Friday, June 27, 2014

The Zoona story: Empowering MSMES via Mobile Money Transfer in Zambia

In 2007, I experienced a turning point in my life. I was completing a theoretical master’s degree in Development Management from the London School of Economics following three years of volunteering in Ghana and Zambia with Engineers Without Borders Canada. I was hungry to get back to Africa as a social entrepreneur, but deep down I felt that I lacked the experience and expertise in business I would need to have the impact I craved. A friend referred me to the Skoll Centre for Social Entrepreneurship at Oxford’s Said Business School, and the moment I opened their webpage I knew I wanted to be there. I applied and was extremely fortunate to be selected as a Skoll Scholar.
The year at Oxford was game changing in so many ways. I shook hands with the visiting President of Ghana in my first month, became friends with some of the most accomplished and talented people I had ever met, built a business network to draw on in the future, and filled my brain with knowledge on topics such as venture capital, organizational design, and social enterprise business models. I also got engaged to my wonderful wife Isabelle, thanks to all of the Oxford fancy balls I took her to!
I also came up with an idea. I would start a business connecting real entrepreneurs in Africa with impact-focused venture capital funds in Europe and North America. I made a business card with the name “African Enterprise Partners” and the logo of a baobab tree and started handing it out at every opportunity. One of my professors of a social enterprise class, Kim Alter, helped me refine the idea into a pitch and introduced me to the Grassroots Business Fund (GBF). Shortly after finishing my MBA, I was back on a plane to Zambia on a GBF consulting contract in search of my first investment deal.
My very first day back in Zambia, I was introduced to two entrepreneurs who also happened to be brothers. Brett Magrath sat quietly while Brad sold me on their start-up mobile payments business that was about to launch called “Mobile Transactions”. They had had built a mobile payment platform from scratch and wanted to empower micro and small businesses in Zambia to process mobile money transfers for the 85% of Zambian consumers that don’t have bank accounts. They were motivated by making money, but the social mission was central to their vision.
I spent the next two months emphatically selling the investment opportunity to GBF, which closed when the Fund boldly invested $200,000 of convertible debt into a business with only three months of revenues. They asked me to source new deals for them but my mind was made up that I was going to work day and night with Brad and Brett to make our business successful. And we had BIG dreams right from the beginning. When I stood in front of both brothers at our first ever strategy meeting and asked them what our vision was, Brad immediately replied, "Breakfast with Bill Gates". We decided we should tone it down and be more realistic so we settled on a "Cashless Africa."
For the first three years we were constantly out of cash. I tapped into my Oxford network and recruited my MBA classmate Keith Davies to join the team and manage our finances while I went out to raise more investment. In early 2012, we closed what was the first ever international venture capital round in a Zambian start-up. The Omidyar NetworkAccion Frontier Investments Group, and Sarona Asset Management Fund put in nearly $4 million of equity, the proceeds of which have helped to put the company on steroids. 
We rebranded to "Zoona", which means, "It’s Real" in a local Zambian language and is one of our core values. We have built a customer base of 500 agent outlets that service 500,000 unique consumers and process $25 million per month in transaction value. And we are growing rapidly: our headcount has increased from 44 people to 75 in the first half of 2014 alone as we gear up for expansion into new markets.The early days were exciting and we always thought we were on the verge of taking off. I remember how exhilarating it was handing out fliers in front of the government-owned post office in downtown Lusaka, which had a monopoly on the money transfer industry in Zambia, when Brad was placed under “citizen’s arrest” by the manager for attempting to steal their customers. So we set up one of our first agents 20 meters away. Five years on, that outlet now processes over $400,000 per month in transactions and is owned by a 24 year old woman named Misozi who operates an additional eight outlets, employs 14 people and earns over $9,000 per month in commissions. The social mission has become reality.
Our biggest challenge now is to prove we can do this at scale. Our vision is to build a billion dollar pan- African business that proves entrepreneurship can have social roots that make a big difference to people’s lives, while also making money. Zoona’s core purpose is to help small businesses grow. We want to become the best in the world at providing business solutions to micro, small, and medium enterprises in Africa that unlock their latent potential. Our mobile payments platform has evolved from money transfers to other transaction types, including payments from retailers to suppliers. We also provide affordable working capital finance and business management tools to our agents so that they can grow their businesses sustainably. Many of our agents are people under 30 years old who are first time entrepreneurs themselves and are creating jobs, servicing their communities, and helping their economy grow.
As Steve Jobs once famously said, "We’re here to put a dent in the universe. Otherwise, why else even be here?" My job at Zoona is to make sure we do just that.
Mike Quinn
Group CEO, Zoona
Follow me on twitter @ZoonaMike

Monday, June 16, 2014

Moving Beyond M-Pesa: Innovations In Financial Inclusion

Everyone has now heard about the success of M-Pesa in Kenya.  With over 11.6 million active users, 79,000 agent outlets, and $1.1 billion in real time payments each month, M-Pesa has been a game changer in the quest for ubiquitous financial inclusion.
M-Pesa has been so successful that mobile network operators (MNOs) have rolled out replicated models around the world based on the assumption that they can copy and paste M-Pesa’s success in other markets. In Africa, there are now 42.4 million active mobile money users with Airtel, MTN, Vodacom, and Tigo joining Safaricom with their own branded mobile money accounts and agent networks. Some have started to gain traction in certain markets, but the elephant in the room is that the vast majority of mobile money accounts are still dormant. GSMA estimated in June 2013 that only 43.1% of registered mobile money users in Africa had done a transaction on their account in the past 90 days, which was positively skewed from the global average of 29.9% by the inclusion of M-Pesa. Furthermore, another GSMA case study of an MNO in an African market found that only 13% of registered users were using their accounts frequently, with 4% of registered users generating 43% of the service’s revenues.
This begs an interesting question: are mobile network operators destined to be the “power stations” of mobile money as was the case with M-Pesa and is often assumed? I’m not convinced they will be – at least not everywhere (and maybe not in most places). MNOs are simply too big, too set in their ways, and make too much money off their core voice services to put in the proper time and attention to successfully build the mobile money infrastructure from scratch. Even when they try, they don’t seem to be that good at it – the lack of liquidity and poor customer service from MNO mobile money agents leaves much to be desired.
Who else can do it then? The obvious alternative is the banks. Equity Bank in Kenya is the poster child in this space, having made a commendable push towards financial inclusion by building an agent network to compete with M-Pesa’s and extend appropriate financial services to previously unbanked rural and urban customers. Equity is now looking to add “mobile” to their core “banking” offering by becoming a Mobile Virtual Network Operator (MVNO) in partnership with Airtel.
But besides Equity Bank, I would argue that banking the unbanked is just not in bankers’ DNA. Banks have been around for a long time, yet 2.5 billion people in lower and middle-income countries remain unbanked. And many of those that are banked don’t have any money in their accounts, despite being counted as “financially included”. 
So who else is there? Luckily there are some new kids on the block: new groups of entrepreneurial start-up companies are stepping up to the plate. These companies are small, agile, and aren’t hamstrung by the organizational constraints and traditional business models of MNOs and banks. They are focused on developing solutions for customer segments that are underserved or are not being served at all. And crucially, they are attracting investment and going to scale.

One grouping consists of service models mainly concentrated in East Africa that are plugging into all those mobile money accounts to create demand to use them. M-Kopa and Off-Grid:Electric allow consumers to use their mobile money accounts to purchase electricity to power stand-alone devices in their homes. Kopo Kopo enables merchants to accept mobile money to purchase goods at their shops. Many more of these companies are in the garage right now and will emerge in the coming years.
Another grouping consists of companies like Zoona that are working in markets where mobile money has yet to take root. We help businesses grow by providing mobile payment and financial services to micro, small, and medium enterprises (MSMEs). MSMEs in Africa are typically financially excluded or underserved, despite being key drivers of employment and economic growth. We are neither an MNO nor a bank, yet we issue mobile money and provide working capital finance to 500 MSME customers in Zambia. Each month, our MSME customers generate over $20 million in over-the-counter money transfers from a base of 500,000 unique consumers plus $5 million in mobile supplier payments to FMCG suppliers such as SABMiller. Furthermore, we focus on helping our MSME customers make money off of our services so they keep using them, open new outlets, hire new people, and generate more transactions. We also work closely with the regulator to engage them in what we do as we share common goals of financial inclusion and building a sustainable industry.
In sum, we at Zoona are building our own mobile money infrastructure and plan to invite MNOs, banks, and the new service models above to plug in and provide value-added services to our fast growing customer base. We believe that companies like ours that are independent and agnostic of MNOs and banks have an important role to play in the future of this budding industry.
What does the future of mobile money look like? In some markets, the M-Pesa model driven by MNOs will win with other services plugging in to create demand. But in many others, it will take companies like Zoona to build the infrastructure for the mobile money ecosystem to emerge. M-Pesa will be written into the history books as the catalyst for the industry, but in the future it will be one of many.

Mike Quinn

Group CEO
, Zoona
Follow me on Twitter at