Question

"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

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

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

(word count is 200 words and this is for an exploring innovation and entrepreneurship course for business major)

Answer 1

1. Digital technology played an extremely important, in fact pivotal, role in the creation of Al Majmoua Capital distinctive business model.

It is the technology that enables the model. First and foremost, the app enables small farmers to transact seamlessly with their processors at minimal cost. This gives both the processor and the farmers a single platform where capital can flow instantly between them. It helps the farmers to get their payments quickly and the invoices clearance is also much faster. On the other side, it helps Al Majouma in tracking the transactions, the amount, the frequency etc and hence allows it to create a credit snapshot of all the farmers. This information enables them to extend just the right amount of loans to a particular farmer. This drives down the loss. As all the transactions are online, it also helps in reducing the costs. Al Majouma can also forecast and track demand must more accurately- reducing overhead costs.

2. The main technology challenges Al Majouma faces are inherent in the platform. These include the higher chances of forgery (as uploading documents is digital), capacity constraints (as the app grows, constant investment in capacity will be needed), backup and security of data, attack on accounts to steal money (hacking) etc.