A U.K.-based fintech company called Bloom Money has raised £1 million to digitize an ethnic communities’ traditional financial management system.
Often referred to as “rotating savings and credit associations” (ROSCA), the microcredit system varies in its specifics across the globe. However, it typically entails an informal gathering of people from a particular community who function as a bank by collecting and saving money that members can withdraw. The system is known by a variety of names around the globe, including “hagbad” in Somalia and “pardna” in regions of the Caribbean.
CEO Nina Mohanty stated that the objective is to avoid conventional banking systems, many of which discriminate against minority communities, particularly in the United Kingdom. “Some of it is simply overt prejudice. We don’t have red-lining like the United States, but there are postcode lookups,” she said.
She explained that the ROSCA system is a way to conduct financial transactions with individuals you trust, regardless of their race, nationality, or tribe. Bloom Money desires to digitize the ROSCA procedure.
Mohanty, the daughter of two immigrants to the United States, decided to work on this issue after moving to the United Kingdom and realizing how difficult it can be for an immigrant to establish themselves financially. “I just felt that there was not only an economic justice aspect to this but also a tremendous opportunity, where people only think of the U.S. as a country of immigrants, but we know that migration is growing across Europe,” she said.
Growing up in a central Birmingham ethnic community, her co-founder and CTO, Dan James, believes in the system because he has witnessed its effectiveness. He said, “I personally saw the advantages that ROSCAs can offer people, particularly those entering the United Kingdom who have historically received subpar financial services.”
The company will use the funds from the pre-seed round to continue developing its digital savings features, for which an electronic money institution safeguards all funds. Zinal Growth led the fundraising effort, which also included January Ventures, Pact VC, and angel investors Berenice Magistretti and June Angelides.
Bloom Money enables users to form Bloom Circles, organizations that share and save money. In addition, it contains educational materials on the fundamentals of life in the United Kingdom, such as how to obtain a driver’s license, establish a trust fund, and understand credit scores.
Mohanty characterized the fundraising procedure as “really interesting.” She stated that the most difficult aspect was conveying to investors the company’s intention to focus on extremely underserved communities. She stated that initially there was a great deal of misunderstanding. “Some extremely racist and xenophobic remarks were made towards us,” she said. Even during the process of regulation, we had to overcome a great deal of prejudice.
Mohanty and James state that they desired ethnic and gender diversity on their cap table, and it appears that they have achieved this thus far: nearly 70% of their cap table identifies as female, nearly 50% originates from a minority ethnic background, and roughly half identify as first- or second-generation immigrants.
Angelides, an angel investor, stated that Bloom Money was her first angel fintech investment. Having grown up in Nigeria, where cash reigns supreme, she immediately recognized the magnitude of the problem the company is attempting to address. “Communities have struggled for generations to develop trust in financial systems, preferring instead to use community-based saving methods such as Ajo (the Nigerian version of the ROSCA system).”
“This comes with its own set of problems, such as people stealing money and being unable to substantially increase their wealth.” This is where Bloom Money comes in,” added Angelidas. “Many migrant communities annually remit significant sums to their home countries. With Bloom, they now have the opportunity to strengthen connections with the United Kingdom, increase their wealth, and qualify for additional products that would have been difficult to obtain otherwise.”