Question

Word count is 200 words.

Al Majmoua Capital

Al Majmoua Capital is a non-bank financing business that uses exclusive technology to provide financial services to microbusinesses within the agricultural value chain. It provides microcredits to smaller farmers and suppliers who are otherwise constrained in their ability to borrow sufficient funds from traditional funding sources (e.g. commercial banks). By enabling processors to pay farmers’ invoices early and at better rates using a digital platform (M-Trader), Al Majmoua Capital is an example of an inclusive business that promotes financial inclusion for small dairy farmers.

Crucial to the success of Al Majmoua is the role digital technology plays as the infrastructure for managing the entire value chain activities of the firm. The business uses M-Trader, a mobile app that enables suppliers to receive payments through their phones. The digital platform has a three-party operating system to capture value (extending loans and receiving payments) and is linked to a digital processor that facilitates monitoring and tracking of activities along the entire value chain. It permits a three-way interaction between farmers, processors and Capital, all of which take place on the same mobile app. The mobile app enables Al Majmoua Capital to extend loans directly to dairy farmers and to collect repayments from the milk processors. Instant text messages are generated to inform farmers when loans are disbursed and when repayments are collected. Processors, in turn, collect payments from farmers through a reduction in the amount they pay farmers each time they supply dairy products. All the data are captured in the digital processor (M-Trader) allowing Al Majmoua to track demand and supply, timing of repayments and instances of defaults. This means that Al Majmoua does not have to worry about farmers defaulting on their loan repayments.

Read the above case-study and answer the following questions

​What role did digital technology play in the creation of Al Majmoua Capital distinctive business model?

​From your knowledge of technology context, what technological challenges do you see facing Al Majmoua Capital’s business model?

Answer 1

Digital technology played a very crucial role of being an intermediator and in helping the firm monitor the credit worthiness of farmers. It eased the process of collecting payments leaving enough capital for the firm to lend more to other businesses who needed the money and left people with more working capital because of the ease of business. Thus digital technology played a very crucial role of creating a fast and easy mechanism for financial assistance.

Technological challenges of the app being encrypted with a virus, would erase all the data and make the company prone to financial risk, thus the company will have to invest heavily in creating a safe and secure database in order to take advantage of large scale financial intermediation. Otherwise even if it has a healthy customer base, it could face bankruptcy.

There could be online phishing wherein there could be duplicate transactions and everything being online, will lead to less authentic transactions and technology not being able to detect any abnormality because of virtual connect. This might expose the company to all sorts of risks of virtual transactions because of technological gap. This could lead to wrongful assessment of the credit worthiness of the borrower.