AND Global’s CEO Anar Chinbaatar

AND Systems, a fintech startup founded in Mongolia, has raised US$2.8 million from Korean investment firm Rhinos Asset Management.

AND Systems is a subsidiary of the Singapore-incorporated company AND Global, and serves as the parent company’s R&D department; AND Global also operates LendMN, a microloans app.

This tranche of funding brings the company and its other subsidiaries total investment raised to date to over US$15.3 million. The company previously raised money from their IPO, angel and seed rounds, as well as through debt financing.

AND Global, which offers a microloans and p2p payment app for the unbanked called LendMN, will use the fresh funding to grow its user base in Myanmar and Philippines next year.

The company is currently in talks with regulators and local partners to secure banking licenses in the aforementioned markets; this is critical for the company’s user base growth as around 80 per cent of the population there do not have a bank account.

AND Global will also put money towards product development. It plans to launch LendMN as a Platform-as-a-Service (PaaS) on the cloud, allowing companies across the globe to license it.

In the near future, AND Global plans to launch P2P payments system via Facebook Messenger and expand to other emerging markets such as Indonesia.

Founded in 2015, AND Global is one of the rare startup success stories to have come out of the vast, landlocked and mostly rural country of Mongolia.

While eight-digit fundraising rounds may be a dime a dozen in tech hubs like Silicon Valley, China and Singapore, in Mongolia, it’s a really big deal. According to the AND Global’s CEO, Anar Chinbaatar, “there aren’t any VCs in Mongolia. There’s no startup ecosystem; people don’t know about startups.”

“The first US$1 million took six months. We started at the bottom, showing people a one-pager about our ‘crazy idea’: lending money with no collateral. People really thought we were crazy,” said Chinbaatar.

“All of the angel investors were actually traditional investors. We had to explain why there wouldn’t be personal responsibility for bankruptcy. But it goes beyond that. It’s an opportunity to create a Mongolian brand. An opportunity for the new generation. Different investors respond to different pitches,” he added.

International or even regional expansion was not AND Global’s game plan initially; Chinbaatar was focused on only addressing Mongolia’s poor moneylending infrastructure.

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“Informal lending is very common in Mongolia. People were constantly asking to borrow money from me. I lost friends over it. Credit cards are not well developed in this country,” he said.

“Under-banked people still need access to financing. Because it is difficult for these people to open or maintain bank accounts, they have to use payday loans more often. Interest at Mongolian banks is 28 per cent, and loan sharks charge 10 per day,” he added.

To tackle this pain point, Chinbaatar went to work on a product that simplifies the process of applying for loans by fusing in machine learning algorithms. Through LendMN, customers can receive collateral-free loans in less than five minutes.

While allowing lenders to receive loans without putting up collaterals might seem like risky business, Chinbaatar is confident in the product’s machine-learning abilities to mitigate the risks.

“The algorithms predict the ability and willingness to repay based on behaviour. Using algorithmic, AI-driven risk assessment can greatly reduce cost and risk,” he said. “For example, regular coffee drinkers in Mongolia are 17 times more likely to repay their loans on time, as coffee is still a luxury item in our country,” he said.

“And this is the kind of information that is easy to find out from social media, for example. We can know people better than their best friends by using machine learning and artificial intelligence to scrape data from all sorts of places,” he added.

Investors eventually warmed to Chinbaatar’s novel idea; by August 2017, AND Global had raised US$4 million in seed movement.

Even retail investors bought into the concept — when LendMN debuted on the Mongolian Stock Exchange, it was oversubscribed by more than 16 times. AND Global claims that today, LendMN’s investors are seeing 300 per cent returns within eight months.

The company currently gives out US$10 million across 70,000 loans per month.

In October, AND Global went on a trial partnership with Rakuten so it can offer microloans via the messaging app Viber. It also partnered with DA5, a Philippines-based Western Union agent.

In the same month, it launched Lend Wallet, which is a mobile wallet with no transaction fees.

Still, as AND Global is the first non-bank financial institution in Mongolia, it faces some regulatory limitations — it is currently only permitted to lend a maximum of US$400 at a time, as an anti-money laundering measure enforced by the government.

However, this will increase to US$800 soon, and starting at the beginning of next year, it will be able to provide micro entrepreneur loans of up to US$10,000 in Mongolia.

Image Credit: AND Global