L-Pesa Microfinance is a fintech startup poised to take advantage of the fast-growing need for financial services in the developing world. L-Pesa has a strong focus on automation. 95% of the user acquisition and loan underwriting process is automated and therefore extremely scalable. The company has spent two years developing its customer-facing and back
office systems using a team of seven software developers. The user experience is based on mobile and web interfaces, and marketing is primarily accomplished via social media and SMS.

L-Pesa’s technology stack is built on top of Amazon Web Services, an extremely scalable on-demand cloud computing platform which has been or is used by major brands such as Netflix, Airbnb, Pinterest, and Spotify. L-Pesa has integrated a number of third party applications to perform tasks such as SMS messaging, user verification, and marketing. Funds transfers are handled via integrations with mobile money service providers such as M-Pesa, Airtel Money, Tigo Pesa, and MTN.

Network Effect:
L-Pesa is not a charity. L-Pesa is purely a business. Being a business gives us certain freedoms that charities don’t have. As a business we have to provide a return. In facilitating microfinance, we have to be extremely efficient; the cost of
doing a $1000 loan is the same as $100, and due to operational costs, banks and financial institutions are limited in how low they can go. Blockchain brings transparency and efficiency, and it drastically reduces the operational costs, making the small lending viable. Tokens are efficient transactionally over fiat, so they are more appealing to the L-Pesa target
market, and they also assist in building a community and creating a network effect.
We have been doing it with fiat as an existing operation; blockchain will allow us to expand our reach and lower our costs. Bank financing costs don’t allow us to reach the people at the bottom who need it the most. Expanding operation by virtue of expanding reach would allow us to now make facilities available to people who can’t be served by banks or microlenders because they’ve been deemed “not profitable”

L-Pesa was founded with the vision to improve people’s lives through efficient access to credit and related financial services. Ron Ezra Tuval, the founder of L-Pesa, has spent most of his career working in developing countries and recognized about a decade ago that the most effective way to improve people’s lives is through access to credit and related financial services. Since founding L-Pesa, Ron has been singularly focused on achieving this vision. It’s about making the world a better place for everyone. L-Pesa started offering microfinance services in Tanzania in 2016 and has grown its service offering and geographic footprint at an increasing pace in pursuit of this vision.

The L-Pesa Initiative

The idea for L-Pesa was incubated for a decade, and the business was
launched at the time four important market forces converged to allow for
rapid scaling.

L-Pesa has built a proprietary credit underwriting system which is one of the keys to its success. Consumer credit reporting as it is available in Western Europe and North America does not exist in Africa, India, or other developing regions. A number of models have been tried over the years, some with more success than others. L-Pesa’s model is based in part on a trust ladder: users start out with very small loans (typically $1.00) and are allowed larger loans after the smaller loans have been successfully repaid on schedule. Successful repayment contributes to a credit score. The credit score is also impacted by other factors, such as completion of identity verification. Furthermore, L-Pesa relies on other service providers to screen users; in its current markets, L-Pesa customers are required to have established accounts with mobile money service providers such as M-Pesa prior to setting up an L-Pesa account.

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