based, which may link us with 1000 to 3000 more customers, in other locations next year. Based on a yearly growth rate of 400%, we’ll be reaching about 50,000 borrowers by year 5. As each microenterprise employs between 1 to 10 employees, we estimate that our solution will help approximately 150,000 people indirectly through employment or vendor services by year 5. 

We have also signed up 45 vendors for the pilot. Vendors will be directly linked to farmers who received a loan through a marketing book with a list of all the vendors available over our hotline, with our field agents, and online. We predict we’ll be able to sign up 1000 vendors within a year and possibly 10,000 within 5 years. One of our key goals is to automate the vendor onboarding process through innovations such as peer ratings, machine learning data analysis, and an accreditation process similar to the process for b-corporations.

Our goals within the next year include:

• June 2019 - January 2020: ReGrow pilot with Laxmi Mahila Saccos (15 borrowers)

• Sept 2019 - pitch for Social Innovation Challenge second round. If successful, ramp up pilot to 100 borrowers either through current partnership or with additional new partnerships with other microfinance institutions

• Sept 2019 - midline survey for 15 borrowers pilot. The results will determine the design of our ramp up pilot

• Oct 2019 - preparation work for 100 borrowers pilot

• Nov 2019 - June 2020: launch of new pilot with 100 borrowers

• Feb 2019 - Endline survey of 15 borrowers pilot. Results will be shared with all stakeholders and inform the continuation of the 100 borrowers pilot. 

• July 2020: Endline survey of 100 borrowers pilot. Results will determine whether we further scale up and sign up additional partners or we need to re-design our core product. 

Our goals within the next 5 years include: 

• Further validate our business model and build our platform for scaling

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

• Build a machine learning team to dig deep into our data

• Expand to another country in South East Asia or East Africa for piloting operations

• Blockchain migration for our database and security features

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

• Become a pioneer of using digital tokens for development and encourage others to join; build a digital token community

Our main barriers for next year are: 

1. Users do not understand or buy into using digital tokens: 

2. Not enough service vendors to cover the requests from users: 

3. Users colluding with vendors to use tokens for other purposes: 

Our main barriers for the next five years are:

• Testing and adjusting the willingness to pay by public and private sector organizations. For example, microfinance organizations would probably be only willing to pay about 1% of the loan amount to use Aeloi for loan management. Development projects, on the other hand, may be willing to pay 10% for project finance management services. We are currently developing the first product and will have to experiment and design the second one in the next few years. 

• Ensuring our data privacy and security is paramount as we are handling sensitive information from vulnerable groups

• Ensuring our product can be adapted to the conditions in different geographies.

• Scaling our team in a way that doesn’t lose our company culture and values

• Other cryptocurrencies, such as Facebook’s Libra; probably more opportunity than barrier

1. We are conducting a lot of user experience testing. A free hotline is available for inquiries. Field officers will make periodic in-person visits. Our marketing materials will include audio and video clips that can be shared for repeated watching.

2. Vendor request hotline will be set up early to make sure we are able to onboard vendors.

3. Real-time tracking of data will alert us to any abnormal number of tokens flowing towards one vendor. Continuous follow up through phone, and physical visit spot checks, for both users and vendors to ask about what type of inputs/training they bought with the tokens.

We will ensure monitoring and evaluation is as rigorous as possible. For our pilot, we will conduct a baseline survey with 15 digital token loan borrowers, 15 who applied, and 15 who did not apply. We will also conduct a midline survey and an endline survey with the same group.

For barriers in the next five years, we believe the key is to build an agile and communicative team that is constantly humbly listening to our users and improving our product based on feedback. As the founding team, we have spent a lot of time discussing how to set up our company culture and how to set up structures so that we can attract and retain talent. To build products that truly serve both our clients and users so that they are willing to pay, we would need to be open to pivoting if there is good evidence.

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2 full time co-founders

3 full time pilot management staff 

3 part time development team

Aeloi 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, we both graduated from the Singularity University Global Solutions Program, based in Silicon Valley. For four months, we were trained in applying exponential technologies to global problems. Passion for using exponential technologies to improve livelihoods in emerging markets fuels our partnership. Recently, we were honoured to be introduced as the only fintech startup led by women in Nepal.

In the last 10 years, Tiffany has implemented projects and statistical surveys in Africa for governments, NGOs, and the World Bank. She also co-founded a tech 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 a seed grant from USAID. 

Sonika has spent the last decade as a software engineer and as a project manager, She oversaw teams of more than 20 software developers at the Microsoft Innovation Center in Nepal. She was the CEO of a fintech platform built on top of a financial cooperative in Kathmandu. Sonika was also trained at the Korea Aerospace Research Institute and is part of a team building first satellite made in Nepal. 

Our development team has more than 50 years of combined experience in fintech for both back end and front end development.

Our partner is Laxmi Mahila Savings and Credit Cooperative, which is a women-owned and operated business cooperative with over 1800 women members in the rural municipalities of Panauti, Banepa, and Dhulikhel. Our pilot is for 6 months with 15 women farming micro-entrepreneurs. Before launching our pilot, we built our minimum viable product for the technology platform. We also conducted market validation through in-depth discussions with three commercial financial institutions, surveying 50 potential users, and Alpha testing with 13 users. 

Our current mentors include advisors and staff from the Civil Society Academy (Welthungerhilfe), Greenpreneurs (Global Green Growth Institute), and the UN Capital Development Fund. 

Aeloi’s platform can channel any type of funding, including public programs or public private partnerships such as vocational skills training. As such, we’re also seeking partners with public sector sources of financing. In addition, in the future once our pilot results are established, we would like to develop more ecosystem partnerships with digital wallets, radio stations, and vendor networks.

ReGrow will be charging a 1% management fee for all financing converted into digital tokens. It would be easier for both banks and borrowers to manage microfinance loans as the process is automatically tracked from loan disbursement to vendor payment. In the future, we will also explore a model of charging vendors to redeem their digital token payments into cash or give discounts if they continue to spend the tokens within the ecosystem. 

For non-profit project implementation partners, our management fee will be 5% of the total financing channelled towards beneficiaries through digital tokens. For example, a farmer skill upgrading project wants to use US$500,000 to train 7000 farmers. We will charge US$25,000 for disbursing the tokens and onboarding appropriate vendors for the aims of this project. 

According to our business modeling, the investment needed for ReGrow is estimated at US$503,000 over three years. We will break even in year 4 and grow to a net income of US$13 million in year 6. This investment over 3 years will be mainly used to enhance the technology platform (19%), market to customers (32%), and office recurrent costs (26%). 

Our future vision is to have hundreds of such products in collaboration with partners which feeds into our Aeloi big data platform. With such a platform with unique algorithms and invaluable data not available anywhere else, we would be able to provide a variety of financial products and monitoring and evaluation impact analysis

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. This includes funders for public service delivery programs, such as government vouchers for purchasing fertilizer or seeds or programs supported by development partners.

Our second revenue stream is to provide customization of our platform for specific projects or industries. For example, we can build a digital token platform for recycling collection companies want a system to management payment and connection with customers. 

Our third revenue stream is from providing data analysis services to the private and public sector. For example, banks would like to know the operation data of vendors in a specific area could approach us for aggregated analysis. 

Our model, especially in the first few years, is to be partially funded by grants through development partners and startup/venture competitions. Our revenue will come from charging our customers, which include financial institutions, impact investment funds, governments, and development projects. According to our business modeling, we expect to breakeven by year 4

Further expansion or more rapid expansion would require injections of capital. Eventually, we will raise investment capital, possibly at a series A level, instead of raising the normal pre-seed and seed rounds.

Aeloi needs to continuously validate our assumptions, especially when applied to different geographies. At the same time, we have to make sure our technology and business model is scalable. As such, we have to find ways to reduce bottlenecks, such as automating the process of onboarding and vetting potential vendors, training all users on how to use the SMS system through digital means, and predicting what goods and services users would want, at what volume, and when. 

With the Solve grant, we would like to replicate our pilot in another geographical area and with a scaled up number of borrowers. We would need to find more ways to test out our thinking about revenue streams and willingness to pay from our customers.

More importantly, through Solve, we would like to gain inspiration, mentorship, and connections through your network. Being able to access mentorship and personalized support for 12 months 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. 

To consistently improve Aeloi, we want to be part of a Brain Trust to soak up strategic advice 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.

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

1) Agriculture extension and innovation research: for example, CGIAR is a global research partnership for a food secure future dedicated to reducing poverty, enhancing food and nutrition security, and improving natural resources.

2) 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.)

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

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

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One of our main goals is to ensure contribution to and access 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 Community-Driven Innovation, 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 ReGrow digital tokens and the farmers would use the tokens to directly repay their loans, buy inputs from vendors, or redeem for cash. 

Aeloi is a company that is for women by women. The majority of our staff and both our co-founders are women. Our products are designed with women, especially first time digital financial services users, at the centre. Due to our values, we are working with a women farmer cooperative and building an SMS platform (not complicated apps needing mobile data). 

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 literacy is not required.

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 video or 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.

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ReGrow aims to help micro-entrepreneurs build the green economy from the ground up, targeting opportunities and needs in their communities. One of the partnerships we are exploring is with the Green Colleges program in India, implemented by Welthungerhilfe. 

The ‘Green Colleges’ train rural youth in green trades. The program helps them with better access to technology, finances and markets in order to become ‘ecopreneurs’. For youth who have graduated from their main program, they have started an incubator that aims to help scale nano-enterprises into micro-enterprises. Green Colleges is interested in a system that can help keep track of these nano-ecopreneurs and provide finances and advice at critical junctures. ReGrow’s system could provide such benefits.  

If we win the Morgridge Family Foundation Community-Driven Innovation Prize, we will use the money to implement a pilot with Green Colleges for their incubator. We will build out a system that uses digital tokens to keep track of the inputs and services the ecopreneurs are buying and provide big data analysis to design potential support structures. We would also test out how to use digital tokens and our platform connecting ecopreneurs and vendors to build a community that can take advantage of economies of scale for marketing, advocacy, diversification, supply chain, and other benefits. 

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