Dissecting the Issue: A Virtual Sandbox Event

On July 16, 2020, Dedalus Global, Africa Fintech Summit, and Ovamba Solutions, Inc. co-hosted their first virtual event "Dissecting the Issue: Virtual Sandbox Event." Ashley Smith, Chief Brand Officer of Dedalus Global, in her introductory remarks mentioned the 'need to expand and explore Africa’s business ecosystem and the role of stakeholders’.  We were excited to have the keynote speech delivered by Prof. Olayinka David-West who leads Lagos Business School's  Program for Sustainable & Inclusive Digital Financial Services Initiatives.  She talked about the 'need to drive collaboration, partnership and innovation to create markets and address social and business challenges in African Markets’. The event was moderated by Viola Llewellyn, President of Ovamba and featured six stakeholders: Chika Ugwueze, Acting Head of the Payments System Initiatives Division from the Central Bank of Nigeria; Olubunmi Abayomi-Olukunle, Founding Partner of Balogun Harold Legal; Lexi Novitske, Managing Partner of Acuity Ventures; Dr. Anino Emuwa, Founder & Managing Director of Avandis; Frank Atat, Divisional Head of eBusiness at ProvidusBank Plc; fellow Fintech innovator, Tomilola Adejana, Chief Executive Officer of Bankly; and serial entrepreneur, Franklin Amoo, Partner of Baylis Emerging Markets.

At the center of the event was George Obed, Chief Executive Officer, Nomad Money. The Nigerian-based company was selected as the finalist from amongst a number of applicants who applied to be the 'case study' of the virtual sandbox.  The purpose of "Dissecting the Issue: Virtual Sandbox Event" was to take a deeper look into the FinTech innovation ecosystem from the perspective of all of the above mentioned stakeholders in order to highlight and resolve the real challenges faced by Nomad Money in the Nigerian market. Leland Rice, CEO of Dedalus closed out the Virtual Sandbox on a high note stating that 'there has never been a better time or forum to support the FinTech sector and the businesses in it'.

ISLAMIC FINANCE – IS THIS THE SILVER LINING IN COVID-19?

By Viola Llewellyn

Africa’s accuracy has been a challenge when it comes to numbers and data. According to a June1st AfricaNews.com update, there have been over 140,000 confirmed cases of Covid-19 in Africa. Lesotho reports only 2 active cases, and Egypt is leading the peak with almost 25,000 cases.

The total recovery rate for the entire Continent is 61,773 and deaths reported is 4,223. Because there has not been wide-spread testing, and testing did not become available to all at the onset of the pandemic, it is hard to know what the true numbers really are. Put this against the backdrop of 1.2 billion people and the image is not as dire as reports from various media outlets claim. Businesses are not shrinking in number the way some have predicted, but survivability is impacted by the lack of digital solutions to meet the ’new normal’. Diminished liquidity and stimulus programmes are not easily available to shore up business continuity.

But despite the weak health systems, early border closures and the common-sense actions of everyday citizens has helped alleviate the worst of the pandemic. African countries as a whole are doing remarkably well considering. This resilience which was demonstrated expertly during the Ebola crisis has again contributed to keeping economies afloat and businesses ’still in business’.

As with the weakness seen in the healthcare systems of some African countries, weaknesses have revealed themselves in the banking system where full digitization has not been fully embraced to provide an effective response to Covid-19. Lending is a paper-heavy process for most African banks. There is a great reluctance to leave 'the paper’ behind and embrace efficiencies from digital solutions. Unsecured lending was already out of reach for most small businesses; this has created a space for alternative finance options. Ovamba was an early pioneer of Islamic solutions and digitized a Murabaha for SMEs back in 2017, and adapted it for Banks to license in 2019. Assisting banks with an “inventory-centric” digital solution to resolve their customers capital needs helps to reduce the impact of Non-performing loans and protects precious bank margins during this time of uncertainty.

The relevance of Islamic finance solutions for our current times should not be underestimated. In fact, the ethical nature of Islamic Finance closely aligns itself with the serious consequences of the virus and the moral imperative to protect the health of customers and staff. Islamic finance is rooted in how Risk is respected and shared. Islamic finance demands a careful approach to ensuring fairness and equity.

Other FinTech solutions are finding their ’time in the sun’ during this pandemic. Digital innovations to integrate payment solutions, mobile wallets and digital currencies with customer bank accounts could save financial institutions, but they have been slow to make the final leap across the digital divide. Ovamba has rolled out enhanced work flow and risk management with anti-fraud processes to support online transaction applications for bank staff working from home who cannot sit down with customers face to face due to the contagion.

It has been an interesting time for finance, businesses, banks and innovation. It can be agreed that Covid-19 pushed African businesses to address digital inclusiveness and disaster recovery sooner than they might have liked. I

In the months to come, we expect to see engagement from Central Banks as they endorse policies to support digital adoption and push for even more financial inclusion. For the business owners who survive Covid-19, they will be looking to thrive and digitally future-proof their businesses and revenues from the impact of future pandemics, because what is now certain in life, other than death and taxes is the likelihood of another pandemic, and there WILL be more of these types of these health-related economic disruptions in the not too distant future.

Winning in Africa’s fintech: The Ovamba way

All businesses need capital to grow. This is especially true in most of Africa.

Ovamba, which is often referred to as a “fintech” platform, specializes in trade and technology. It was founded in 2013 and launched a successful pilot in Cameroon in 2014. Ovamba’s strategic focus is to offer businesses in the formal and informal sector short-term capital for the importation of wholesale/retail goods and to support exportation of commodities such as coffee, cocoa, and cashews. The inspiration came to us when we observed how the under-developed business ecosystem was compounding the problem of access to capital. Applied technology, especially in the finance and trade sectors, brings the creative freedom of innovation to markets and demographics where traditional solutions are restricted by regulation, leadership, or understanding of the changing needs of businesses.

Having noticed that banks and microfinance institutions were not closing the credit gap nor creating sustainable wealth, we were inspired to take a multi-track approach and offer a combination of capital and business support (such as logistics and warehousing), deep analytics, and alternative risk assessment algorithms. Ovamba specializes in culturally attuned innovations that respond to Africa’s varied ecosystem to fund businesses with the capital they desperately need to grow. We do this via mobile apps and online platforms that efficiently meet the demands of fast-moving small and medium-sized enterprises in ways that banks cannot. As one of the few providers of what we refer to as “tradetech” solutions in the market, we have had a long honeymoon and have now expanded beyond Cameroon into Côte d’Ivoire, with more markets coming online.

To date, Ovamba has funded approximately 270 small businesses with over 22 million euros ($25.4 million). Some of Ovamba’s customers are on their seventh transaction. Some customers have seen their businesses grow almost 450 percent over an 18-month period. Access to global suppliers has brought new diversity of products to the wholesale space. Demand for cocoa financing is up by more than 25 percent. New funding partners have been identified to satisfy this pipeline. Looking ahead, 2019 and 2020 look very promising indeed.

We have great optimism that small and medium-sized enterprise development in commodities exportation will continue to grow, requiring banks to provide more than basic services. At present, banks do not seem to be able to keep pace with the needs of these businesses. Ovamba believes this is an opportunity to innovate alternative risk models and financial services, such as sharia-compliant financing. These innovations are key to unlocking this new asset class. New asset classes along with capital velocity will go a long way to closing Africa’s business credit gap, which by some World Bank reports has continued to increase past $360 billion.

An improved investment environment and private sector performance will attract foreign direct investment into regions with a thriving trade economy. Excited as Ovamba is about having a head start in this new asset class, we realize that ill-informed policies, heavy-handed regulation, and prohibitive taxation could slow our progress and quell the inflow of much needed capital from external investors.

Over the next few years, we will focus on improving literacy and financial awareness in the informal sector because better-educated business owners are a better investment risk. We have created a natural language chatbot that uses African languages to teach business efficiencies to customers who are not “classically” trained in business in order to drive financial inclusion. Designing a paradigm shift for Africans to see finance as a tool for success is the prize and promise of fintech. Solutions such as ours that use artificial intelligence and behavioral metrics will have the most impact.

In considering areas of risk, instability in Central Africa is of great concern. Cyber security and corruption in Cameroon and its bordering neighbors such as Gabon will require constant vigilance. Also, access to a steady source of blended capital will be required. Our main challenge is and always will be politics and the governments that are afraid of technology, afraid of change, and lack appreciation of the value of Africa’s private sector and growing middle class.

We credit our success to our business philosophy. We do not view Africa’s business challenges as a capital problem, but instead as an ecosystem development opportunity. We answer the problem that is rarely articulated: How can we build wealth and financial freedom for all Africans? The answer: By combining investment, trade, culture, and financial awareness into supply chains and the collective business consciousness.