Kenyan startup M-Changa, which allows users to leverage their connections to raise funds in the tradition of community self-help or “harambee”, is to launch in Tanzania in June through a partnership with mobile operator Tigo.
The startup is also today launching a crowdfunding campaign on European platform Seedrs, setting a target of US$500,000 to cover the costs of tech implementation on a number of partnerships, most notably one with Equity Bank, the largest financial services provider in Kenya.
M-Changa is a fundraiser management platform that allows individuals to raise money from their immediate community, in the traditional Kenyan spirit of harambee, for the likes of weddings and school fees. Money can be donated free of charge via mobile money, with the company charging only the recipient a fee of 4.25 per cent of the total money raised.
It has been a success in Kenya – US$250,000 has been raised on the site to date, from 3,200 campaigns and 26,000 contributors. NGOs and non-profits are also using the platform, with payments also able to be made using credit cards of PayPal, providing a more traditional crowdfunding feel in some cases and additional revenue streams for the startup.
Co-founder and chief executive officer (CEO) Kyai Mullei told Disrupt Africa M-Changa is set to go live in neighbouring Tanzania in June through a partnership with Tigo, with the startup using the launch as a way of testing its model in a more competitive telecoms environment.
“We’re actually just working on the transactions and things like that now. What’s interesting to us about Tanzania is that the market works differently to here. There is no dominant operator, it is a much more competitive environment. There’s not many markets in Africa that are dominated by one as much as Kenya. Tanzania may be a template for us for other African markets,” he said.
M-Changa, which raised US$35,000 in seed funding late 2012 and a further US$20,000 later, is also busy with a crowdfunding campaign to support the various partnerships it is signing.
“It is really tech and tech-related. What’s really happening now is that we’re getting more partnerships,” Mullei said, adding that a deal with Equity Bank would be announced soon.
“And this costs, doing the transactions, so a lot of the spend will be putting those together.”
He said M-Change had fought hard to distinguish itself from other payment solutions, and stressed that the startup did not see itself as just another payments or crowdfunding solution.
“It is really about community and it is about using it as your life needs change. And that comes back to the whole harambee package,” he said.
“The concept was always harambee. Crowdfunding isn’t harambee. In harambee you know who is contributing. So I’m using it to raise money for my wedding, and tomorrow someone is using it for their educational needs.”
He said the fact that some organisations had chosen to make their fundraisers open to the public and use M-Changa in a more traditional crowdfunding way had been important when it comes to revenue, with the credit card fees charged by M-Changa an “important revenue driver”.
“The revenue model comes severely under pressure when you get closer to the bottom of the pyramid. There is some sort of cross-subsidising that’s happening with larger transactions,” he said.
Mullei has big ambitions for the next two years.
“By 2017 we really hope to be pushing about US$50 million through the platform. The market is running close to US$10 billion, so it’ll still be a miniscule part of that market, because players like Western Union are active in this space,” he said.
“This seems to be working. Not massive growth, but strong growth. People want to know as they’re donating how much has been raised in real time, how many are contributing in real time.”
