Ovamba Taps the online space for SME growth in Africa.

Wednesday, 03 August 2016

Three years ago, Marvin Cole, together with his partner Viola Llewellyn, discovered an opportunity to tap into the SME sector in Africa by providing access to much-needed financing that will allow businesses to take off. Now, the company that they have built is making its presence felt in the Central African region and South Africa with its Shariah compliant products that serve the needs of the SME business community, with further plans to make inroads into East and West Africa. DANIAL IDRAKI brings you the story.

Operating as an online SME funding and logistics services provider in Africa, Ovamba was created to meet the market demand for business financing in Cameroon by bridging the divide between SMEs and lending institutions, and gradually expanded beyond its borders to other African nations. To date, the company has disbursed approximately EUR10.5 million (US$11.73 million) to SMEs in the region, which the company says represents only 12% of demand from well-run, high-impact local firms. It reckons that once the next round of fundraising is completed, Ovamba will facilitate between EUR100-150 million (US$111.7-167.54 million) in transactions.

Ovamba Logo

“We target markets with either deep liquidity, [such as] South Africa, or where the currencies are pegged to the euro (Central African franc), which provides macroeconomic stability. All of our products are Shariah compliant and we believe that the risk-sharing and ethical standards offer value not only to Africa’s 400 million Muslims but to any one of Africa’s 60 million-plus SMEs looking for a partner to help grow,” Ovamba told IFN recently. Operating from its hub in Douala, Cameroon, Ovamba plans to make inroads into Nigeria and eventually expand to Kenya and Senegal, which it sees as having the potential to become the future hubs for East Africa and French-speaking West Africa respectively.

Ovamba’s product suites have been certified as Shariah compliant by the Bahrain-based Shariyah Review Bureau, with structures such as IjarahWakalah and Mudarabah in the mix. “Our Murabahah-structured product is now 95% of our volume and we generate demand of around EUR10-20 million (US$11.17-22.34 million) across key geographies,” the company explained. Trade Partner Ovamba, the Murabahah-structured product of the company, purchases or sells goods on behalf of clients, and allows the full transaction to be executed via mobile phone. 

“Unlike firms that use commodity Murabahah for traditional commodities, we focus on ‘unsexy’ but profitable consumer/industrial commodities, such as soap, vehicle tyres, toothpaste, motor oil/lubricants and other basic requirements for modern living. We open supply chains so that domestic wholesalers, traders and international retailers connect more efficiently, and African SMEs can obtain the primary goods they need to keep business not only ticking over but also growing in tandem with demand,” Ovamba explained.

It further noted that Africa leads the world in the adoption of mobile money and mobile phone-based financial services, therefore its strategy of pairing Islamic finance knowledge with the reach of mobile phones could bring Islamic finance to the masses. According to a Moody’s report, sub-Saharan Africa is experiencing the world’s fastest rise in new bank accounts, fueled by the growth in mobile banking. Approximately 12% of adults in the region had a mobile money account at the end of 2014, compared with just 2% globally. Kenya leads Africa’s mobile banking revolution with 58% of the adult population having a mobile account.

world bank findex

“We are creating an alternative finance asset class not currently available at scale within Africa’s traditional banking system. Utilizing Ovamba’s wealth of data on African SMEs, more non-bank investors can be active in the market and [remain] confident that the platform’s short-term, risk-sharing, collateralized transaction offers very attractive commercial returns while being socially impactful.”

With an approximately US$368 billion credit gap in the SME sector and roughly 84% of the more than one billion people unable to access capital in order to meet their business needs, Ovamba appears to position itself well in Africa’s growth story, and its Shariah compliant products make it an exciting time for the company to be operating in the African markets.

This article first appeared in Islamic Finance news on 3rd August 2016 (Volume 13 Issue 31).