In pursuit of building a billion dollar mobile payment business in Africa

September 23, 2016
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The World Bank estimates 12 percent of adults (64 million) in Sub-Saharan Africa have mobile money accounts.
The World Bank estimates 12 percent of adults (64 million) in Sub-Saharan Africa have mobile money accounts.

, NAIROBI, Kenya 23 Sep – For decades, the Nigerian government grappled with a continuous decline of the agricultural sector threatening food security and escalating the import bill.

The sector contributed 20 percent of Nigeria’s GDP in 2013 from a high of 60 percent in the 1960’s, with the country increasingly depending on oil as the backbone of the economy.

Efforts by the government to jumpstart the sector were at best, insufficient and steeped in corruption. For example, out of the $200M the government was pumping in a subsidized fertilizer programme every year, only 11 percent was reaching the farmers, the rest disappearing in ‘administration leakages.’

In total, over 776 billion naira was estimated to have been lost to corruption, undermining the government’s efforts to boost food production and farmer’s income.

But that began to change in 2011. The then Minister of Agriculture in Nigeria, Akinwumi Adesina and a number of government officials engaged pan-African mobile tech company, Cellulant, to develop a mobile wallet connecting farmers, suppliers, agro-dealers, banks and the ministry of Agriculture and Rural Development.

Through the e-wallet, subsidies are delivered to farmers through an electronic voucher with mobile phones and national identity cards used as unique identifiers to create transparency and accountability in the system.

After the first year, agro-dealers had delivered subsidized fertilizers and seeds to 1 million farmers. That figure jumped to 5 million in the second year. From 2012 to 2015, more than 70 million transactions had gone through while 1.3 million metric tonnes of fertilizer and improved seeds had been delivered. By 2014, 90 percent of inputs reached 7.1 million farmers who accessed inputs using their e-wallets.

The impact of the program, under the Government’s Agricultural Transformation Agenda (ATA), helped the food import bill to fall from $11 billion in 2011 to $5 billion in 2012, according to a Grow Africa 2014 report.

There have also been significance investments in the sector – over $5 billion in 3 years – and the lives of 14.5 million farmers have been considerably changed due to higher productivity and better prices of their output.

Channels and Consumers

The transformation in the agricultural sector that Cellulant engineered as the technology partner in the ATA is partly the reason Cellulant co-founders Ken Njoroge and Bolaji Akinboro are confident they can build a billion dollar business by simplifying and facilitating mobile payments.

10 years after the two met at a restaurant in Nairobi and scribbled their business plan on the back of a napkin, the technology company headquartered in Kenya has expanded to 250 people spreading across 10 physical offices covering 36 African countries.

Bryan Kariuki, Cellulant Kenya MD says the tech company has positioned itself at the intersection of banks, consumers, mobile operators and consumers.

“We connect people to their money every day enabling people pay their bills using money sitting in a bank or MNO wallet,” explains Kariuki, adding there are different ways consumers can get value from the ecosystem Cellulant has built.

This ecosystem – which includes 70 financial institutions, over 40 mobile network operators and 200 merchants – gives Cellulant the vantage point of adding value to nearly 100 million customers served in the ecosystem.

“We can do this through the traditional way we have done by providing mobile banking services or payment aggregation. We can also add value to consumer payments or digitize the entire value chain for FMCG companies, for example” says Kariuki.

The IT company has evolved over the last 12 years, changing its business model from the initial mobile content provider pushing local news and music to 8 million Kenyans and Nigerians to now facilitating mobile payments.

The turning point came in 2005 when Cellulant started testing mobile banking platforms. Three years later, the company deployed the first mobile banking solution on USSD for a multi-national bank.

Mobile phones have become ubiquitous in Africa, and e-wallet solutions are quickly spreading across the continent. The World Bank estimates 12 percent of adults (64 million) in Sub-Saharan Africa have mobile money accounts, with that number rising to 58 percent of adults in countries like Kenya.

Kariuki is of the opinion that the next level in digital payments will be hinged on uptake and long-term usage.

“There are a lot of solutions out there but no one is using them and usage as a metric is one of most important metrics. The businesses that have cracked this are the ones doing well,” Kariuki says.

Cellulant is eyeing to grow its portfolio as it responds to the growing needs of its corporate and public clients. The company has been nominated for the 100 African Innovators Financial Technical Awards 2016, as one of the innovative companies that will contribute to changing the financial landscape in Africa.

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