Why mobile money is big business in Africa

Another week and another bank in Africa is entering the mobile money space.

Pan-African Ecobank is partnering with Orange Cameroon to allow the telco’s customers with accounts at the bank to transfer cash between the two services. The two firms are already working together in Mali and plan to introduce the service in four other African countries.

Banks partnering with mobile companies is the latest attempt by financial firms to tap into the continent’s large populace of the “unbanked.”

In sub-Saharan Africa, only a third of adults have access to bank accounts. Compare this to Latin America, another emerging market, the figure stands at 51%, according to the World Bank. There are a lot of people whose money simply never touches the region’s financial systems.

The mobile phone revolution and the rise of mobile money, especially in east Africa with platforms such as M-Pesa, has changed this.

Mobile money is now big business in Africa. Last year, the market generated $656m in revenue and in the next four years this is expected to double to $1.3 billion, analysts say.

Until recently, financial firms ceded this space to telecom companies. But the clear growth of the sector has compelled a re-evaluation. Now banks are not only trying to compete in this space but also offer new products that promise access to banking services to those who up until this point were excluded.

So in Nigeria, for example, GT Bank are getting in business with Etisalat Nigeria, the country’s third biggest mobile operator, to create GTEasySavers, a savings account that can be opened via mobile phones. For the 57% of the country with no access to formal financial services, that’s a small step in the right direction.

And in Kenya, in 2011, only 42% of people had bank accounts. That has risen dramatically, driven by mobile money platforms.

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Impact Investing: What Will It Take to Get to Scale?

The world is rapidly changing. Global population has reached 7.3 billion and is predicted to increase to 9 billion by 2050. Eighty percent of the world lives on less than $10 a day. There is pervasively poor access to good jobs, healthcare, education, and housing. Dwindling natural resources, increasing drought and climate-related natural disasters, and insufficient access to energy and sanitation are omnipresent. In order to meet the demand of a fast-growing population, food production must increase by 70 percent.

The status quo of how capital is currently deployed can no longer support this changing world. Philanthropy and government aid are insufficient to solve the world’s most intractable social and environmental issues. There is mistrust of the capital markets, with their myopic focus on quarterly returns rather than long- term value creation.

Impact investing represents a paradigm shift, allocating capital for measurable social and environmental impact as well as financial returns. It focuses on maximizing stakeholder value rather than concentrating exclusively on shareholder value.

Impact investing in the US totals $6.5 trillion, a fraction of the $43 trillion of all US assets undermanagement. The vast majorityof impact assets are invested in the public markets through socially responsible investing (SRI) and environmental, social, and governance investing (ESG) strategies. Deep impact investing — investing in privately held impact ventures and funds — represents just $60 billion worldwide. Impact ventures focus on job creation, financial inclusion, sustainable agriculture, health, education, housing, energy, water, and sanitation.

What will it take to create greater growth in impact investing across asset classes? First, let’s look at the key players in the impact investing landscape and take stock of current activity and hurdles, both real and perceived.

IMPACT INVESTING’S KEY PLAYERS

1 – IMPACT INVESTORS

Impact investors range from individual (retail and high net worth) to institutional (foundations, pension funds, university endowments). High net worth investors have been leading the deep impact investing charge. Through angel investment groups such as Toniic and Investors’ Circle and peer networks like the 100% Impact Network and The ImPact, the deep impact investment movement has been growing. Increasingly, there are deep impact options for retail investors, including offerings from the Calvert Foundation, ImpactAssets, The Nature Conservancy, and RSF Social Finance.

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6 Facts About The Nigerian Impact Investing Landscape

Some actors believe that Nigeria may be in some sort of ‘impact investing bubble’. This thinking is encouraged by the lack of a record of successful exits and the growing skepticism in the long-term viability of existing impact investments, according to the Global Impact Investing Network (GIIN) report on the landscape of impact investing west Africa.

Impact investments are investments made into companies with the intention to generate social and environmental impact along with a financial return.

The research conducted in partnership with Dalberg, with support from the UK’s The Impact Programme also revealed that the recurring mischaracterization of Impact Investing with [venture] philanthropy has led to difficulty in raising capital because a fair amount of local investors are convinced ‘impact investing’ implies a compromise on financial returns.

Here are 6 more facts about the Nigerian impact investing landscape:

1: Nigeria leads the way in impact investing in West Africa

Twenty eight impact investors are active in the country, including 20 non-DFI and 8 DFI investors.

2: Impact investment deals in Nigerian amount to $ 1.9 billion in last decade

Identified impact investments (which include deals made by all DFIs – Development Financial Institutions –  and 12 non-DFIs) amount to USD 1.9 billion in deployed capital across 181 direct  investments since 2005

3:  Impact investing is still playing small in Nigeria

Although the impact investing sector in Nigeria outpaces other countries in the region, the community of investors is small relative to the size of the market. Ethiopia, for example, is less than a quarter the size of Nigeria in terms of GDP, but has almost triple (58) the number of non-DFI impact investors.

4: Investors are not local

Only seven of the 28 identified impact investors have a local presence as at December 2015. This is because of the high cost of living and operating businesses in the country. Nigeria ranks 170 out of 189 countries on the 2014 World Bank Doing Business index.

5:  The TEF is the only identified truly local impact investment fund

The Tony Elumelu Foundation—funded through the personal wealth of a Nigerian national, Tony Elumelu—is the only identified impact investor that relies significantly on local sources of capital

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Reel Fruits, a fruit processing company leading the pack.

Affiong Williams is on track to becoming one of Nigeria’s young, high net worth individuals with her fruit processing company, Reel Fruits. Set up in 2014, the company packages, brands and processes locally grown fruits. Williams has grown from packaging the products in her home, to running a small factory that now supplies 80 stores in Nigeria.

Affiong is a leading example of Impact entrepreneurs building businesses that create jobs, increase access to opportunity, and enhance quality of life for their employees, customers, partners, and community.

Africa truly need more of such entrepreneurs that would help in creating the opportunities and enable millions of youths and women to be gainfully employed and sustain the current growth.

Impact Entrepreneurship

Paul Graham sparked a furious debate over the last few days about inequality with his blog post, Economic Inequality. He points out that the focus of the dialog should shift from inequality to combating poverty and providing more economic opportunity. The power of entrepreneurship, mixed with technological disruption, is creating an “acceleration of productivity” that is leading to rapid, massive wealth creation. Paul’s essay argues that we should celebrate this, not seek to suppress it, and instead focus on inequality and social mobility.

I like that Graham is sparking dialog on this important topic. He puts himself “out there”, even if it means being exposed to some withering critiques.

His essay caused me to step back and reflect on the fact that I am seeing more entrepreneurs inspired to harness the power of some of the forces he describes – entrepreneurship, technology, innovation and shockingly fast productivity – to make a positive societal impact. I would like to see this trend continue. I’d like to see more Impact Entrepreneurs (a concept I first saw coined in an article in Wired Magazine by Adam Levene) not just wealth-creating entrepreneurs. Impact entrepreneurs are inspired to direct their entrepreneurial energy and skill to make a difference, help a group in society, right a wrong or turn around an injustice. Not just build the next Candy Crush Saga.

Don’t get me wrong – I love wealth-focused entrepreneurs, too. As a venture capitalist, investing in and supporting entrepreneurs focused on turning Flybridge’s seed and Series A investments into something very valuable is my day job. But if we want to unleash the full power of entrepreneurship and technological innovation to better society, more entrepreneurs need to direct their energy to truly making an impact. This effort can take a few forms. Some examples and trends are:

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