Category Archives: SME solutions

Future of Financial Services in Africa and the Middle East

Technology will continue to offer great opportunities for millions of unbanked people including groups of women, Muslims and governments in Africa, Middle East and South Asia (MEASA) and new companies who design financial services in these space.

These are the findings from a report by the Economist Intelligence Unit that was sponsored by the Dubai International Finance Centre which highlights that:

  • Findings Gaps in financial services present an opportunity for financial companies—both traditional and non- traditional players.
  • Overcoming a strong preference for cash in the MEASA region will be imperative to move towards a cashless economy
  • Blockchain has the potential to change the financial architecture in MEASA, particularly for banking.
  • New business models are being developed to reach the “missing middle” of retail investors and medium-sized businesses.
  • In Islamic finance, the approach is shifting from “sharia-compliant” to “sharia-based”
  • Governments and regulators have a crucial mandate to drive financial innovation.

It notes that there is a prevalence to use cash in the three continents (to receive wages, pay school fees and for utilities etc.) and that current regulations which require the use of ID cards are a barrier for women who need ID cards and other documents to receive these services.

The 3 billion people on the three continents will be a source of demand and supply for better financial services, and governments have a role, regulators should balance prudence with innovation, and financial service providers should collaborate for everyone to benefit.

There are opportunities for wealth and private equity funds and individuals (through crowd-funding) to support the growth of new players to take on financial sectors such as insurance, whose levels of penetration can be increased through the mobile phone as has been seen for banking and Islamic financing, by promoting sharia-based products, more than ‘sharia-compliant’ ones. Technology has the ability to address financial exclusion and scale services to millions while reducing costs and creating new revenue models; this can be through smart data to improve credit scoring models and the use of bitcoin to replace money transfers (with banks and currency conversions to international dollars).

Startup Battlefield Africa by Techcrunch and Facebook

The Techcrunch Startup Battlefield Africa, supported by Facebook, was won by Lori, a logistics platform being developed to simplify the movement of cargo in Kenya.

At the TechCrunch event in Nairobi, 15 startup companies pitched and demonstrated their concepts in between chat sessions on the unique business climate of Africa that featured other seasoned entrepreneurs, advisors, and funders, with moderation by Facebook and TechCrunch staff.

The competing companies were drawn from sectors like finance (WeCashUpAbacus), data collection (Form+Delivery Science), logistics (Lori Systems), sales (Sellio,  SynCommerce), entertainment (Big5 Games, Tango TV, Gazkar from Lomay), health – ConnectMed,  education (M-Shule, Dot Learn), recruitment – Talent2Africa and agri-business – AgroCenta.

Lori won the day and walked away with $25,000 and an all-expense paid trip for two to compete in  TechCrunch’s flagship event: Disrupt SF 2018

Winners will join TechCrunch’s Startup Battlefield Alumni Network. Alumni have collectively raised nearly $7 billion and produced nearly 100 exits and IPOs to date.

Some excerpts from the day:

  • Brands are creating collections and Michele, Beyonce, Rihanna are wearing African brands – that’s opportunity @KISUAonline #TCBattlefield
  • Most lucrative buyers for @agrocenta are big companies such as breweries, animal feed, soya oil #TCBattlefield
  • Logistics is a $500B market for innovations that eliminate middle-men and make food supply and demand efficient – @agrocenta #TCBattlefield
  • 80% of farmers don’t have access to direct markets and logistic inefficiencies lead for 25% of food being wasted – @agrocenta #TCBattlefield
  • Black Africans in tech are not getting a lot of the money coming into tech – @africatechie #TCBattlefield
  • I’m in Silicon Valley; I may be on a board, but I’m not at the birthday party or talks for the next round – @africatechie #TCBattlefield
  • @big5games builds localized data-optimized easy-to-play games on sports, farming, stocks with partners like Kwese & telcos – #TCBattlefield
  • If you arrange for 20 cargo trucks between Nakuru to Eldoret, 15 will commit, 5 agree on price, but 2 will show up – Lori #TCBattlefield
  • A typical lorry takes 3 days to load its cargo, to make a 12-hour journey, then another 3 days to unload – Lori #TCBattlefield
  • Products cost more in Kenya as the logistics chain is broken; trucks are empty or idle 93% of the time – Lori #TCBattlefield
  • Today @AbacusKe launches Kenya’s first automated investment service – using algorithms to personalize advice – @TheMacharia #TCBattlefield
  • @AbacusKe aims to be Africa’s e-trade; local & foreign investors can make stock debt property & unlisted buys – @TheMacharia #TCBattlefield
  • @wecashup does 1M transactions per month of ~10 euros and partners with banks so they don’t need a license for every country #TCBattlefield
  • @wecashup 2.0 integrates payments whether cash, mobile money, cards, crypto-currencies in 42 countries, and own 6 patents #TCBattlefield
  • You can build a $50M business serving a Lagos neighbourhood; but there’s a daily swing between risk & uncertianity – @EghosaO #TCBattlefield
  • Local investors say – don’t tell me about 10-yr plans when I can bring a container from China and make more money – @EghosaO #TCBattlefield
  • Africa is about iceberg micro-economies; see below the surface – biggest opportunity is organising offline markets – @EghosaO #TCBattlefield
  • Saying Nigeria has 180m people or Africa has 1.2 billion brings wow – but you should think at city levels – @EghosaO #TCBattlefield
  • Our challenges include raisng capital and dealing with regulators & muscled players (non-market forces) – @oviosu #TCBattlefield
  • Nigeria is the biggest market in Africa. River State is bigger than most African countries – @oviosu #TCBattlefield

Nairobi Supermarkets & Mall Moments

It has been an interesting few days in the Nairobi mall and supermarkets space.

It started off with a notice on social media from the Junction, a 26,000 square meter mall stating that Nakumatt had surrendered their space at the mall. Nakumatt was the anchor tenant of the mall which opened in 2004 and now has  115 stores.

But Nakumatt which has been having cash flow and supplier payment issues, and which have all resulted in  most common everyday products like fresh foods and supplies missing from their store shelves, then put out a statement alluding to ongoing talks with the Junction mall and their suppliers with advanced plans to restock their shelves.

Later on the same day Nakumatt got a court injunction temporarily stopping their removal from the Junction and issued another more formal statement about how the Junction management had tricked them and illegally took over their space after they had paid Kshs 20 million, hurting their image in the mind of employees, suppliers, and customers.

Knight Frank who manage the Junction also issued a statement acknowledging the court order, which they would follow, but stating that Nakumatt had signed a surrender on 15th September and then failed in its payment obligations and had not documented a commitment to restock the shelves by the surrender date.

Tuesday also saw an announcement by Majid Al Futtaim that they would be opening their third Carrefour store in Kenya at TRM (Thika Road Mall),  a 28,000 square meter mall on Thika Highway. The space had been surrendered by Nakumatt just two weeks before that. Carrefour operates stores at the Hub in Karen and Two River malls.

The release also contained some interesting stats on suppliers and employment:

– We are looking to stock over 30,000 items at the hypermarket, including fresh produce, groceries, a fresh bakery, and a butchery
– (We) work with over 640 suppliers, local manufacturers, producers, and farmers, which contribute to the overall economic growth in Kenya both directly and indirectly. Only one of the suppliers is foreign.
– The opening of the new branch at TRM will boost the staff employment count at Carrefour in Kenya to 800, with 600 already working at the other two branches located at The Hub in Karen and the Two Rivers Mall.

There has been quite a bit of clamour by customers of Carrefour, which was becoming quite crowded at Karen on month end, to expand.

An equity deal to rescue Nakumatt deal seems to have floundered, and a new announcement about ongoing discussions for a management partnership arrangement  between Nakumatt and a rival supermarket chain Tuskys have not inspired the confidence of supplier and financiers of Nakumatt.

Other believed beneficiaries of Nakumatt surrendering any more stores are expected to be Naivas and Khetia. This week also saw Naivas launched Naivas Pay in partnership with Interswitch. The launch was a Ciata Mall, at their store in a space Naivas took over after it had been previously booked by the management of Uchumi.

Uchumi itself is in the process of concluding a deal to raise Kshs 3.5 billion from a  private equity investor.

Another interesting concept in the supermarket space, is Seven 2 Seven, a franchise of mini market stores that only stock fast-moving consumer goods (FMCG) and serve as agents of some banks. They are on track to have 100 stores in Machakos, Kajiado, Nairobi, Kiambu, Muranga, Nyeri, Embu, Kirinyaga, Meru and Nakuru counties by year-end.

Inuka for SME’s from Kenya Bankers

During a Kenya Bankers’ CEO chat on Friday, it was revealed that local banks would, through the Kenyan Bankers Association (KBA), soon launch an Inuka initiative for small and medium enterprises (SME’s).

Accelerated lending to SME’s was one of the pledges that the banks had set out to accomplish ahead of the passing of the interest rate capping bill of 2016 by Kenya’s parliament as it edged closer to becoming a law.  The banks committed to set aside  SME support facilities at all banks that would channel Kshs 30 billion to SME’s and a third of that would go to SME’s owned by women and youth. These firms would borrow at a concessionary rate not exceeding 14.5% and banks would progressively report, each quarter, on their allocations, SME loan uptake, and loan performance.

But the interest rate cap did pass, which resulted in SME’s borrowing at the same level of interest that the banks had pledged. Other commitments that the banks made and which they  have fulfilled include ending the practice of account oolong charges, and they also  rolled out the KBA cost of credit web site and calculator to enable bank customers to properly assess the cost of loans offered, with the impact of bank fees, before they commit to borrow any money.

After the chat with I&M Bank CEO, two more KBA CEO chats are scheduled in that next few weeks with the CEO’s of Dubai Islamic Bank Kenya on 29th September and of Family Bank on 6th October.

mVisa Launches in Kenya with Free Money Transfers

This week, mVisa was launched in Nairobi. It had earlier debuted as a pilot with Family Bank nine months ago butis now live at eight other banks including Barclays, Cooperative, Ecobank, KCB, National Bank, NIC, Prime and Standard Chartered.

The roll out comes with free person-to-person (P2P) money transfers for mVisa customers at these banks to others registered mVisa members at any of the banks. For example, customers of Cooperative Bank can get mVisa by updating their MCo-op cash phone apps or those without MCo-op cash can get it by dialing USSD *667# on their phones and this will bring up mVisa which they can send to any other mVisa users and pay for goods and services at no extra cost.

mVisa depiction from Visa site.

For merchants, payment is by a QR code within a phone or via a card displayed at a shop or other places of business. QR codes enable transfers without the need for a smart phone and for merchants, they can accept payments without having to invest in expensive point of sale devices such as card readers.

There was a neat video shown about how a boda boda (motorcycle taxi) operator could have a QR code on the back of their safety jacket – and which a passenger could scan to complete a payment. mVisa aims to drive financial inclusion and a comment was made that one cost to using cash (which is not transparent) is that small businesses (SME’s) may have good sales and receipts, but can’t get credit from banks; therefore easing the processing of verifiable payments to a business will enhance its viability.

mVisa is now live in Kenya , India, Rwanda and Egypt with plans to launch in Nigeria, Uganda, Tanzania, Ghana, Indonesia, Kazakhstan, Pakistan and Vietnam underway.