The Fintech Revolution: how mobile money is transforming Africa

Cellulant Co-founders Bolaji Akinboro (left) and Ken Njoroge (right)

Cellulant Co-founders Bolaji Akinboro (left) and Ken Njoroge (right)

The fintech industry in Africa is predicted to be worth $3 billion by 2030. Businesses in Africa cannot afford to ignore the digital revolution underway and some of the most successful African start-up stories of the last decade have built their business models on mobile money. We spoke to Milkah Wachiuri, Chief Growth Officer at Cellulant, a leading pan-African digital payment platform, about the impact of fintech on African markets and how Cellulant plans to scale-up its business.    

Over 57% of all mobile money accounts globally are in Sub-Saharan Africa. Why is fintech so popular in the region?

Sub-Saharan Africa leads globally in mobile phone uptake with a rapidly increasing mobile penetration rate in the last decade. Currently there are 420 million mobile phone users in the region (44% of the population). The advent of Mobile money, led by Kenya in 2007, heralded the fintech revolution and extended financial inclusion to the unbanked. The World Bank lists 66% of sub-Saharan Africans as ‘unbanked’. This is a huge market.

66% Sub-Saharan Africans are ‘unbanked’.

In most of sub-Saharan Africa, nearly 90% of all payments and transactions remain cash based. However, with two-thirds of the region adopting mobile phone usage, there is a large opportunity to increase mobile-money penetration and as a result, enable consumers across Africa to become financially empowered.

 Financial service providers in sub-Saharan Africa, such as Cellulant, are transforming Africa, which is largely a cash-driven society, by extending financial services to the unbanked populations, enabling peer to peer lending, powering micropayments, making payments to local and international merchants and enabling purchasing of goods and services.

The fintech market clearly has huge potential and Cellulant has achieved remarkable growth since founders wrote the company’s business model on the back of a napkin in 2002. The company now operates in 34 countries and processes 12% of Africa’s digital payments. Can you tell us about Cellulant’s business model? Why has it been so successful?

Since its inception, Cellulant has grown into a leading Pan-African technology company that connects buyers, sellers and other critical stakeholders in Africa’s marketplaces through an underlying payments solution, enabling them to make and receive payments. We provide a single digital payments platform that runs an ecosystem of consumers, retailers, merchants, banks, mobile network operators, Governments and International Development Partners.

‘Cellulant is digitising the entire agriculture value chain.’

Our business model hinges on building products and platforms that come together to serve multiple use-cases for businesses and consumers at both across all income levels:

  • For consumers, Cellulant offers a single payment solution that integrates all payment methods, be they debit/credit card, mobile money or through a direct bank payment giving consumers greater convenience and flexibility.

  • For merchants, Cellulant offers a comprehensive solution that allows them to receive payments from their customers hassle-free through their preferred store of value across Africa. Merchants can access a single connection that will enable them to collect with multiple payment methods from over 220m customers spread across 35 markets.

  • For banks and mobile wallets, Cellulant offers a single point of connection for their consumers to pay over 600 merchants.

  • For the Agricultural sector, Cellulant is digitising the entire agriculture value chain in Africa by building a blockchain based smart contracting and customer relationship management system used by millions of farmers across Africa; connecting them to market and helping them sell their goods to a diverse range of corporate buyers.

In 2012, Cellulant’s e-wallet powered the Nigerian Government’s Growth Enhancement Scheme. It has since powered more than $1 billion in subsidy payments to more than 17 million farmers. Can you tell us more about Cellulant’s involvement in this scheme? How can technology scale up the impact of business ventures and development projects alike?

In July 2011, a chance meeting between our co-founders, Bolaji Akinboro and Ken Njoroge, with Dr. Akin Adesina, who later become Nigeria’s Minister for Agriculture, led to a discussion about how the Nigerian government was spending $400 million on fertilizer subsidies but only 11% of this sum was reaching farmers. The remaining portion found its way back onto the market and was sold to the farmers through the black market. The resulting structural anomaly dropped farmer productivity, pushing 20 million farmers into poverty. Subsequent decline in food production drove the food import bill in Nigeria to 16 billion This led to the government initiating this GES project to distribute subsidies directly to farmers with Cellulant being awarded the contract to implement an e-wallet solution.

 With 14.5 million farmers being registered, this eWallet provided an efficient and transparent system for the purchase and distribution of agricultural inputs. Ninety per cent of farm inputs had reached 7.1 million farmers by 2013 as the government could now distribute fertilizer and seeds subsidies directly to farmers. As a result, income for every farmer moved from $700 to $1800.

 By 2014, the farmers were eligible for financing and approximately $600 million was created in lending and microfinancing opportunities. Upon implementation of the second phase of the project, the food import bill dropped by 75% as farming had contributed over $30 billion to the country’s economy.

To date, a total of $1 billion in government subsidies has been distributed through the scheme.

 This project was a defining moment not only because it allowed us to deepen and broaden our offering across different sectors but also because it built the foundation of our Agrikore platform. Agrikore is a blockchain based smart contracting system which today transforms people’s lives, communities and economies. Technologies such as mobile wallet or blockchain can be pivotal in transforming sectors such as Agriculture. We have now re-designed the value chain of subsidy payments and linked multiple players – corporate commodity buyers, farmers, banks and agro-input dealers - to digitize the Agri value chain in Nigeria and roll this out to the rest of Africa.

One of the core challenges in harnessing technological innovation is ensuring that the right projects receive funding. How was Cellulant able to stand out and receive Africa’s largest investment in a financial technology firm from the American fund, TPG? What advice would you give to startups seeking funding?

Cellulant Co-Founders & the TPG Rise Fund investors at the signing

Cellulant Co-Founders & the TPG Rise Fund investors at the signing

Closing our recent investment was a key highlight in 2018. Although African fintech space is burgeoning, it continues to be poorly understood. We spent almost 2 years on the road, speaking to 60 investors and making 400 pitches selling our vision of Cellulant’s role in organising and powering payments in Africa’s marketplaces.

In the end, we got investors on board who not only understood our business but also believed in our mission and vision for Africa. This investment will give us the momentum to grow and scale the company.  We plan on entering new geographies across the continent, but also consolidating our presence in existing markets.

‘Entrepreneurship is not an easy fix…but a demanding journey that requires long-term commitment'.’

In view of the steadily growing capital investments in youth-led tech startups, it is tempting to sensationalize the achievements of a few young entrepreneurs and forget the multitudes who experience successive failures, despite the commercial viability of their solutions.  I echo the three principles our Group CEO, Ken Njoroge has noted to be particularly useful for young entrepreneurs who have tremendous talent but lack the benefit of experience:

1.  Reach out to experienced people outside your core network to help you set up a board and establish solid corporate governance structures.

2.  While it is understandable for entrepreneurs to be sentimentally attached to their first big idea, evolution and adaption are necessary, especially if there are other commercially viable opportunities within your ecosystem.

3.   Young entrepreneurs need to realise from the outset that entrepreneurship is not an easy fix to their financial problems, but a demanding journey that requires long-term commitment. You will be stretched during the fundraising process for sure - but clear intent on why and more importantly who you want as a partner will get you to the finish line.

To hear more from Milkah Wachiuri, join us at The Annual Debate on 5th June.