JUMO is a leading fintech company operating across several African countries. With a focus on providing micro-loans to individuals and small businesses, the company has harnessed data and technology to build a dynamic pricing model that adjusts loan interest rates based on multiple factors, ensuring a balance between risk management and competitive pricing.
Established in 2014, JUMO noticed that traditional banking systems in many African countries were often out of reach for the common individual, especially in rural areas. With the rise of mobile money platforms, there was an opportunity to offer financial products to a previously underserved market segment.
Pricing in the microfinance sector is a delicate balance. Set rates too high, and potential customers might shy away or could struggle with repayments. Set them too low, and the risk might outweigh the reward, especially given that many of these loans are unsecured. Moreover, competitors were emerging rapidly, making the pricing landscape even more challenging.
- Segmented Pricing: JUMO segmented its audience based on credit history, the amount borrowed, and loan duration. Repeat customers with good repayment histories enjoyed better rates.
- Dynamic Pricing: Using algorithms and real-time data, JUMO could adjust interest rates based on prevailing market conditions, competitor rates, and customer risk profiles.
- Psychological Discounting: To promote larger loan amounts or longer repayment durations, they employed tactics like “Borrow for 3 months, and get a 1% discount on your interest rate.”
- Seasonal Pricing: Understanding the agricultural backbone of many African economies, JUMO offered reduced rates during planting seasons when farmers needed capital and could repay after harvest.
JUMO’s dynamic pricing strategy proved effective. They maintained a low default rate compared to the industry standard. Their customer base grew, with a considerable percentage being repeat borrowers. Additionally, their flexible pricing acted as a competitive barrier, setting them apart in a crowded marketplace.