The Iroko project: The Crowd lending Pioneer in West Africa

The Iroko project is the first crowdlending platform in West Africa. The objective is to allow individuals to lend their savings directly to small and medium-sized companies in West Africa, for a fixed term and interest rate.

The project:

The project was created by two former students of Paris HEC (who graduated in June 2016), passionate about the dynamics and stakes that cross the African continent, especially West Africa.

Their work is based on a threefold observation: in the coming decades, the creation of millions of jobs represents a major challenge of the region, but SME’s are the main levers of job creation. However, these companies often lack the necessary funds for their development. This is the famous “missing middle” or “missing link” of financing. Since September 2015, they have been working on the opportunity of crowdfunding for small and medium businesses from West Africa and they conducted a feasibility study in April/May 2016 in Senegal and Ivory Coast. This study led to partnerships notably with Cofina group and Lendopolis (KissKissBankBank Group).

There were 3 objectives: to develop a legal operational model in the West Arican legal framework (there is no regulation on crowdlending in West Africa yet), to gauge the SMB and lender's interest in the service and to create strategic partnerships with local institutions. Then, they  presented and published their report (which is available on their website) and went back in October to start their activity.

The aim of the pilot stage (october to march) is to realize the three first lendings of about 30 millions CFA francs each. The first collection will start after the first project presentation during the launching event in Dakar on November 15th. They also joined the Cofina Group business incubator in Dakar.

Function and business model

The pivot of their model is their partnerships with agencies that assist SME’s, such as the Entreprise Upgrading Office or the ADEPME in Senegal. Every small and medium business funded is supported and  tutored by these agencies for at least a year.  These provide quantitative and qualitative information on the companies they assist and act as trusted third parties. The applications transmitted by these agencies are then reviewed by the Iroko Project team, and for those selected, presented to the lender community. The needs of the projects funded, vary between 10 and 100 million CFA francs. If the needs are more substantial, they can be complemented with a traditional bank loan. Once the project is presented online, lenders choose individually if they want to contribute, depending on the quantitative and qualitative information available on the company and its team. They also decide the amount they want to lend: between 100 000 and 2 million CFA francs. During this phase, lenders have the possibility to exchange with the manager and ask questions about the company activity. Data on social and environmental impacts are also highlighted, following the setting up of credit are also highlighted. These include: number of jobs created, reduction in the use of fossil energy, impact on local products etc. Once the collection is completed, the credit is disbursed and the reimbursements start. The proposed remuneration to lenders equals the credit interest rate and is around 9 to 14% each year.

The service proposes a complementary source of financing and a performing savings product, affordable for individuals. Once the credits have been set up, the Iroko project teams are in charge of following up the reimbursements and the possible recovery in partnership with the agencies. Concerning the default risk, as a last resort, it is supported by the lenders who are actually paid for the risk taken.

The economic model relies on the amount drawn during the credit setup, incurred by the company at a rate of 4,5 % of the total credit amount.For the lenders, the service is free and joining the community is very simple. Iroko project is open to every resident having a bank account in CFA francs. The only documents required are an ID and and bank transfer information.


The goal is to create a dynamic network where lenders and borrowers coordinate their funds, competence and know-how to encourage the development of the West African economic structure. The team is aware that their service targets the West-African privileged part of the population who have a strong savings capacity.   Developing innovative and popular payments channels such as mobile money is a priority.  However, these solutions are still very expensive and very difficult to bear by the parties at stake (SMB, lenders, Iroko Project).

Finally, the team hopes that their initiative helps the implementation of a specific regulation for crowd lending in this region. That is the reason why they discuss with the Senegalese authorities and the UEMOA zone to support the reflexion in that way.

The official project launching is scheduled on November 15th 2016 in Dakar.

You can contact the Iroko project team at contact@iroko-project or on Facebook and Twitter

Translated by

Anne-Sophie Cadet

Youth employment in Africa : what to do when informal is normal

carriere3In low-income African countries, most people cannot afford to be unemployed. Lacking any significant safety net, 70 to 80 percent of the labor force ekes out a living by working in low-productivity, informal farms or household enterprises. Private-sector wage and salary jobs have been growing at a fairly rapid clip—at 7.3 percent a year between 1992 and 2005 in Uganda, for instance (Exhibit 1)—but this growth is from such a small base that it cannot come close to absorbing the 7 million to 10 million young people entering the labor force every year. Furthermore, some of these young people are not qualified for the wage jobs that are available. As a result, most young people will end up working in the same place as their parents—small farms or household enterprises. Taking the example of Uganda again, under optimistic assumptions about economic growth and wage-employment creation, the share of the labor force in informal activities will only fall from 79 percent today to 74 percent in 2020 (Exhibit 2). In short, informal is normal.

Calculations by World Bank staff from household and labor-force surveys

The challenge of youth employment in Africa, therefore, is not just to create more wage and salary jobs—important as this may be—but to increase the productivity, and hence earnings, of the majority of young people who will be employed in informal farms and household enterprises. How can this be done? In general, workers’ productivity can be increased by (i) “demand-side” measures, such as better infrastructure and business climate, that lower the costs of production and thus increase the demand for labor; and (ii) “supply-side” measures that improve the skills of workers. In the case of farms, agricultural development is already geared toward increasing agricultural productivity. This will result in higher incomes but lower demand for labor in agriculture. This is how all economies develop; Africa is no exception. In the case of household enterprises (where the farm labor will move to), most are tiny—mom-and-pop or pop-and-son shops—that do not benefit from capital investment and economies of scale of larger enterprises. Small and medium enterprises that hire 5 to 20 people enjoy higher productivity. The problem is that very few of the household enterprises grow into larger ones; most remain very small or die.

Calculations by World Bank staff from household and labor-force surveys

There appears to be greater scope for supply-side measures. People with a primary education or less are disproportionately concentrated in the informal sector. By increasing the skills of those who leave school, we can increase their productivity in farm and nonfarm household enterprises. With higher skills, new entrants can increase their earnings by moving out of the farm sector and eventually the household-enterprise sector. Such an investment will not be lost if the worker moves out of the informal sector: they can take their human capital with them.

How can the skills of these new entrants be increased? Even among students who have completed primary school, a disturbingly high share has difficulty with reading and writing. A survey in Tanzania showed that, among seventh-grade students, 20 percent could not read a sentence in Kiswahili, 30 percent could not perform a two-digit multiplication problem, and 50 percent could not read English, which is the language of instruction in secondary school. One reason for these disappointing results is that teachers in public primary schools in Tanzania are absent 23 percent of the time. When present, they spend just over two hours a day teaching. And only 11 percent of the teachers had minimal language skills. Thus, increasing informal workers’ productivity by strengthening their skills requires reforms in basic education—making teachers more accountable to students, and politicians accountable for delivering on education outcomes.

Does this mean that there should be no effort on the demand side? No. Large-scale efforts are unlikely to work, especially if workers are eventually going to move out of agriculture. But it is possible for local governments to support the growth of informal nonfarm-sector enterprises by enabling them to conduct business—rather than suppressing them for violating property rights. Increasing access to financial services would also help these capital-strapped enterprises.

Finally, what about the wage and salary sector? Jobs in factories and services will be the final destination for all workers (possibly over a generation), so the growth of this sector is clearly important. Achieving this growth will involve a multitude of efforts to raise the competitiveness of the economy, with a better investment climate and improved infrastructure the main ingredients. Programs that support matching the skills of educated workers (secondary school and university graduates) to jobs will probably not see returns as high as those produced by simply creating more formal-sector jobs.

In sum, because most young Africans will work in informal farms and household enterprises, the challenge of increasing their productivity needs to be met by first, increasing their basic skills, which they can take with them when they move to new enterprises; and second, creating jobs in the formal sector by improving the economy’s competitiveness, so that this sector can absorb more qualified workers into a productive workforce.

An article by Shantayana Devarajan,  initially published on McKinsey on Society