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.

Best,

Mike Quinn

Group CEO
, Zoona
Follow me on Twitter at @ZoonaMike

2013: Zoona’s Breakout Year!

One year ago, I wrote a blog about how 2013 was going to be Zoona’s breakout year. We had spent most of 2012 securing our financing, getting the right people in the right seats on the Zoona bus, and focusing on a few key goals to put us on a path to success.

And what a breakout year it was!

To highlight but a few of our achievements in 2013:

• We processed our 1 millionth Zoona money transfer since we launched in April 2009
• Our agents and distributors processed 2.2 million cash in and out transactions valued at over $142 million
• We injected over $500k in working capital to micro & small enterprises
• We paid out over $1.4 million in commissions to our network of 200+ Zoona agents
• We became cash flow positive!!!
• We closed our first straight debt facility
• We launched a partnership with Airtel Money in Zambia and integrated with their payment platform
• We deepened our partnership with Zambian Breweries and are now processing a significant share of their payments
• We released a new website, www.ilovezoona.com 
• We appointed Lelemba Phiri as our Managing Director in Zambia as a strong signal that our Zambian entity can now stand on its own two feet

These are considerable achievements that would not have been possible without tremendous effort from every member of the Zoona family: our customers, employees, board members, investors, partners, and colleagues.

However, despite this progress we have much more work to do to achieve our vision of a world of Cashless Growing Businesses…everywhere! I am reminded of my favorite quote from the late, great Nelson Mandela:
“After climbing a great hill, one only finds that there are many more hills to climb.”

I see three hills on the horizon for Zoona in 2014. First, we have much work to do in Zambia to fully integrate Airtel Money into our agent service offering.  We want to activate 1 million Airtel Money mobile wallet users, and provide a guaranteed “cash in / out” service to these customers. This will involve scaling up our agent network significantly to meet the anticipated demand.

Second, we want to further scale our payment and working capital services to Zambian Breweries’ cross-country network of beverage distributors and the 25,000 small retailers below them. Our vision is to create a completely cashless distribution channel in Zambia as a proof of concept that we can scale to other value chains elsewhere.

Third, we are now looking beyond Zambia and a key priority for 2014 will be to test our model in new markets. Our dream has always been to build a pan-African business, and it is time to make this a reality.

As much as I am looking forward to a break after an exhausting year, I am more excited than ever to get back to work in January. The Zoona story is just getting started, and 2014 is going to be a big test to see if we can elevate our business to the next level.

Thanks to everyone for your continued support and I wish you all the happiest of holidays.

Best,

Mike Quinn

Group CEO
, Zoona
Follow me on Twitter at @ZoonaMike

Zoona Launches Micro-Entrepreneurs on Kiva

Growing a business is hard in Africa. Trust me, I have experienced this first hand as CEO of Zoona over the past 4 years (Mike’s Story). There are the day-to-day challenges that businesses everywhere have to go through – acquiring and retaining customers, hiring good people, managing a cash flow, and positioning against competitors. But in Africa, raising finance is a particularly hard challenge to overcome, especially for micro-entrepreneurs.

Take Cosmas for example a Zoona micro-entrepreneur who is in the business of distributing Coca-Cola products into the informal market settlements of Ndola, Zambia’s third largest city. In addition to supporting his family and sending his children to school, his business provides a source of recurring income to the 150 informal retailers that he supplies daily.

Cosmas’ biggest problem is accessing growth finance to increase his turnover because his profit margins are very small. He cannot access a bank loan because of the strict collateral requirements, and his business cannot sustain more successful microfinance loans because of the high interest (typically 42% pa in Zambia). His best alternative is to simply not grow and leave his dreams unfulfilled. As an entrepreneur, I can tell you there is no worse feeling.

This is why Zoona is so excited to be the first mobile payments partner of Kiva. Kiva’s mission is to create opportunities for people like Cosmas around the world by connecting him to a pool of lenders. Kiva raises over $1.5m per week for micro-entrepreneurs like Cosmas, which changes their lives.

Right now, Kiva has a promotion where first time lenders can make a FREE $25 loan to a Kiva borrower. A Kiva donor funds the loan. All you need to do is to accept my personal invitation.

Then, you can click this link to search for the Zoona micro-entrepreneurs that are fundraising:

And don’t stop with the first loan – you’ll find a continuous stream of Zoona micro-entrepreneurs looking for finance to help grow their business. These micro-entrepreneurs are the real deal, and we at Zoona are committed to do everything we can to unlock their growth potential and achieve their goals.

See you on Kiva!

Best,

Mike Quinn

CEO, Zoona

Follow me on Twitter at @ZoonaMike

Time to Break Out

2012 was an amazing year for Zoona. It started with us closing what was Zambia’s first ever venture capital investment as a technology start-up. This was no small feat for a company that started in 2008 with a late night text message from Brad to Brett Magrath about an idea to bring mobile payments to the masses in Africa. It felt like we had been fighting a trenchwar ever since, and finally had the breakthrough we needed.

But the investment was somewhat of a false dawn. As exhilarating, as it was to finally look at a cash flow forecast that didn’t plummet into the red at the end of the month, we didn’t fully appreciate how much of a hole we would have to dig out of before we could really start to grow. Our operational systems and processes were held together with duct tape and glue and it quickly became apparent they couldn’t scale. We had a dozen key hires to make, which would take months of interviewing, onboarding, and integrating into our existing teams. We had to set-up two Boards for our international and Zambian entities, which involved building new working relationships, getting used to new governance processes, and recruiting new independent Directors. We also had a backlog of pre-investment external development contracts to deliver on before we could even start to think about developing new products and executing our strategy for the future.

We were, as we liked to put it, constipated. Our business could not move forward until we could relieve the backlog and establish new foundations for growth.

The problem was that it took us a few months to figure this out. As a CEO who had spent nearly 18-months fundraising, I was the furthest away from the actual business on the ground; I didn’t recognize how constipated we were. I wrongly assumed that with the money in the bank the plan would play out like we had designed many months earlier and I had pitched repeatedly to investors. Our new investors naturally assumed the same, setting the stage for some difficult months of missed targets, misaligned expectations, and worst of all, an increasing cash burn.

Note to first-time CEOs who successfully complete a fundraising round: Don’t underestimate how much time it will take you and your team to really learn your business again once the money is in the bank. It’s a big transition from a pre-investment cash strapped start-up to the business in your investment plan, and your goal should be to make this transition as quickly as possible without burning through your hard-earned investment cash.

When we did get real about relieving our constipation in Q3, we took the first steps towards becoming a much better business and more effective management team. We set a list of operational priorities, none of which were related to revenue: We completed our hiring and onboarding, rolled out our new Zoona brand, restructured our agent operations, automated manual payment processes, and put in place new controls. We also spent a lot of time figuring out how to get the right people focused on the right things – which became my biggest priority in my role as CEO.

While this transformation is still not complete and we have had to endure some staff turnover, the results started to come in Q4:

• We achieved our first $200k revenue month
• We grew our Money Transfer revenue by 38% in Q4 versus Q3, with our biggest day ever on Christmas Eve (3,000 money transfers valued at close to $200k)
• We launched a new Supplier Payment product from a cold start in August to close to $1m in payment value in December

These achievements have built some real momentum and have increased our intensity as a team. They have also enabled us to become much more focused on four key goals for 2013:

1.    Become cash flow positive.

Working for a start-up is a life and death battle every day until we can generate positive cash flow and regain control of our own destiny. In 2013, we need to grow revenue as quickly as possible without increasing expenses.

2.    Focus our resources on our core customers.

Getting more focused on paper is only the first step – the real challenge is ensuring that the bulk of our people and resources are allocated to serving our most important customers. In 2013, we need to have the courage and discipline to say “No” at least as much as we say “Yes”.

3.    Enable our employees to drive a delightful customer experience.

We will only become the business we want to be by developing a customer-centric culture. In 2013, we need every single employee at Zoona to understand how his or her day-to-day job touches – and delights – our core customers.

4.    Establish a data-driven culture and decision-making framework.

Finally, our business has grown to the point where gut-feel decisions are no longer good enough. In 2013, we need to complete the automation of business intelligence data and dashboards so that managers have the right information at their fingertips and make better decisions everyday.

Everyone at Zoona has a part to play to achieve these goals. As one of our core beliefs states:

We believe in performance. We will build a high-performing team with diverse backgrounds and skill-sets and hold them accountable for results.

This belief in performance starts and ends with me as CEO. I am accountable for ensuring these goals are met, and for leading Zoona closer to our vision of a Cashless Africa. Despite the hype around mobile payments, Africa is still dominated by cash, unbanked masses, and usury interest rates (for those “lucky” enough who have access to financial services at all). The market opportunity is bigger than ever, and the need for Zoona’s innovative payment solutions has never been greater. After a year of progress in 2012, we now have the team in place, the money in the bank, a solid base of customers and agents, and a strategy that can win. And best of all, we aren’t constipated anymore.

Welcome 2013. It’s time to break out.

Best,

Mike

Follow me on Twitter at @ZoonaMike

Inhabiting Planet Zoona

An organization is a collection of people working together towards a shared goal.

It sounds simple, doesn’t it? But building an effective organization with capable, motivated people working together in unison is incredibly hard.

This has been our biggest challenge at Zoona since closing our Series A investment in February this year. Since then, we have grown from 28 to 49 people across our Lusaka and Cape Town offices. This has come with its growing pains, as the new mix with the old and everyone is forced to adapt to a rapid pace of change.

But it has also come with a tremendous input of energy. To name but a few of our newest inhabitants of Planet Zoona:

• Lelemba is our very own Financial DIVA. A Zambian now living in Cape Town, Lelemba has jumped into the Financial Controller role feet first. She is always on the lookout for opportunities to leverage her background in financial education to empower our Zambian staff and maximize employee experience for everyone.
• John is our new System Architect. He practices mixed martial arts in between work and family time, and isn’t afraid to hand out push-ups if any of our IT developers go over their 30 second allocation in their daily stand-up meeting! We’re still waiting to see what he’ll do if someone doesn’t document their code properly.
• Marian is our Consumer Payments Manager. Having moved to Zambia from Cape Town, she is applying her extensive mobile media and consumer experience to drive transaction growth through our agent channel. She also lives on a game farm outside of Lusaka with wild animals.
• Randall is a Jamaican living in Zambia who has made it his personal mission to vault our Enterprise Payments product line to the top of our revenue mix. He’s so focused on this goal that it’s not uncommon to receive work emails at 3am from him while he’s on leave (shh just don’t tell his wife!).
• Oliver is our new Zambia Operations Manager. He After his first day of work I asked how he was doing and he simply said: “I have to be here.” Since then, he’s “been here” 110% and has now added Customer Care to his list of management responsibilities.

I could go on and on about what I believe is a truly special team we are assembling at Zoona. What has inspired me about this group is how motivated everyone is to play a leading role in Africa’s economic rise. Everyone is genuinely bought in to our vision of a Cashless Africa, and we aren’t going to quit until we get there.

This post was written by Mike Quinn, CEO at Zoona

Introducing Zoona!

Following the close of our recent investment, we asked our staff and customers what they thought of our name and brand. Here is what we heard:

• "I thought your name was MTZL; or was it MTZ?" 
• "I just call you 'Mobile' because 'Transactions' is too hard to say" 
• "Are you the green guys?" Sometimes being a successful business means listening to feedback, even when it means changing your name! 

We are therefore rebranding under the name of Zoona (pronounced Z-oh-na), which means, "It's real" in Nyanja, one of Zambia's major languages. We have a brand new logo in our unique bright green representing growth for Africa, our customers, and ourselves. And we are more committed than ever to make transacting in Africa Easy Quick Safe for our customers.

But a brand is much more than a name and logo. As my mother once told me, "It's what's inside that really counts." The true Zoona brand is represented by the following core beliefs that guide our actions and keep us grounded:

We believe in finding solutions. We proactively search within our target market for bottlenecks, inefficiencies, and processes that don't work where our technology solutions can create new ways of doing things for our customers.

We believe in traction by action. We are not afraid to take calculated risks to test new ideas, and we will systematically learn from our experiences. 

We believe in working with change-makers. We want to work with disruptive and innovative people and organisations who will adopt and adapt technology solutions to their problems. 

We believe in getting it right. Our customers must understand what we're offering them and we must consistently deliver on our commitments through effective and efficient structures and processes. 

We believe in scale. We will develop technology solutions that enable our customers to scale, thereby making a positive contribution to Africa's economic growth. 

We believe in people. We understand that we will succeed or fail on our ability to find great customers and staff and keep them happy. We will achieve this by behaving with humility and operating with fairness and transparency. 

We hope you like our new brand as much as we do!

Best,
Mike

ps. Look for me on Twitter @ZoonaMike

Using eVouchers to Change Behaviour in Rural Zambia

Family

Imagine yourself as a smallholder cotton farmer in rural Zambia. For many months, you and your entire family are out at the crack of dawn toiling on your farm - ploughing, planting, and weeding by hand to nurture a handful of seeds into a thriving crop of cotton. You are proud of what you have achieved with nothing more than your bare hands, a primitive set of tools, and if you are lucky, an oxen.

And then comes payday. Finally, after all that laborious work, your crop is sold for hard cash. Everyone in your community is upbeat and happy. There are festivals and celebrations. Houses are repaired and thatched roofs are replaced by corrugated iron. New TVs and mobile phones beam airwaves in and out of the village.

But almost as fast as this “enlightening”, your long lost relatives and less fortunate neighbours show up at your doorstep asking for money. They have watched you tend your crop from the first seedlings. They know the exact size of your harvest by the number of bags of cotton stacked outside your mud hut, and have easily and accurately calculated the amount of cash you received for your burden.

They are begging you for help because they are “not as lucky as you.” You know you have only one choice – to help them by giving them money – or risk a bad reputation in your community and shame from your extended family. You reluctantly dish out your hard earned cash, knowing full well that some of it will end up being spent at the local bar. You know in your gut that many of the people you are “helping” will be back on your doorstep at the same time next year.

Mobile Transactions has a vision to change this very real story that is a hindrance to the economic development of rural African communities. We have launched an innovative pilot project, in partnership with Dunavant Cotton and a local NGO called Musika, to test whether smallholder farmers will opt to receive eVoucher scratch cards instead of cash for their cotton crop.

eVouchers allow farmers to store electronic value instead of cash. Each eVoucher is linked to a farmer’s unique ID number so that it can’t be used by anyone else, and there is no requirement for farmers to memorize a personal PIN (which is a significant barrier for financial services). In fact, farmers don’t even need to have mobile phones! eVouchers can then be redeemed for goods at local retailers, who are willing to offer discounts to attract customers and win sales from their competitors.

If this pilot works, there could be a significant benefit to Dunavant, which pays out tens of millions of dollars in cash to over 150,000 smallholder cotton farmers in Zambia. This is both operationally expensive and extremely risky. If we can prove that farmers will accept eVouchers instead of cash, Dunavant is ready and willing to take this solution to scale and take a step towards becoming a Cashless Corporation.

Donovan Nickel (Board member) and Abishank Jajur (Accion intern)

I had the privilege of visiting some Dunavant farmers near a town called Monze with Hans Hesse (eVoucher Manager), Donovan Nickel (Board Member), and Abishank Jajur (Accion intern). It’s always a treat to get out of the office and into the field, and this was a humbling experience. This year, the world market price for cotton has dropped to half of what it was last year and farmers are facing a tough year ahead with a shock to their expected income. Despite this, the farmers I spoke with were optimistic about eVouchers. When I asked one lead farmer whether he was planning on taking an eVoucher, he replied:
“I will take an eVoucher because when my relatives come asking for money after I sell my crop, I can tell them I don’t have any.”

Behaviour change in rural Africa is a hard and slow process. But I left Monze energized that we are onto something that could improve the lives of productive farmers who are leaders in their communities. Now it’s time to get to work and make it happen.

  Left Mike Quinn (CEO) centre Hans Hesse (eVoucher Manager)



By Mike Quinn
CEO of Mobile Transactions