MyC4 - bridging the financial gap to Africa? A case study concerning online lending services in the battle against poverty

Christian Høegh-Guldberg Hoff

Student thesis: Master thesis


The main purpose of the dissertation was to bridge the knowledge gap on the subject of online lending platforms aimed at eradicating poverty in Africa. Through the case of the Danish online lending platform, MyC4 A/S (hereinafter referred to as MyC4), and moreover, the exploration of the problems and successes they experienced and encountered in Kenya, I have researched the concept of online lending platforms and their current operating circumstances in Africa. MyC4 targets the microfinance and mesofinance industry in Africa, offering loans to ‘the missing middle’ – referring to the segment of small and medium-sized enterprises, which find themselves beyond the reach of the existing African financial institutions. As a concept, microfinance is a relatively new phenomenon, seeing as it first surfaced in the late 1970’s, when Mohammed Yunus opened The Grameen Bank with the purpose of lending small amounts to poor entrepreneurs, who, in turn, would use the money to start their own businesses. Mesofinance, however, is the level above microfinance – that is to say, small and medium-sized enterprises. Furthermore, the research had for purpose to explain how the microfinance and mesofinance industry work in Kenya. The conclusions are partly based on field work in Nairobi, Kenya and, in part, on extensive analysis of secondary data. MyC4 has created a business model, which establishes a connection between the investors in developed countries and the poor entrepreneurs in Africa with the internet as infrastructure. To enable the final link to the loaners – who typically find themselves without an internet connection – MyC4 cooperates with various African partners, who are responsible for the financial management of the loans. Conclusively, the dissertation and the conducted research reveal that the African market was considerably more difficult to penetrate than MyC4 expected. The fact that MyC4 entered the African market without having an actual risk policy may be to blame. Their business model had an expansive approach to money-lending, which means that they depended on having as many loaners as possible, and the amount of loans being at a constant high. Consequently, MyC4 focused more on the quantity of loans than on the quality and credibility of their African partners, and, as a result, the partners neither had the necessary capacities to ensure repayment of the loans nor the growth potential the MyC4 business model required. Supported by the principal agent theory, the MyC4 case is an example of the notion that opportunistic behavior occurs, when there are several parties involved in the loan, hence, underlining the importance of control at all levels of the loan. The online lending platforms create enormous opportunities for poor people in the developing countries. This dissertation concludes, though, that trust-building and understanding of the African market are essential for success. Thus, patience and caution is required from MyC4.

EducationsMSc in Business, Language and Culture, (Graduate Programme) Final Thesis
Publication date2010
Number of pages101