Fintech: African Markets, COVID-19 and where entrepreneurs fit in… Got a success story for you
African Markets are quite frankly unpredictable and unstable… for any investor without context. We have frequently changing governments or incumbent political parties and individuals who’s terms of government rule are just unheard of. Sometimes its basically absolute inertia to leave office and other times, some people wake up and leave. African Markets also have culturally ingrained practices to our finances and the services we need as well which are unique to the continent.
I am African, and it takes an understanding of our culture to get to the conclusion that… African problems NEED African solutions.
That being said, Fintech is not a one size fits all solution.
Finance has many services; macro and micro services. Financial establishments in Africa can not cater for all; given our continuously fluctuating currencies, political circuses that have ingrained corruption, lack of infrastructure and declarations for national days of prayer. -> I kid you know, these happen on the fly by the way.
With that being said, the addition of a Global Pandemic is definitely not ideal for business. Micro-finance which allows people to function as business holders, like below, is a severely hit sector from the pandemic due to the risk of exposure to COVID-19. What choice would you have with a struggling, underdeveloped medical sector and a new virus going round, you have to halt business.
However, entrepreneurs don’t waste a pandemic and allow situations to determine them and how they do business. They work around their challenges and adapt; some with compassion and others without it.
I did an interview with a micro-service finance sole trader who is a provider for loans in Lusaka, Zambia. Here is a transcribe of the highlights of the interview.
Q: You basically offer credit with cash, based off collateral. You take collateral when you don’t know the person, or you don’t trust the person and if you do know the person, you don’t mind waiting to take the collateral. Am I correct?
A: On certain occasions, yeah. So ideally, I give out financial services with collateral being my security. For items which are less portable; like a house, vehicle, items which I can’t carry; I get the paper work from the individual. Hold on to the paperwork until the contract is done whereas, the smaller items, like phones, electronics; I take possession until the contract is done.
Q: When did you start?
A: Mid January, 2020. When my former employment ended.
Q: What inspired you to do this kind of service?
A: I met a guy I worked with who offered full blown professional finance services and consultancy. He’s basically my inspiration for starting.
Q: Then what made you do it on your own and get it started and not request to join the guy?
A: I sat down and analysed. He had a pre-established operation going on for himself and on my part, I could pull this off solo because it’s a singular service, not diverse yet for expansion.
Q: So keeping track of everything, payment, contracts, how do you do it?
A: Paper trail, for any business is essential, whether large or small. So first thing is the contract, establishing roles of lender and client. Then co-signing once terms are agreed upon.
… The part of interest to me came here …
A: All paperwork is transferred to my PC’s database, synchronise this on all my devices for consistent timely updates. Depending on timeframe of the loan, long term (5 months) and others on a shorter term; I have a column for payment tracking. Whether fully paid, running, adjustments, amendments and just a scope of how things are flowing.
Q: So you do this manually? When you meet your clients, any future prospects of automating that? Going online, website and what are the risks that would come with that? The information is taken off hand with trust, but automating would require a change of business model?
A: For accessibility, granting my services to those far away, one way or the other. I’m still working around it, it would be more of a running cost. I’ll need someone to run the website, I’ll need someone on the ground for that.
My next steps for expansion are registration under a brand name cause that is how my license is structured as a sole lender. I haven’t really given it much thought and it is something that I will get to a little later along.
Q: Tell me how Coronavirus has impacted your business?
A: It’s kinda been a double edged sword.
On one end, it’s helped the business shoot up; certain people’s jobs have seen salary cuts, or income cuts by a certain margin, due to company contingencies. Allowance cuts have distorted people’s budget plans and they need my services of cashflow for other emergencies or cash to fall on. The change of financial situations has been a pro.
Unfortunately, with the rise in clients so has my defaults during this period. Especially from private business owners who have been profitably running businesses through the proof of their documents. But lately, businesses have been shaken, and there’s not that much I can do if you default from a running contract.
Q: So how have you been handling the defaults?
A: Simply selling and possession collection of the collateral items. It’s co-signed, no gun to your head to put it down on paper, so no fuss. There is a provision I introduced for slight extensions, for those who think they can make a payment in the following week. However, application for extension comes at a cost, obviously. We sit down, default or application for an extension.
… Sounds like a deal or no deal scenario, right? Fintech is also about understanding your target market, your users. If you have options for them, providing that in an African way is just as essential for client base retention in Africa…
Q: How have you integrated being “Ubuntu” in how you acquire clients and dealing with them. How do you integrate cultural beliefs in your business handling?
A: There are definitely hurdles that come with that. The ideology that friends will always want that ‘friend discount’ or family needs that ‘family discount’ is present in our society. At the end of the day, that helps no one.
There are always those who feel my rates are too steep or those who come through with a favour or two, or guilt tripping; it does happen. But that helps no one, we are all trying to make things work, for ourselves and for others. If we all keep giving discounted services, towards everybody, no business will thrive. Everyone ends up in a sinking ship.
Q: Last one for you; taking the step to own your own business, especially one monopolised by banks. What keeps you going?
A: I’d say the will to do better for myself, to see how far I can go really. Just the will to not stop. I have situations where clients don’t show up, sometimes I have the same clientele base month in and month out and all sorts of hurdles. Doing better and self affirmation towards my goals.
Entrepreneur in Microservice Finance: Cyprian Chewe
Location: Lusaka, Zambia.
Fintech usage: Intermediate with consistent database updates.
An African Millennial Story to watch unfold……
Written by: Massi Nachombe Mapani