WhatsApp Image 2021-07-04 at 18.25.20

Netherlands Trust Fund (NTF IV) Uganda project closed but still alive.

Being proactive, seeking out opportunities rather than waiting for them to come to you, tends to deliver just rewards. The success of the Financial Technology Service Providers Association (FITSPA) of Uganda is partly due to this attitude.

Four years ago, the Dutch government launched the Netherlands Trust Fund IV (NTF IV) project.

Described as an Export Sector Competitiveness Programme, it was based on a partnership between the Dutch Centre for the Promotion of Imports from Developing Countries (CBI) and the Geneva based International Trade Centre (ITC). CBI is affiliated to the Netherlands Ministry of Foreign Affairs.

The Dutch government provided funding while the ITC implemented the project in a group of selected countries. Uganda was fortunate enough to be chosen, specifically to assist in the area of IT-enabled services that can support exports.

Zianah Muddu, Engagement Partner of the Financial Technology Service Providers’ Association (FITSPA) recalls her first interaction and experience with the NTFIV project “The project implementers were looking for Ugandan organizations and companies with the grit to scale up their operations and in doing so become more competitive on a bigger stage. FITSPA met the criteria so I made follow-up inquiries. At the time, many Ugandans were still unsure of the possibilities associated with financial technology (fintech) yet this was a budding industry that could strengthen linkages with other existing business sectors, to simplify and add-value to their operations. After some due diligence, NTF IV agreed to support FITSPA activities and have been doing so for the past four years. In the interlude, the visibility of our members has steadily increased. The technical support has also helped to unlock both local and international opportunities previously missed. Another invaluable aspect of this assistance has involved appropriate mentoring to attract potential investors to Uganda’s growing fintech ecosystem.”

One the first start-ups to benefit was Akellobanker, this digital platform was launched by Jean Onyait to provide agricultural inputs and services on credit to improve farmers’ productivity.

Onyait said, “We joined NTF-IV in 2017 with just three people on our team. Now we are 58 and growing. We operated in only one region and have scaled up to three more. Our tech team, which was just one person, is now made up of six people. NTF-IV hand held us and helped build our capacity to not only run a sustainable business, but also to manage our team more efficiently.”

He said the consultants provided capacity-building training, business diagnostic checks and funded trips to meet similar startup leaders in other countries, besides connecting him with investors.

“The outcome of all this support has been evident with the Covid-19 outbreak. We have weathered all the shocks that came and yet managed to expand our marketing which increased the uptake of our services by 45%.”

Allan Rwakatungu of Xente, an e-commerce and financial services business said, the NTF IV project paid the expenses for them to travel to the UK and meet their partners, investors and potential clients. As a result of that trip, Xente is now in a position to grow, not only in Uganda but across Africa.

Together with technical input from ITC, the Dutch donors have been a major reason behind FITSPA’s rapid growth. From its nascent stages in 2017, the Association has now established itself as an increasingly high-profile presence in Uganda with a membership of vital enablers.

Starting out with just seven founding members, today the Association can boast of 160-plus members and still counting who have bought into the importance of forming synergies.

FITSPA is governed by a pool of passionate, skilled, talented, exposed professionals with experience in technology, banking, telecom, legal and investment who make the Board of Directors and oversee the day-to-day activities of the secretariat.

It is currently, chaired by Peter Kawumi. Other members include Gerald Begumisa, Eric Kamau, Allan Rwakatungu, Brian Kalule, Josephine Olok, Henry Kevin Wava and Dr. Mawanda J. Haruna.

They say, all good things must come to an end, but in this particular case the knowhow, exposure and positive experiences will stay with us and carry us forward. As FITSPA, we are forever grateful and indebted to our donors and consultants for their confidence and trust during the past four years.

Recently on Zoom, during a farewell breakfast, Zianah Muddu, who was the major lead on discussions with the project was only given one minute to speak. However, she felt she could not do justice to what the NTF IV project has done in lifting the profile of Uganda’s innovation ecosystem. Listed below are the highlights of major areas in which the project made a great contribution to FITSPA.

In 2018, the NTF IV project supported local fintechs to participate in the Nigeria Fintech Festival. Being a result-based organisation, the Fund gave FITSPA and the participating fintechs specific targets to achieve, for instance which Nigerian fintechs to speak with, investors, partners and so forth. Being proactive and determined not to let our donors down, the following were achieved:

1. Uganda was elected to a seat on the committee set up the Africa Fintech Network.

2. Uganda won the bid and was selected to host the second Africa Fintech Festival held in Kampala during November 2019.  By all accounts, it turned out to be a great success, especially with the help of Martin Labbe and his team of consultants.

In 2019, they stepped in to sponsor another set of fintechs for the UK-Uganda Fintech Convention to expose our members to various British investors.

Then in 2020, they went ahead to sponsor the FITSPA Fintech Symposium. On Wednesday 16th September 2020, stakeholders in the financial services sector converged at the Kampala Serena Conference Center to discuss the implementation of the National Payment Systems Act that was passed on July 29, 2020.

FITSPA has nothing but appreciation and praise for everybody behind the NTF IV project as it was specific to Uganda. We would like to thank all the consultants, in particular Martin Labbe, John Ndabarasa and Richard Okuti. We hope that we can still form even synergies like this in the near future for the greater good of the Ugandan fintech ecosystem.

The NTFIV project set the Fintech Ecosystem in Uganda on a positive growth trajectory, it was highly viable, impactful, and a critical stepping stone.


MFS Africa leads $2.3M seed round in Ugandan fintech startup Numida

Small businesses in Africa need digital banking services, including plenty of credit. Although these businesses drive economic growth and contribute up to one-third of the continent’s GDP, they are often financially excluded from credit and other financial services due to their size and informality.

One such company tackling this challenge in the eastern part of Africa is Ugandan fintech startup Numida. And today, the company is announcing the close of its $2.3 million seed round.

Mina Shahid, Catherine Denis and Ben Best founded Numida in 2017 and capitalized on the opportunity to build one of East Africa’s first digital fintechs targeting semi-formal micro and small businesses. Typically, these businesses access credit from family, loan sharks and informal money lenders that offer poorly designed consumer credit. They can also get loans from a traditional microfinance institution but not without meeting a series of requirements.

But the founders didn’t set out to offer credit to businesses when they first started. An initial pilot in 2016 was centered around a bookkeeping tool that enabled traditional microfinance institutions (MFIs) to provide unsecured credit to semi-formal businesses.

“One of the major reasons why financial institutions don’t give loans to these businesses is because they don’t have good financial track records and cash flow history,” Shahid said to TechCrunch. “That was the problem we set out to solve — to create the mechanisms to get that cash flow data and present it in a form that can be used and incorporated into the underwriting processes.”

The founders thought that these microfinance institutions would begin to use the data obtained from months of bookkeeping to serve these businesses. But they didn’t envisage what happened after nine months. Shahid stated that even though the MFIs claimed to love the data that Numida could bring out, they were unwilling to adjust their underwriting practices. In turn, they rejected all Numida’s customers who applied for loans on the platform because they lacked collateral.

“So we thought among ourselves that if our mission is to unlock access to resources that these mom and pop shops need in order to grow their businesses, we’re not going to do that by partnering with these traditional MFIs; we had to do that ourselves,” he continued.

Via a proprietary credit score, Numida offers risk-based pricing on an applicant’s first loan. After that, businesses can access unsecured working capital loans of up to $3,500 in less than two hours, according to the company.Two business people using Numida

Numida business owners. Image Credits: Numida

From May 2017, when it pivoted, to September 2019, Numida kept its outstanding portfolio very small and iterated on its underwriting process and credit risk algorithm. After making several iterations, the company went full on to the market in October 2019, and the CEO says the company has grown 6x in lending volumes.

To date, it has provided more than $2 million in unsecured credit to 3,000 micro and small businesses in Uganda, disbursing around $250,000 per month. This is with outstanding collections, repayment rates and client retention, the CEO added.

Although the consumer digital lending space in East Africa has seen an abundance of transactions in recent years, the same cannot be said for startups targeting the micro and small business segment. As one of the few facing this segment, the business has faced issues around getting relevant data to improve its model but doesn’t collate data it thinks isn’t necessary (social media activities, SMS or mobile money transactions) for the sake of aggregating data.

“We look at the business fundamentals, the cash flow of the business, and some demographic data about the applicants. We’ve had to build our own data set because there are no readily available cashflow data on semi-formal, micro and small businesses in Africa,” remarked Shahid.

Its underwriting model was built off 15,000 loans, which took a long time to execute, and this timing puts some strain on how fast it can onboard customers and serve them. But the company has since moved past that problem and easily serves thousands of customers. The pandemic also helped in accelerating its growth and with this new investment, Numida is poised to grow further.

Pan-African payments company MFS Africa led the seed round. There was also participation from firms like DRK Foundation, Equilibria Capital and Segal Family Foundation alongside angel investors.

The last time MFS Africa was in the news regarding an investment dates back to June 2020, when it acquired Ugandan fintech startup Beyonic for an undisclosed amount.

Rising African venture investment powers fintech, clean tech bets in 2020

Numida is another Ugandan fintech, and a similar play might be in the cards. According to Shahid, the most obvious acquisition path for any successful lending startup to small businesses in Africa is a payments platform. His reason? Because credit is one of the core financial products that will create loyalty and retention to a specific payments platform.

He adds that MFS is a strategic investor in Numida and not the typical VC. He sees the Pan-African company as owning infrastructure, which his company can ride on as a solid foundation for scale. “That’s an opportunity we see in the future. We were concerned about scaling across the continent and who would be the best partner for this. We thought MFS has a lot of expertise and footprint on the continent that will allow us to scale moving forward.”

With this new financing, Numida plans to expand aggressively in Uganda and pilot in a new market, preferably in West Africa. There are some parallels between Uganda and Ghana, Numida’s primary choice in the region. They both have similar mobile money penetration, issues with traditional financial service providers and similar businesses that Shahid says make an enticing market. Per plans, Numida will introduce to its customers additional financial services like payments, micro-insurance and deposits


Flutterwave and PayPal collaborate to allow African merchants to accept and make payments

It is nearly impossible for businesses in some African countries to receive money from PayPal. While the payments giant has not given reasons why this is so, speculation hints at factors like insufficient regulation and poor banking security in said countries. 

That might be a thing of the past for some businesses, as African payments company Flutterwave today is announcing a collaboration with PayPal to allow PayPal customers globally to pay African merchants through its “Pay with PayPal” feature.

Via this partnership, African businesses can connect with the more than 377 million PayPal accounts globally and overcome the challenges presented by the highly fragmented and complex payment and banking infrastructure on the continent.

According to CEO Olugbenga “GB” Agboola, this will happen via a Flutterwave integration with PayPal so merchants can add PayPal as a payment option when receiving money outside the continent. The service, which is already available for merchants with registered business accounts on Flutterwave, will be operational across 50 African countries and worldwide, the company claims. Flutterwave hopes to roll out this service to individual merchants on the platform as well.  

“In a nutshell, we’re bringing more than 300 million PayPal users to African businesses so they can accept payments across the continent,” he said to TechCrunch. “Our mission at the company has always been to simplify payments for endless possibilities, and from when we started, it has always been about global payments. So despite having the largest payment infrastructure in Africa, we want to have arguably all the important payments systems in the world on our platform.”

Image Credits: Flutterwave

A PayPal spokesperson confirmed the Flutterwave collaboration with TechCrunch.

Since the company’s expansion to Africa, it has maintained a one-sided relationship with most countries on the continent, allowing them only to send money. And according to its website, only 12 African countries can send and receive money on the platform, but to varying degrees. They include Algeria, Botswana, Egypt, Kenya, Lesotho, Malawi, Mauritius, Morocco, Mozambique, Senegal, Seychelles and South Africa.

Users in countries who are not afforded the luxury to do so have to rely on using the PayPal account of a friend or family, based in countries where payments can be received. Next, they request the funds via bank transfer, leading to more incurred costs or use other cross-border money platforms like WorldRemit.

This is a pain point for these businesses, particularly in Nigeria. PayPal finally arrived in Africa’s most populous country in 2014, and a year later it became the company’s second-biggest market on the continent.But despite its fast adoption rate and large fintech appetite, merchants cannot still receive payments from other countries on the platform. Various sources have alluded to PayPal’s decision not to make this service available to the country due to its history with internet fraud. Fraud or not, Nigeria’s e-commerce and that of the continent at large continues to grow at a breathtaking pace. In 2017, Africa generated $16.5 billion in revenue, and by 2022, it is expected to reach $29 billion. With numbers like this, it isn’t hard to see why PayPal wants to get in on the action, albeit not completely. Hence, the partnership with Flutterwave.

The company, via its APIs, offers payment services to individuals and businesses across the continent. Since launching in 2019, the African payments company has partnered with Visa to launch Barter; Alipay to offer digital payments between Africa and China; and Worldpay FIS for payments in Africa.

But this one with PayPal is arguably its biggest collaboration yet. Now, African businesses have more access to sell to global customers using PayPal to receive and send payments online. 

In a way, Flutterwave absorbs most of the risk PayPal thinks it will incur if it makes its platform more open to merchants in these countries. But at the same time, it solidifies Flutterwave’s position in the eyes of multinationals looking to enter the African market.

Like when its partnership with Worldpay FIS coincided with its Series B funding, this announcement is also coming on the back of a raise. Last week, the payments company closed a $170 million Series C led by Avenir Growth Capital and Tiger Global, becoming a billion-dollar company in the process.

In hindsight, the mammoth raise suggests that there are a couple of projects in the company’s pipeline. Going by this partnership, we can expect the majority of them to be global plays.

Yet, these questions remain top of mind — What happens when PayPal automatically allows businesses from these neglected African countries to start receiving payments? Will both services continue to coexist if that happens? We’ve reached out to PayPal for comment.

However that plays out, this is a step forward in the right direction for Flutterwave, which has shown time and time again the length it is willing to go for its 290,000 merchants and the ongoing quest to become a global payments company.

“By working with PayPal, we can further strengthen our commitment to our customers and service users as we will be enabling them to transact and expand their business operations to reach new markets. PayPal’s global reach is unrivalled, and collaborating with them allows our customers to explore new markets where PayPal is embedded,” the CEO said.

Early Stage is the premier “how-to” event for startup entrepreneurs and investors. You’ll hear firsthand how some of the most successful founders and VCs build their businesses, raise money and manage their portfolios. We’ll cover every aspect of company building: Fundraising, recruiting, sales, product-market fit, PR, marketing and brand building. Each session also has audience participation built-in — there’s ample time included for audience questions and discussion. Use code “TCARTICLE at checkout to get 20% off tickets right here.