IMPACT DRIVEN

Sonika Manandhar

Co-founder and CTO, Aloi

Building tech-led transformational support to grassroots entrepreneurs Sonika Manandhar, Co-founder and CTO of Aloi, prefers to call herself an engineer turned impact entrepreneur. “I studied computer engineering but I co-founded Aloi, a fintech company, and prefer to call myself an entrepreneur with a greater purpose,” she opens the conversation. Manandhar says that it was her father’s life journey that inspired her to become an entrepreneur with the ability to make whatever little difference she could in other people’s lives. “My father started out as a driver and over the years, he kept upscaling and went on to own a tempo initially and then a microbus and now has shares in buses,” she shares, “However, I also know that everybody may not get the same type of opportunity and I want to be able to help on that front.” “We work with micro entrepreneurs like farmers and Safa tempo drivers at the grassroots level,” she states, adding that people often talk about developing entrepreneurship in the country but neglect the micro, small and medium entrepreneurs who have a major contribution to the national economy. She says that for any person who decides to open their own venture, the first major problem is always the availability of finances or rather the lack of it. Even when people do take loans to start a business, they tend to go astray and are compelled to constantly live with the burden of loans. “How can a person start a business without any money and even after receiving the money, do they have the financial knowledge to utilise it?” she questions. It is here that Aloi comes into play for the micro entrepreneurs. “We try to make finances available to these entrepreneurs and once they have received the money, we look into what the money has been spent on. We basically help track the movement of finances that the entrepreneurs have received,” she states. After completing her course on computer engineering, Manadhar says she got the opportunity to do a four-month course at Singular University in Silicon Valley. “It was through the Global Solutions Programme and I was the first to be selected from Nepal for that opportunity and coincidentally I met my Co-founder there,” she reveals. She later joined Microsoft Innovation Centre where she worked for seven years as a software engineer. It was only in 2019 that Manadhar decided to quit her job and start her own venture. “People often ask what’s the difference in owning a business and having to work for someone else and my answer to that would be what is the purpose in your life,” she says. A strong optimist, Manandhar says that it is the challenges that have shaped her to become what she is now. Business 360 spoke to the young achiever who has received multiple awards and recognition for her work in recent days. We ask her about the things that propel her journey and why tech is integral to her work.

Tell us about your early entrepreneurial years.

From a young age itself, I wanted to become an entrepreneur. I was heavily influenced by my father’s professional growth. Since I had worked in the IT industry for quite some time, I had developed a network, thus it was easy for me. Moreover, I am a proactive type of person and I knew how to start, it was not like taking a shot in the dark. However, the problem was external. We wanted to start Aloi as a fintech company that would also have a social impact. So, with two females talking about starting a business that would have a social impact, people would perceive us in a different way. Most of them suggested us to open a not-for-profit organisation. Before registering the company, we had a lot of conversations with various lawyers regarding the procedures of setting up a company, and it was amazing that even lawyers would speak along the same lines. Instead of opening a profit-driven private venture, they too would advise us to open a not-for-profit organisation. This shows that people still have the patriarchal mindset and also that many have not yet understood the concept of social entrepreneurship.

"People often ask what’s the difference in owning a business and having to work for someone else and my answer to that would be what is the purpose in your life,”

A company does not have to be only about making profits, there can be businesses which earn profits but their major motive could be having a social impact. Though a majority of the people we met would ask us to ditch the idea of starting a private, for-profit company I never wanted to do that. I don’t want my company to sustain itself only through grants. Of course, we have been fortunate with grants but I have always seen grants as a kickstart mechanism to reach a certain stage. Beyond that a company has to be revenue generating and self-sustaining. So, no matter how many hours it would take, I would make sure that people understood what we were trying to do. I believe it is god’s gift that I am a bit different in the sense that when I see a problem I sit down and look for ways to solve it unlike many people who start getting frustrated. We decided to start Aloi to work with micro entrepreneurs, especially those involved in the agriculture and transport sectors. If you ask me why transport, then I would say it is very dear to my heart because of my father. After high school I did take up computer engineering and did a job but deep down I never wanted to be seen as someone sitting in front of a computer and taking home a good pay cheque. I always wanted to do something that would have a concrete social impact. And then one thing led to another and Aloi happened.

What were some challenges that you had to face during the initial phase?

The initial days were a bootstrapping phase. I had just left my job and I didn’t have any savings. Whatever little savings I had at the time; I had chipped in to renovate our house after the earthquake of 2015. It was a crazy time as I was thinking of starting a company but did not have any funds. Thankfully, my family gave me Rs five lakhs and a bit earlier we had won a competition and received 3,000 euros in prize money, so we were able to kick off with a pilot programme in Kavre in 2019. After we successfully concluded that programme, we were recognised by United Nations Environment Programme because our focus was on green businesses, electric vehicles and women entrepreneurs. Once international organisations started recognising us, people in Nepal too became aware of Aloi. The reason why we chose Kavre to run our first project was because it was a bootstrapping phase. We didn’t have the funds to conduct anything that was far away from Kathmandu. Even though we had decided to conduct the programme in Kavre, the other challenge was I couldn’t think of anybody I knew in the place who could help us. That’s when Facebook came into play and I posted a message asking if there was any one I knew in Kavre. We immediately got a response from around 15 people and from among them I identified one person who could be of help to us. He took us to a cooperative he knew and from there, we started our first project with 15 members. Apparently, the cooperative had separated Rs 15 lakhs to invest and the borrowers’ obtained loans by using our system. The first project was a very small one but the most crucial because it helped launch our company.

You have been emphasising social impact through your work, could you specify how Aloi does this?

One of the fundamental problems in our country is there is no transparency in loan utilisation and the reason why the cooperative in Kavre decided to work with us was basically because we would be providing that transparency through our system. Our software helps in tracking the loans that people have taken. There is a general tendency in Nepal whereby people take a loan of let’s say Rs 20,000 for cauliflower farming but actually utilise only Rs 2,500 for which the loan has been availed and the rest on other things. There is lack of financial discipline. When people integrate with our system, then they unknowingly become more financially disciplined. Forget about the village folks, even educated people living in cities - when they need to take a home loan and the actual amount needed is Rs 44 lakhs, they take Rs 50 lakhs not realising that they still have to pay back that extra Rs 6 lakhs irrespective of whether you spend it on your house or on other things. If you look at the loan culture closely, you will notice that most people take more than they actually need with the thought that they will cross the bridge when they come to it. But when the bridge does come, they are already mired in deep financial problems. Our system automatically makes the borrower financially disciplined. So, if a farmer needs a loan they will have to start calculating right from the beginning on how much they need for various purposes. Through our system the money that has been taken itself shows where it has been spent.

A company does not have to be only about making profits, there can be businesses which earn profits but their major motive could be having a social impact.

Another experience I would like to share is since I am a software engineer it is easy for me to develop an app. Most of us assume that in this modern age everybody is comfortable using apps but when you actually go to the field the situation is totally different. We often talk about innovation but what I would like to mention is innovation does not only mean creating something new. Innovation also means going backward at times and developing a product or service which the end-user actually needs. Since the micro entrepreneurs we work with were not comfortable, in fact, they were hesitant, using apps we decided to use SMS. Moreover, people also do not have to be connected to the internet all the time and we all know that internet connectivity is not stable in all the regions and can be used in all types of phones. As an entrepreneur we must always provide products, services or solutions that the consumer is seeking then only can we create a platform to grow. Even when we revamped our system and started using SMS, we faced another problem. People were not comfortable using the asterisk symbol so we did away with that and introduced a system whereby people just needed to press the space button. Yes, we are a profit-driven company but simultaneously we want to have a social impact but how can we make an impact when the end-users are not willing to use our system. So, every step of the journey till date has been a learning experience and we are still learning and improving. Improvement is a never-ending process and growth of any business means learning and trying to be better with the next step.

So how does the Aloi system actually work?

There are three major parties in our system. First, we need somebody who is willing to give the money like the banks and cooperatives, or at times it could be some development institute who gives funds to certain beneficiaries. The second party is the people who are taking that money which could be borrowers in case of a financial institute (FI) or beneficiaries in case of a development organisation. Now, where is that money being spent? It is at the vendors, so they are the third party. So, the FI or development partner first provides the money and the borrower buys what they need from the vendors. The vendors then go back to the FIs to get their money. What you have to keep in mind is till the moment the vendor goes to the FI to get their money reimbursed there has been no cash transaction. We do this with tokens. For instance, if a borrower has taken a loan of Rs 10,000 then they do not get the cash, they receive a token for that amount. The borrower then spends the money through SMS at several vendors and then the vendors go and collect the money from the institute that has provided that fund. So, what happens is if a bank has given a loan for an agriculture purpose then it can restrict the expenditure by the borrower only on a vendor selling agricultural products. If you are borrowing money for a business you have to invest it in that, you can’t take the money and go and pay in another cooperative. Right now, we are facing a liquidity crunch and it is mainly due to over indebtedness. What people are doing is they are taking a loan for a certain purpose but spending the money on other things. Our goal is to stop that trend. Initially, we used to visit individual borrowers, be it farmers or drivers. In fact, I used to go to the area in front of Nepal Airlines Corporation where previously the Safa tempos used to park and speak to female drivers. But now we have started connecting with the borrowers through umbrella organisations. Drivers of Safa tempos have an umbrella body and farmers too are linked through cooperatives. Right now, we are also channeling our services through seller points because the borrowers are connected to various vendors. Sellers are also helping us connect with borrowers. What you must also understand is that the borrowers are not our main clients because we do not charge our borrowers. The paying clients are either the financial institutes or the vendors. Since vendors get customers through our system, we charge them a certain percentage and we charge FIs for using our system.

It is very clear that repayment of loans is a major problem. How does Aloi look into this?

We started by tracking where loans are being spent but yes, repayment is a major issue in Nepal. We realised that just tracking loans is not enough so we have started working on the repayment aspect too. More than tracking the repayments we are providing default alerts to borrowers. So, for example, if a tempo driver has taken a loan and has to pay Rs 30,000 EMI, we have developed a system of frequent repayments. Safa tempo drivers earn quite a lot every day but the moment they have money in their hands they tend to spend it. We, thus, ask them to deposit Rs 1,500 every day and by the end of the month they will have deposited a substantial amount. And even if they are not able to work for a couple of days due to any reason, they still have money to pay the EMI. We help them make those daily deposits and they do not have to visit any FI for that purpose. We have created trusted deposit points for that. When they deposit the money, they get a token verifying that amount has been deposited at that point. If the borrower misses any payment, we send a default alert and the borrower can get back on track.

There are a lot of micro entrepreneurs in Nepal and I always say development is not a one-line linear thing. If you want to grow, you have to go up and if you want to go up you need finances because at the end of the day everything boils down to finance. We are trying to build that finance linkage.

In the meantime, we have also introduced a new service. People often think the agriculture sector is a simple affair but it is quite complex. In different value chains there are different players and a lot of complications arise due to that. There is a need for loans in the agriculture sector but since it is quite complicated many FIs are reluctant to get involved at the moment. So, we are working with different traders in that sector. We are trying to digitise the commodity. If a trader wants to buy coffee or milk or any other product then we digitise the product the farmer is selling and based on that token we are trying to make loans available from FIs. For instance, if Buyer A buys coffee worth Rs 1 lakh from a farmer now the total amount does not have to be paid to the farmer. The farmer could have taken a loan to do coffee farming so the buyer can directly pay the bank. All this is tracked in tokens by our system. The problem for the buyer right now is if they want to buy coffee from the Mahabharata range, they would have to go and pay in cash. I recently went there and realised we had to pay Rs 10,000 just to hire a vehicle for a day and the roads are so bad it takes one whole day to travel from one place to another even though the distance is short. So, when a buyer has to spend so much just on transportation, the profit is all lost there. There is a system of advance payments too, and the bank can also see that and is assured of repayments. If a farmer wants a Rs one lakh loan the bank gives it through token; the farmer spends it through the token; the buyer makes the payment in token to the farmer, and the farmer pays the bank through token. A buyer does not have to go there with cash. This is something different that we are trying to do. It is not that loans are not given against advance payments, but what we are trying to do is digitalise that movement of money so actual cash does not have to be carried around.

How do you see the growth of fintech industry globally and specifically in Nepal?

Globally, the industry has moved so far ahead. In Nepal, even for simple digital transactions we still encounter so many problems. One problem in the development of fintech industry in Nepal is the digital literacy level which is a bit low. Penetration in the rural areas is also not much. I feel that technology which suits every stratum of people must be developed in Nepal and our aim is that. We design for low literacy people because for high literacy anybody can make a digital app. If we create something for low literacy segment, then we can gradually upgrade that system. That is a whole new opportunity for us actually because nobody is looking at that. There are a number of good fintech companies in Nepal. If you look at the global industry there are so many things that we can do differently here and that excites me. Whatever we do at the end of the day we are a data platform. We want data so that we can do something. The moment we have data, we can create a credit rating of borrowers. Right now, there is no credit rating as such of borrowers. In developed countries they have a credit score mechanism and based on that score people can take loans up to a certain amount. In Nepal, cooperatives are working in their own style and banks on their own. It is only the Credit Information Bureau that does have some data. We want to start credit profiling mechanism in Nepal and that should be automated. It is also about building inclusive technology. We are trying to include people who have not been done so by the major FIs. Gradually, people will learn to use apps and we are ready for that too because I myself can develop an app.

Recently we have been hearing a lot about the difficulties MSMEs are facing; what is the major problem in this sector?

We have had some unfortunate incidents taking place in recent times in Nepal. If you look at the agriculture sector, there are a lot of players in the value chain. I wouldn’t say we don’t need those players in the chain but what I would like to emphasise is that it needs to be systematic and transparent. There are times when a person has sold a commodity and the payment from the actual buyer has already been made, but the seller does not receive any money at all. Supposing there are two players in the middle then it is hard to identify which one of them has taken the seller’s share. Supposing the buyer had to pay Rs 200 and one person in the middle was entitled to Rs 30 and the other Rs 25 then that process should be transparent for the buyer and seller, so that they know about the entire transaction detail. I am not saying that transparency will solve 100% of the problem but at least 30% of the problem will be resolved. Another area we need to focus on is upgrading technology, especially when it comes to micro entrepreneurs with Safa tempos. They do buy the vehicle but after a certain period they need to replace the battery and the problem is they still have not paid the previous due of the tempo and are burdened with another. If we upgrade technologies whereby batteries can last longer then these entrepreneurs will not face financial burdens. The other aspect is regarding financing. If you ask me whether there is financing happening in the country then the answer obviously would be yes, but what is not happening is access to finance. What is happening at the moment is banks are more willing to give a Rs one crore loan than Rs ten lakhs. Also, there is a trust deficit with the tempo drivers. We are helping to bridge that. Our message is if the loan is disbursed through our system, then we will keep track of the loan utilisation and we will also assure repayments.

What is your opinion on green financing?

There is a lot of talk these days related to green financing, however there are many companies who talk about green financing but are actually greenwashing. Greenwashing basically means when a company tries to deceive a customer into believing that they are following environment friendly policies in their system. Everybody is not into greenwashing and there are only a few involved in it but even if one company does it, then people tend to distrust others too. When it comes to green financing, I feel traceability is very important and I have been advocating for it. When people speak about green financing it is usually those who are at the higher levels who are doing so. Those who are actually working in that sector at the ground level receive nothing. Most of them have no idea about the concept of green financing or how they can avail it. I hope that gap is reduced. At present, there are many businesses doing greenwashing which is regretful. I think it will take 5- 10 years for the green financing concept to actually seep through to those who actually work for it. Green financing is there but how do we take it to the ground level and once it has reached there, how do we track whether the financing has been utilised or not. We have to work on that.

Tell us about the recognition you received from National Geographic Society recently.

Actually, I was recognised by the National Geographic Society initially in 2020. There is a mechanism in the Society whereby one can apply for grants and if you are eligible and selected as an explorer then they provide some grants. In my case, I had not applied because previously whenever I used to hear about National Geographic, I used to think it was for photographers and people involved in wildlife. One day, I got a notification that I had been nominated as an Emerging Explorer which they call Wayfinder these days. Honestly speaking, in the beginning I thought it was some kind of scam because I was working in the fintech sector and I had no contribution at all to the wildlife sector. It was only later that I got to know that besides applying one could also be nominated by somebody else but I had no idea who had nominated me because they do not divulge the name. Before receiving the next call, I did some research on Nepal’s wildlife as I thought they would ask me questions related to the subject. That recognition came as a surprise and later the person who had nominated me called me and explained why he had nominated me. He liked our work because it touches women entrepreneurship, environment and reducing air pollution. For the recent grant, we did apply and received $100,000 which we will be using to upscale the Safa tempo business in the country. We will try to bring in new entrepreneurs to this EV business by helping them with finances by linking them with our system. We will try to create as big a database as possible. The reason why we want to create this database is so that the borrowers’ names are included in the banking system and when they apply for further loans the system recognises them and they have access to finance.

You are running a successful startup but generally, startups in Nepal or across the world have a huge rate of failure, what - in your opinion - accounts for this?

The startup journey in itself is very difficult. Many people only see the glamorous aspect of a startup from the outside. For instance, tomorrow when somebody reads my interview, they may not focus on the hardships I went through and only read about the awards and recognition I have received. I am a computer engineer but that does not mean I will only look into the technical aspects of our business. There are so many other aspects where I have to be involved like sales, training, operations, a whole gamut of things. As a startup one does not have the luxury of funds to hire different people for different roles, so you need to learn about everything in detail and put in a lot of time and effort. What I have noticed is startups are usually opened by young people and many do not have proper financial knowledge. They need to learn to maintain cash flow. When you open a venture, it is not about you only as you will be hiring a few employees and they need to be paid their salaries on time. So, you need to keep that calculation too in your mind. Fundamentally speaking, to start a business and run it successfully you need to be able to wear different hats at different intervals of time and that is not everybody’s cup of tea. I feel many open up looking at the bright side of things only without doing thorough research into what goes into making a business successful. I am not trying to boast that I did a lot of homework because we are still learning in the process. At times it is very difficult. Also, network plays a big role. Who do you know in the industry you are involved in? This is very crucial. Even to buy a small product for your business you need to know where you can get it from else you lose time and money looking for the product. Networking is also important because it is not only about asking the right question but also knowing whom to ask that question. If you ask a question to the wrong person, you will always get the wrong answer. I feel youngsters are not prepared to balance all these activities I just mentioned. I would like to reiterate that opening a startup looks glamorous but it is crazy. You need to be able to juggle a lot of things.

What are the values you work with?

The driving force for me I would say is ingenuity or rather what are you doing and for whom. I think nobody should forget that, no matter which sector you are involved in. People need to be grounded. For example, as a tech startup it is quite strange for us to say our system works on SMS when the whole world is talking about apps. But we know who we are working for and what effect we want to bring about so we have stuck with SMS. One has to know the purpose of what they are doing. I have always followed the four Ps – people, planet, profit and prosperity. We cannot just speak about people or planet or profit. Profit is also necessary because without funds you won’t be able to do anything substantial. And again, just the first three Ps will not suffice because one needs to prosper too. I always keep these four Ps in my mind whenever I am doing anything. I want to make a profit but I also want the planet to benefit and then those in the planet, the people, need to prosper.

Fundamentally speaking, to start a business and run it successfully you need to be able to wear different hats at different intervals of time and that is not everybody’s cup of tea.

My father started as a driver and now he has shares in buses; I want other people too to achieve this type of success. I want the people that I am working with to be able to provide their children the same opportunities that I received. The only thing I bother about is whether my work has had a positive impact on society. There are a lot of micro entrepreneurs in Nepal and I always say development is not a one-line linear thing. If you want to grow, you have to go up and if you want to go up you need finances because at the end of the day everything boils down to finance. We are trying to build that finance linkage. Let’s be honest, the finances we make available are not from our pockets but from the finance that is available through different sources like FIs and development agencies. It is satisfying when a woman who was previously involved in cleaning work at homes or offices takes a training and starts driving a tempo and later musters the courage to own a tempo. Satisfaction for me is when the people who we are working with have financial independence. Getting awards and recognition are definitely satisfying but when people at the grassroots level appreciate your help - nothing beats that feeling. READ ALSO:

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