Andrew Lockley – Exponential Investor (United Kingdom) –
As you know, Exponential Investor has been all over cryptocurrencies. They’ve been making staggering gains for many private investors – people just like you. In just the last few weeks, bitcoin has again posted record-breaking prices – over $6,000.
I’m sure you’ll be interested in getting a piece of the action. My colleague, Sam Volkering, has prepared a special book, giving you the lowdown on how you can profit from crypto. You can get it for free .
But there’s more to this technological revolution – for example, there’s a new way to own exciting tech firms. Kik, the social media app, raised nearly $100m using an initial coin offering (ICO). Furthermore, the blockchain, on which all cryptos are based, can be used for a very broad array of financial tasks.
Many people are talking about this blockchain-based distributed finance technology as being “the next big thing” – and today I’m talking to one of them. Boubacar Dembele, co-founder of Tontyne Finance, is helping to usher in this new reality.
AL: How did you get the idea of creating a financial services platform?
BD: Well, although I grew up in France and lived in the UK for the past 14 years, I was born in Mali, where “tontines”, also referred to as “ristournes”, are commonly used by communities, friends and families to manage their finances. As I was participating in one with my sister and another eight friends and family members, I realised that there was no app to help us do it and thus make our lives easier. I also realised that it wasn’t just a West African tradition, but that most communities throughout the world had a similar system with only small variations and with different names such as committee, moni, chilemba and many, many others depending on location.
AL: Can you tell us why you believe the time is right for blockchain to revolutionise finance?
BD: Blockchain-powered cryptocurrencies, and other products using the technology, are on every insider’s lips. I see blockchain technology as a way to enable people to be able to trust each other again – without the need for an institution to play the middleman. I believe that our platform, which has roots in patterns of behaviour that could be as old as money itself, is the key to making distributed finance and smart contracts something genuinely accessible.
AL: Your platform is called Tontyne Finance. What’s it all about?
BD: Tontyne Finance is a private social funding platform. In other words, it is a peer-to-peer platform, based on the cooperative finance concept. This is the foundation of rotating saving and credit associations – which have been passed down for centuries, throughout the world. They are called susus or paris in part of Africa; hui in Asia; tandas, cundinas or pandeiros in South America – and by many other names, in other places throughout the world.
Thanks to Tontyne Finance, people participating in the beta have been able to organise themselves in private communities, which support each member of the community to borrow and save money. Using the feedback we’ve had so far, the platform will be open to all, which helps everyone to reach their respective financial goals. Tontyne is enabling online and offline communities to be back at the heart of how money is used to achieve goals. This is what makes the platform so ground-breaking – yet so simple and elegant, at the same time. Tontyne, unlike most of existing peer-to-peer lending and saving platforms, places all participants are on equal footings. They need to trust each other, and therefore, need an established relationship to take part. That also means that we will always be true to our principles, and to the spirit behind our endeavour – since there will always be balance between the saving and lending pool.
AL: Can you provide an example of how it would work practically?
BD: Picture four friends who trust each other when it comes to money. They each need to raise £4,000 within the next four months for various reasons. One has found the perfect house and now needs some cash to buy a few furniture. One has found a job in London that starts in a month’s time, but he needs to buy a travel card for the year as he lives in Reading. The last two want to save to buy an expensive curved TV and a holiday package respectively. Each of them could put those expenses on their respective credit cards, but as they all have £1,000 of disposable income every month, they decided to start a Tontyne Campaign. In this example, three of the members contribute to the money collected by the fourth one every month.
So, by adding those £3,000 to his £1,000, the first one who got the money has effectively taken an interest free loan. For the last one, thanks to his friends and the importance their trust is to him, he managed to save money without the effort he usually needs to make himself put money aside. The two others are either more borrower and more saver, but in the end, they are all winners. They all benefited from the positive effect of peer pressure that compels them to be financially disciplined.
The beauty of this concept is that the same can be done with a number of participants that is only limited by the number of people they know and trust, and an amount for each periodic contribution that is only limited by the disposable income and saving goals of each participants.
AL: So your target market is not limited to the African community?
BD: Of course not, I have too much ambition for that! As I said, rotating saving and credit associations go by many names throughout the world; they sit under the microfinance umbrella. In effect, many people don’t find what they need in the products offered by existing financial institutions. This is the reason why they turn to microfinance products, including loans, savings and insurance, that are often more accessible to them.
It is not just big in Africa, but also in Asia, the Middle East and South America. The World Bank estimates that the microfinance industry currently represents 60-100 billion dollars, which can translate into 50% of all savings in some countries in Africa and Asia. Initially, we will be targeting individual diaspora communities from the regions listed above in the UK (one-by-one, as lending rarely takes place across communities). Ultimately, the goal is to open the platform to the world.
AL: What, in your view, makes this approach so popular?
BD: Many people around the world have chosen to use a type of cooperative finance. There are many reasons for this: to get interest free loans; develop effective saving habits; save money in a trusted environment; and avoid loan sharks, credit cards and institutions that aren’t trusted. In the Middle East, this approach is very common because all the characteristics described previously makes it a product that is effectively Shariah-compliant. Consequently, people choose to turn to people they trust. They opt for a more sustainable way of managing their finances, within their private community.
AL: Why would anyone decide to use Tontyne Finance?
BD: Tontyne Finance has an important role to play as an enabler, for people that never knew that such opportunity to save and borrow money existed. It’s a facilitator, for the people who were looking for a way to make the organisations of their rotating saving and credit easier and more trustworthy. In other words, Tontyne aims to become a champion of the circular economy, thanks to the philosophy that underpins it.
AL: This process will be unfamiliar to many of our readers. Can you step through what’s involved?
BD: Certainly. Thanks to Tontyne, members will be able to manage their campaigns much more easily, since the platform helps to organise group meetings, schedule payments dates while sending relevant automated emails. Our platform also lowers the risk associated with informal “verbal financial commitment”. For instance, it encourages financial transparency of transactions between parties by automatically generating written contracts. These will be taken care of by smart contracts, using the blockchain technology. Finally, we aim for Tontyne to truly become a game-changer –accessible to all. Therefore, the core features are free and cross-platform – and will always be.
We all have several friends and family that we trust when it comes to money, and as far as I am concerned, that’s all we need to start a saving and borrowing revolution.
AL: How will you make money?
BD: Our income will be generated through subions that give access to premium services. We also have targeted marketing opportunities, and resulting sales fees, thanks to the upselling of other financial products. For instance, if a member is saving to have enough money to have a deposit for a house, we can offer a selection of related products to help that member get on the property ladder – through partnership with both alternative finance and traditional finance actors.
AL: Are you seeking investment to realise your vision?
BD: Yes, we are now almost ready to open the platform to the public and therefore, we are now looking to raise £600k seed investment over a two-year period. This is in order to make changes to our platform, based on the feedback we’ve had from our early adopters. The investment is also required to develop it further. We plan on using blockchain to add smart contracts; building native apps; and growing our user base through the organisation and sponsoring of cultural events, alongside more traditional marketing and user onboarding strategies.
Can you lend me a fiver? – firstname.lastname@example.org.