Ghanaian startup LendingSquare, which provides a web platform allowing lenders and borrowers to connect and agree terms, is set for a full launch next month after successfully testing its minimum viable product (MVP).
LendingSquare aims to facilitate better rates for borrowers and greater returns for investors, handling the servicing of the loan and operating fully online with no branch infrastructure in order to lower costs.
Having tested its MVP and completed upgrades to the platform, LendingSquare will launch publicly towards the end of October, with co-founder Israel Mbalam telling Disrupt Africa the startup was also on the brink of signing some major partnerships that would enhance its services. It will also be seeking funding.
“The funds when acquired will be used to finance marketing, staff recruitment and training, further product development, platform hosting, and last but not the least, support our provision fund for the first six months,” Mbalam said.
LendingSquare is looking to disrupt the traditional financial service providers, which obtain money as cheaply as possible and lend it on at rates as high as possible, making more profit.
“Thus, they use deposits from savers to lend to borrowers and charge high interest rates. The problem here is that a saver gets lesser interest than he should and the borrower pays higher interest than he can actually afford. We started LendingSquare to address this unfair situation,” Mbalam said.
“At LendingSquare, the story is different. We offer a very simple yet secured web platform that brings the saver and borrower directly together and enables them invest in each other in a way that is financially and socially rewarding. It is an approach that gives more control to money owners and decision making to those it affects the most.”
With interest rates in Ghana ranging from 30 per cent with commercial banks up to 90 per cent with microfinance institutions, Mbalam said LendingSquare believes it can gain traction in the space with interest rates that are “negotiable and flexible”, usually falling between 15 per cent and 24 per cent.
Meanwhile, with only 30 per cent of the Ghanaian population banked and only five per cent having access to credit, he said LendingSquare would give a larger group of people access to credits when needed, through an easier and less time-consuming process.
LendingSquare’s primary competition, according to Mbalam, comes from the peer-to-peer lending industry, which though in its nascent stage has a lot of potential and is predicted to hit a market valuation of US$1 trillion by 2020.
“Such a market will attract a lot of interest, however, in the African market there are few players. LendingSquare has a first-to-market advantage in the Ghanaian market but faces a few direct competitors in the African market. Our indirect competitors will be family and friends, and traditional financial service providers,” he said.
Funding will be pivotal to the startup’s success, with LendingSquare thus far funded through the personal finance of the co-founders and support from iSpace Foundation.
Future expansion is planned, both outside Ghana and in terms of product offering. Mbalam said LendingSquare currently grants personal or business loans at negotiable interest rates from GHS500 (US$130) to GHS25,000 (US$6,400), but it intends to add other products such as student and agricultural loans as its investor base increases.
The company also has expansion plans within Africa, with Mbalam saying LendingSquare wanted to create a prime marketplace for good credit and people looking for steady return on investments.
LendingSquare currently makes money from two key revenue streams – loan origination fees of between 1.5 per cent and five per cent, and payments made to investors, on which it charges a 4.98 per cent commission on the interest investors gain per transaction.