Category Archives: FSD

Idea Exchange: Anzisha, Obama, Elumelu, HEVA

EDIT The African Banker Awards that will take place during the African Development Bank Annual Meetings on 11th June in Malabo, Equatorial Guinea are now accepting entries for the awards of African Bank of the Year, African Banker of the Year, Investment Bank of the Year, Best Regional Bank in Africa, Best Retail Bank in Africa, Innovation in Banking, Infrastructure Deal of the Year, Deal of the Year (Debt), Deal of the Year (Equity), Award for Financial Inclusion, and Socially Responsible Bank of the Year. All financial institutions (banks, micro-financiers, investment banks, DFIs and others) are invited to compete. Completed entry forms should be submitted by Monday 1st of April.

Edit Africa CEO Forum Awards recognizes outstanding business leaders and this year includes a  “Gender Leader of the Year” prize and “Disrupter of the Year” award to go with other existing awards for CEO of the Year, African Champion of the Year, and International Company. Some nominees include Mohamed El Kettani – Attijariwafa bank and Tewolde Gebremariam – Ethiopian Airlines for “CEO of the year”, Banque Centrale Populaire, Ethiopian Airlines, OCP Group and Royal Air Maroc for “company of the year”, Absa Group, Access Bank, First Bank of Nigeria and Unilever for “gender leader” and Africa’s Talking, Baobab+, InTouch, Jumia and Kobo360 for the “disruptor” award. The awards will be given during the 7th Africa CEO Forum on 25 – 26 March 2019 in Kigali, Rwanda.

Africa Netpreneur Prize Initiative (ANPI) will officially open its call for applications starting from the 27th of March 2019. The ANPI is a US$10 million Prize competition for African entrepreneurs, founded by the Jack Ma Foundation, where ten finalists from across the continent will compete for US$1 million in total prize money. Deadline for applications is 30th June 2019

EDIT Class 5 of the Alibaba Global Initiatives eFounders fellowship is open to founders/co-founders of digital ventures from Botswana, Cameroon, Chad, Kenya, Rwanda, or Uganda. It is jointly organized by Alibaba Business School and UNCTAD and the deadline is March 17. Note that the fellowship does not cover air tickets and transportation/pick-up services to and from Hangzhou, China.

The Anzisha Prize is Africa’s biggest award for her youngest entrepreneurs and hands out over USD $100,000 every year in funding to entrepreneurs from all over the continent.  Details here.

EDIT  The British Council Future Leaders Connect, is a global network for emerging policy leaders seeking to connect to a long-term network of emerging leaders from around the globe, who want to change the world through policy making. To take part you must be aged 18-35 and live in one of our participating countries – Canada, Egypt, India, Indonesia, Kenya, Mexico, Morocco, Nigeria, Pakistan, Poland, Tunisia, UK and USA. Applications from Egypt and the USA are by invitation only. Applications close on Monday 6 May 2019.

EDIT Cities Alliance a global partnership supporting cities to deliver sustainable development, hosted by the United Nations United Nations Office for Projects Services (UNOPS), is offering grants up to USD 50,000 to people working on innovative and accessible solutions for improving tenure security and land and property rights in any African country. It is open to Innovators, microenterprises, social entrepreneurs, community-based organisations, and national and local NGOs working in African cities.  Deadline to apply for the Cities Alliance is  March 14, 2019.

Edit Coca-Cola Beverages Africa and PETCO have launched an innovation challenge, dubbed the Beyond Baling Innovation Challenge (BBIC), that aims to provide innovative solutions to bale post-consumer PET plastic in order to ease their transportation for recycling and manufacturing.

DRC Innovation for Financial Services 2019:  The Central Bank of Congo, in partnership with FSDA Africa and Elan DRC, has launched Innovation for Financial Services 2019, a competition for businesses and entrepreneurs aimed at promoting the development of innovative and relevant financial services and payment solutions in the DRC. The winner of each category will then have access to FSD Africa’s investment process with the possibility of raising up to US$130,000.

The Tony Elumelu Foundation, the leading African-funded and founded philanthropy committed to empowering African entrepreneurs, has announced its last call for applications into its prestigious 2019 Entrepreneurship Programme. Selected beneficiaries will join 4,470 current alumni and will receive $5,000 seed capital, access to mentors, bespoke training and numerous opportunities to impact policies at the local and global level.

The programs is a 10-year, $100 million commitment to identify, train, mentor and fund 10,000 African entrepreneurs, the Programme’s objective is to generate at least 1,000,000 new jobs and create at least $10 billion in new business revenue across Africa. Applicants can apply on TEFConnect, the largest digital networking platform for African entrepreneurs by March 1.

HEVA Fund: HEVA has launched a Growth Fund in collaboration with Agence Française de Développement (AFD), targeting mature businesses in the creative economy – fashion, apparel and accessories; live cultural events (music, shows, venues, festivals); and digital media content production and distribution. – that have been in operation for at least 5 years, with annual revenues exceeding KES 10 million. The targeted businesses are in the following creative economy value chains:  HEVA will be investing a minimum of KES 5 million and a maximum of KES 10 million in each successful enterprise. Deadline is 13th March 2019. HEVA is also receiving applications for its Cultural Heritage Fund and for a Young Women in Creative Enterprise Fund.

The Inter Region Economic Network (IREN) has launched the IREN Technologies and Innovations Platform 2019 (ITIC 2019) to promote the best mix of technology and innovation to processes along the agribusiness value chains. Innovators are expected to address the region’s challenges in value addition, energy, storage, logistics and marketing. The Lake region is known for fish, grain, vegetable, cash crop, dairy and livestock production. IREN welcomes Institutions and established companies to participate in the final ITIP 2019 Trade Fair to be held later in November 2019.

Edit MEST: Five promising start-ups from across Africa have been chosen as regional winners in MEST Africa’s annual Pan-African pitch competition, moving one step closer to winning $50,000 in equity investment, a place in the MEST Africa incubator of their choice and global mentorship to help their company scale. The winners who were chosen from over 1,000 applicants are AMPZ.TV – a ‘LinkedIn for Sports’ (Nigeria), OZÉ – a financial data insights company (Ghana), Snode – real-time cyber security (South Africa),  WayaWaya – a fintech company (Kenya) and Seekewa – an agricultural financing platform (Cote d’Ivoire).

Obama Founder Leaders Africa Applications are live for the Obama Foundation Leaders Africa Program which aims to identify a group of emerging African leaders from all sectors—government, civil society, and entrepreneurs—who have demonstrated a commitment to advancing the common good. Apply by February 28, 2019.

Edit  Pivot East: East Africa’s premier entrepreneurs’ program is back for its 6th year after a two year break with a call for applications opening on 11th March 2019 and the startups pitching competition and conference event happening on 27th June 2019. Applicants can be in software and hardware in five categories of finance, enterprise, entertainment, social Impact and utilities.

Sanofi, the global pharmaceutical company, extended the registration deadline for entries to this year’s edition of the VivaTech innovation conference. 17 Kenyan start-ups have registered so far and are expected to participate in the conference.

FSD Kenya Insights on Youth and Agri Finance

FSD Kenya, which aims to create value through financial inclusion, have just released their 2017 Annual Report which contains findings from ongoing research projects around Kenya.  

Some excerpts 

  • The unregulated digital credit space in Kenya, mainly phone loans, has overtaken other forms of credit in the country with 19% paying digital loans, much more than 17% repaying family/friends or 14% paying shopkeepers for goods taken on credit. 
  • 45% of borrowers through mobile phones are now female. Usage has shifted from day-to-day to investing in businesses, but 14% (900,000 individuals) are juggling multiple loans, and half have defaulted or delayed loan repayment.
  • Tweaking Agri-Finance: There is lack of access to credit for agriculture which receives just 4% of banking credit. This could be partly due to lack of data so they are partnering with M-Kopa Labs to research other models. Hall of M-Kopa customers make money from agriculture and buy solar products so the research aims to see of if the pay-as-you-go model can be applied to other products like farm inputs, water tanks, fertilizer, animal feed etc.
  • Youth Finance products: 40% of the population is under 15 years but youth are underserved by the banking sector. They see money as a means of survival and savings as being for buying something not long-term or unanticipated needs. There is a lack of appropriate financial products for the youth, and this could be because older adults are the ones developing financial solution for the youth. One outcome of this research, funded by SIDA and the Bill and Melinda Gates Foundation could be a new class of lending to the youth, a development by FSD Kenya and the Kenya Bankers Association. 

  • They are also involved in the Kenya Hunger Safety Net program in which the government transfers Kshs 20 billion ($200 million) a year to people over 70 years.
  • Visiting economist John Kay gave a lecture where he advised that Kenya should develop local financial solutions and not adopt western financial models.
  • Smartphone uptake is still low, but USSD is how Kenyans can access robust banking services with cheap handsets.

Digital App Loans: Understanding Borrower Behavior

An Interesting conversation was started by a tweet by Francis Waithaka on the true borrowing of costs of app loans that hundreds of Kenyans take every day by making a few clicks on their phones.

It elicited a lot of comments on the cost of finance offers to Kenyans, since an interest capping law passed in 2016 that restrict banks to lend at a maximum of 14%, the lack of regulation of app loans who may be taking advance of Kenyans by charging usurious rates etc. It also led to a mention of a research report from Micro Save about the digital credit landscape in Kenya that was shared by one of the authors.

The Microsave Report (PDF) titled “Where Credit Is Due: Customer Experience of Digital Credit In Kenya”  had lots of insights. It was drawn from feedback from 1,009 farmers located in 50 villages, equally split between Central Kenya and Western Kenya, and also with an equal number of men and women in the study.

At the end of it, the report makes some recommendations to the Communications Authority of Kenya and the Central Bank of Kenya – such as to control the type of messaging sent by text to consumers, and to require app loan companies to share information and to list all defaulters, respectively.

Habits of Borrowers 

  • There is a preference for Chama’ s, SACCO’s and M-Shwari as a source of funding. App loan amounts are too small for significant investments.
  • Majority of the customers took up loans to smooth consumption, emergencies or to boost business.
  • They don’t understand terms and conditions of app loans and they don’t understand credit reference.
  • There are three types of borrowers: repayers (who pay loans on time), defaulters  (who don’t understand the consequences of being listed), and jugglers who take both traditional and app loans – but if they are financially stretched, they are more likely to repay the traditional loans.
  • Customers have learned to game the system through timely repayment of loans and juggling multiple borrowers.
  • There is no extra “PIN” required to request and withdraw an app loan and some family members have done this in secret leading the phone owner to default on a loan.
  • Digital credit usage doubled in Kenya between 2015 and 2016, with awareness and usage of digital credit by far lower in rural Kenya.
  • Digital credit, which offers privacy, is replacing shop credit and family/ friends as financiers.
  • The simplicity of the loan application procedures matters;  too much information requested or if there are too many variables that make it confusing, makes potential borrowers drop off.

Phone Types 

Download a loan app or use USSd

  • App usage is rather low – and this probably related to lower usage of smartphones as their batteries rarely last a full day as compared to cheaper feature phones that retain battery charge for several days of use.
  • Phones are mainly used for money transfer,  deposits, and withdrawals. There is little usage to get information or to browse the internet
  • 64% of respondents in the survey had a basic phone (57% in 2015). Smartphones were 14%, growing slightly and off-setting feature phones which declined slightly to 26%.
  • Loss of a phone may result in a  borrower defaulting on repayment.

Credit Reference Bureaus

  • Formal lenders require clearance from a credit reference bureau (CRB) which costs $22 (i.e Kshs 2,200) and that may exclude borrowers from formal finance. App loans don’t require this, e except that borrowers have not been black-listed.
  • One concern is there is little understanding of credit reference bureaus, and of channels for redress of any disputes.
  • Not all fintech’s report loans to credit reference bureaus.

App loan costs

  • High loan/interest charges are not a concern as they are comparable to other informal money lenders

At the time of the survey, M-Shwari issued 62 million loans (worth Kshs 1.3 trillion), while Equitel and KCB about 4 million each. In comments to accompany the release of their 2017 bank results last month, KCB had 13 million mobile customers, Equity Bank has 12.1 million, while a  CBA statement noted that the bank also serves 33 million mobile savings & loans customers, in East Africa, in partnership with mobile money operators.

Bond Moment: M-Akiba, EABL and other NSE Bonds

Update on NSE Bonds or bonds listed at the Nairobi Securities Exchanges and other bonds, since the last bond moment in May 2015.

Globally, the bond market is bigger than equities one, and according to the latest CMA Kenya quarterly statistics (PDF),  bond market turnover in Kenya has been larger than the equities one since 2009 mainly due to government bonds. In 2016, equity market turnover was Kshs 147 billion (down from 209 billion) in 2015. Bond market turnover was Kshs 433 billion (~$4.2 billion) in 2016 (up from 305 billion in 2015). Turnover has been 99% due to government treasury bonds, while that of corporates is less than 1% of bond turnover in a year – except in the years 2010 and 2011.

If one doesn’t want to buy NSE bonds directly, there are CMA-approved bond funds for investors including the Apollo Bond Fund, Co-op Bond Fund, Diaspora Bond Fund, Dyer & Blair Bond Fund, ICEA Bond Fund, Madison Asset Bond Fund, and the Old Mutual Bond Fund. These fixed income /bond funds total Kshs 1.4 billion (or 2.5% of the 57 billion) of funds under management by fund managers in Kenya.

Government Bonds

  • M-Akiba: Following the successful launch of M-Akiba, Kenya’s Kshs 150 million, 10%, tax-free, 3 year bonds that were entirely sold via mobile phone (the minimum investment was Kshs 3,000 (~$30))  another Kshs 4.85 billion (~$47 million) is to be floated in June 2017.
  • Following the launch of a green bonds program, banks, under the ambit of the Kenya Bankers Association (KBA), have partnered with Nairobi Securities Exchange (NSE) towards raising the country’s first bank-supported climate change-aligned corporate debt instruments in the next six to eight months. The capital flows from the green bonds in Kenya will go towards funding bank clients that require finance for clean and sustainable development projects in the priority areas of energy, agriculture, transport, infrastructure, building and urban planning, and water and waste management…so far, banks operating in South Africa and Morocco are already tapping the green finance opportunities in partnership with local municipalities and development finance institutions. projects. Also in South Africa, the World Bank’s International Finance Corp (IFC) successfully raised a 9-year, 1 billion Rand Green Bond via the Johannesburg Stock Exchange. More on the Kenya Bankers Association Sustainable Finance Initiative.
  • The Kenya Government finance bill 2017 will give Islamic finance bonds the same treatment as conventional bonds and also allow Islamic finance products in the cooperatives sub-sector.
  • The Rwanda government is about to issue a 10 billion Rwanda franc (~$12 million), 7-year Treasury bond. It will be issued on May 24 and the funds will be used for infrastructure project and capital markets development. The bonds will be listed at the Rwanda stock exchange and trade in multiple of 100,000 francs (~$120).
  • Nigeria has asked Goldman Sachs & Stanbic IBTC Bank to advise it on the sale of a debut “diaspora bond” targeted at Nigerians living abroad. – via @kenyanwalstreet

Corporate NSE Bonds:

  • Centum announced a Kshs 2 billion one year 14.5% note for the Two Rivers Development.
  • Cytonn is seeking advisors for their medium-term notes to raise Kshs 5 billion from the public towards the financing of Cytonn real estate’s (CRE) projects including Taraji Heights in Ruaka and The Ridge in Ridgeways.
  • On Monday EABL listed the Kshs 6 billion (~$58 million) of bonds at the Nairobi Securities Exchange (NSE) as the second and final tranche of its Kshs 11 billion shilling medium-term note program that was launched in 2015. The tranche attracted bids worth Kshs 8.4 billion, representing a 41% over-subscription. The bonds maturing in March 2022 will pay an annual fixed interest of at least 14.17% and the raised funds will go towards optimising operations and restructuring the brewer’s balance sheet. “This is the first corporate bond to be listed on the bourse this year, and we are confident that its success, a subscription rate of 140.9% will open the doors for more listings in the course of this year,” said Nairobi Securities Exchange CEO Mr. Geoffrey Odundo. Citi upgraded EABL as a buy, due to its low price – seeing value even as the beer market was flat. The first half of FY17 (ended December 2016) showed decent volume growth for EABL (+5% YOY) but weak sales growth (-6%) as beer demand continued to shift from mainstream to value. EABL is doing well in spirits but struggling in beer, and Tanzania continues to present a challenge. – Citi report.
  • A South African credit-only micro-finance institution Real People Investment Holdings which issued a multi-billion bond in Kenya late 2015, has received a negative rating. Global Credit Ratings (GCR) said it had downgraded the primary and special servicer quality ratings assigned, with the outlook accorded as negative.
  • Transcentury bondholders lost 50% in a restructuring buyout deal.

Other Bonds

  • The African Development Bank had led the establishment of an African Domestic Bond Index and a $200 million African Domestic Bond Fund to deepen liquidity in local bond markets. It has also issued local currency bonds in 11 countries, including Kenya, South Africa, Egypt, Ghana, Nigeria, Botswana, and Uganda. leading the African Union in mobilizing domestic resources required to execute the Bank’s five developmental priorities dubbed the ‘High 5s’. – Light up and power Africa, Feed Africa, Industrialize Africa, Integrate Africa and Improve the quality of life for the people of Africa.
  • The Africa Finance Corporation issued a US$500 million 7 year Eurobond. The senior, unsecured Eurobond which carries a coupon of 3.875% was priced to yield 4.000% and matures in April 2024. It attracted orders of US$2.4 billion, representing about 5 times over-subscription from 231 investors. The bond will be listed on the Irish Stock Exchange. The Eurobond was distributed to investors in Europe (29%), United States (25%), United Kingdom (24%), Asia (18%) and the Middle East (4%). Citi, J.P. Morgan, MUFG and Standard Chartered Bank acted as Joint Lead Managers and Bookrunners for the U.S. dollar-denominated issue.
  • FSD Africa (Financial Sector Deepening Africa) and KfW Development Bank will invest £15.3 million (~$19.8 million or Kshs 2 billion) in the African Local Currency Bond Fund enabling it to step up its engagement with developmentally important industry sectors such as green energy and housing and take on investments in fragile and conflict-affected states. ALCBF is managed by Lion’s Head Global Partners (LHGP) Asset Management LLP.
  • Bonds, Loans & Sukuk Africa “the continent’s only Pan-African debt event” takes place on 13th & 14th March 2018, at the Cape Town International Convention Centre.

Mapping Financial Inclusion in Kenya

This week, FSD Kenya launched an interactive tool called the FinAccess Spatial Map that mapped all the formal financial service points in Kenya.  This has been an ongoing private-public partnership, and it’s notable as a previous FSD study on the numbers of ‘unbanked’ Kenyans became the justification for the relatively unregulated roll out of m-pesa and mobile money in the country.  

The searchable tool interprets data like financial service points (GIS locations of bank branches, mobile money agent), county borders, and local population numbers from the census – to plot some interesting metrics.

The tool tends to find that there are more financial service points in wealthier parts of the country (no surprise) and that more Kenyans live closer to a mobile money point (58% are within 3 kilometers of one) than a bank branch (21%). It can  also pick out useful trends for further research e.g. at the launch, it was mentioned that in Isiolo, 40% of the population own mobile phones, but only 20% use mobile money, while in Nyeri, 75% own phones, but an even larger number – 80% use mobile money.

Partners in the FSD mapping program included the Central Bank of Kenya, Brand Fusion, SpatialDev, and the Bill & Melinda Gates Foundation.