In Jamaica it’s called sou-sou; in Somalia, hagbad; and in South Africa, stokvel.
These rotating savings and credit associations, also known as informal microfinance groups, are common in many African and Caribbean cultures where members contribute savings to a fund and then take turns allocating them to one member at a time for larger purchases.
“It’s very popular back home [in Zimbabwe],” says Jonah Chininga, co-founder and chief executive officer of MICC Financial, a Charlottetown-based financial technology startup that has developed a rotational savings platform for newcomers to Canada.
The social enterprise was founded in 2020 to help support a growing number of Canadians who are seen as underserved by the existing, traditional financial system. MICC’s collaborative finance platform provides education and access to credit markets to help newcomers raise families and run businesses in the country.
More companies are developing a social conscience
A growing number of Canadian companies are executing with purpose alongside profit, either directly like MICC or through a shift in their business operations. For many, it’s not just the right thing to do, but also a response to the increased interest in companies with a social conscience among consumers, investors and employees.
Studies show the pandemic, civil unrest and racial injustice that have proliferated in society over the past couple of years have inspired people to reconsider the brands they buy from and companies they work for.
A 2021 McKinsey and Co. report shows about half of employees surveyed were reconsidering the kind of work they do because of the pandemic. The report also shows 70 per cent of workers say their purpose is defined by their work, and it calls on organizations to help their employees find meaning in their roles, or risk losing them.
The investor interest is evident in a Morningstar report that shows assets invested in sustainable funds in Canada doubled to $34.5-billion last year, while a global Zeno Group “Strength of Purpose” study from 2020 says consumers are four to six times more likely to buy from, trust, champion and defend companies with a strong purpose.
Elizabeth Chick, executive director of the non-profit organization Buy Social Canada, says more people are asking questions about what companies are doing to help make the world a better place. She points to workers who are becoming increasingly vocal with their employers.
“We’re seeing employees asking: What are we doing as an organization to contribute to our community? How am I managing to or having the opportunity to live out my goals? And how do I want to contribute to my community through my work?” says Ms. Chick, whose organization promotes socially responsible production and procurement throughout a company or institution’s supply chain. It also certifies social enterprises.
Ms. Chick says her organization’s “social value marketplace” also includes other companies and agencies looking to add social values to their supply chain. For example, the federal, provincial and municipal governments, with billions of dollars in procurement at stake, now regularly include questions in their bid processes asking potential suppliers about their environmental, social and governance goals.
“In their considerations of what they’re purchasing, within best value, there are social and environmental considerations,” she says. “So yes, price and quality are still really important considerations, but your social and environmental contribution and impacts and benefits are also part of that best value consideration.”
Purpose-first operations can be profitable
Purpose came before profit at MICC Financial, says Mr. Chininga, who co-founded the company in 2020 with chief operating officer James Muhato, chief technology officer Sergio Fernandez, and Daniel Ohaegbu, a member of the company’s board of advisors.
When Mr. Chininga came to Canada from Zimbabwe in 2014 to study business at the University of Prince Edward Island, he discovered first-hand the challenges of accessing affordable credit as a newcomer to the country.
“That lack of security, that was a hard thing to experience,” Mr. Chininga says.
The founders wanted to build a better system. “It’s something we are very, very passionate about,” Mr. Chininga says.
In fact, they didn’t initially envision MICC as a business, Mr. Muhato says.
“It was just more the intention of okay, how could we solve a problem we were seeing within our communities, since it was an issue our friends are going through,” he says.
MICC isn’t a financial institution: It doesn’t lend money or charge interest to individual members of savings collectives. Instead, the platform helps people in these collectives automate their savings, with automatic withdrawals, e-mail reminders and administrative functions.
It verifies user identities, as required by the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC), Canada’s financial intelligence unit. MICC also reports the savings and timely payments to credit bureaus, which helps members build their credit scores.
The Canadian branch of the Policy and Economic Research Council estimates six million Canadians are “credit invisible,” many of them immigrants or members of minority communities. It is a barrier to affordable credit and home or small-business ownership.
Irene Mlambo, who runs the Elevate Businesswomen Capitalization Collective from her home in Metro Vancouver, says rotational savings are common among immigrant communities.
“We don’t traditionally get money from traditional banking systems to assist us due to either lack of credit, bad credit or just not enough credit,” says Ms. Mlambo, who administrates three savings groups using the MICC platform.
Being able to tap group savings means members can avoid high-interest loans and credit cards, she says.
For her, the platform makes administration much easier, and for group members, it builds financial literacy as well as credit history, she says.
“That will qualify us to get better loans from traditional banking sectors. We are building that paper trail.”
Since its soft launch in May, 2021, MICC has facilitated $300,000 in transactions among 1,500 people – and zero payment defaults to date.
The team of six behind MICC only began working on the platform full-time in January and balancing purpose with profit has to be top of mind, Mr. Muhato says.
“It is a constant balance and always one of those things we are thinking about – how we ensure our product at the core fundamentally still supports the communities we are trying to empower,” he says.