A Kenyan startup that offers insurance from as little as $1 a month is betting the market for small policies will eventually make money, even if the metrics are pointing in the other direction.

“To date most micro-insurance has been supported by grants and are really not viable business models,” Ted Pantone, the co-founder and chief executive officer of Turaco, said in an interview in Nairobi. “With the changes that our business is implementing, it shows there are clear opportunities to turn it into a commercial enterprise.”

Turaco, backed by Denver-based GAN Ventures LLC and the venture fund of Mercy Corps, is entering a shrinking industry in East Africa’s biggest economy with basic insurance products to help cover everything from medical costs to accidents and life. With a population of 47.6 million people, Kenya’s total insurance coverage was 7.2% in 2018 compared with a record of 9.1% in 2014, according to the nation’s Insurance Regulatory Authority.

The fintech firm is using partnerships with other consumer-services businesses to reach a larger pool of potential customers, Pantone said. It uses technology to distribute its products and verify claims, which helps lift profit margins. Turaco has 40,000 customers and growing and the rate of 20% every month.

“We will have hundreds of thousands of customers even by the end of this year,” he said.”Micro-insurance is the only way to massively increase general uptake of insurance,” while using commercial capital will also help expand the industry.

Turaco initially raised cash to start the business from friends and families of the founders and in 2019 got seed funding from financiers, including GAN Ventures, Mercy Corps Ventures, Musha Ventures and several angel investors, Pantone said. Talks with potential investors have begun for the third funding round, though the amount being sought has yet to be determined, he said.

“The investors that we have to date have still been a little bit philanthropic-minded because it is a risky business, it is not a proven business model at all,” he said. “The margins are prtty low and the need to have patient capital is definitely there.”