Ethiopian Financial Trio Debut Agar, Integrated Digital Insurance, Credit Service

A fintech, a commercial bank, and an insurance company have joined forces to launch an integrated digital credit and insurance service. Kacha, the first private mobile money service provider, Lucy Insurance, and Global Bank announced the partnership yesterday morning at the Skylight Hotel. The new service, dubbed Agar, which roughly translates to a supporter in Amharic, allows customers to access insurance without the need for any physical paperwork.

The finance trio also debuted a digital credit service for taxi-hailing drivers and a digital salary advance microloan function accessible through Kacha’s mobile application.

Adeferes Wesene, CEO of Lucy Insurance, said the new services align with the company’s growing portfolio of services, which increasingly include non-life and general insurance products.

The insurance product incorporated in Agar is a third-party motor insurance policy. Car ownership is rising in Ethiopia, with over 1.4 million vehicles on the road, and third-party motor insurance is mandatory.

In August of last year, authorities began enforcing a new proclamation that increased third-party car insurance premiums by up to five times, with rates reaching as high as 4,360 birr for private vehicles. Agar collects premiums starting from 5,000 birr while offering standard insurance services through an online portal.

To activate the insurance, users must upload details such as their plate number, ownership certificate (Libre), chassis number, and photos of the car via the app.

The digital loan service in Agar targets two segments. Agar for Drivers is a loan service that provides meter taxi operators with quick access to digital loans for urgent vehicle repairs or expenses. Meanwhile, Agar for Salaried Employees is a salary advance loan service that allows employees to access a portion of their wages before payday without requiring collateral.

In addition, the platform also offers digital loans to help customers manage premium payments, with repayment periods ranging from one to nine months.

Ethiopia has one of the lowest insurance penetration rates in the world, with less than one percent of the population using insurance services. The recent boom in the adoption of technology has unlocked new opportunities for incumbents to experiment with services tailored to specific industry segments. Two weeks back, ride-hailing company Little Ethiopia and Lion Insurance introduced insurance coverage for passengers and drivers covering up to one million birr in claims.

Mikias Fekadu, Partnership and Business Development Manager at Kacha, says a year and a half of development preceded the debut of the new platform. He pointed out that access to the digital loan service is predicated on transaction history through Global Bank. One branch visit is necessary to activate the service.

Up to 50,000-birr loans are available through the Kacha Wallet, with the exact amount set through an automated credit scoring system based on history. Delays in settling loans can entail daily penalties of up to 0.6% for up to 60 days, with the loan being categorized as nonperforming after 90 days.

Martha Hailemariam, advisor to the Vice Governor of the National Bank of Ethiopia, said the central bank will continue to provide oversight support for the successful implementation of the new services. She made sure to note that the project also entails significant responsibilities as it pertains to sensitive customer data.

“The trio should ensure to protect customer privacy and maintain robust cybersecurity protocols on their sites,” Martha emphasized.