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Issue 69
Aug 17 - Aug 23, 2020

Hi there,

Last week, we launched Paystack Music, a collection of monthly playlists that the Paystack team shares and curate from Slack. Music is very integral to how we work at Paystack, and this is true for even this newsletter - This issue was made while jamming Burna Boy's oft-forgotten Redemption, vibing to The Cavemen's silky highlife debut ROOTS, and raging on Remy Baggins' chaotic Amaterasu!

Music is time travel. An exercise in shared memory and presence that brings people together at a time that requires many of us to stay apart. This is why for us, it is about making payments work just as it is about the music that we share along the way.

So come jam with us! And while jamming remember to stay safe and wear your masks.

Tochukwu Ironsi
Product Specialist, Paystack
GlobalOpera partners with MobiMagic to launch Nanobank. Opera, global internet company behind Nigeria's OPay, has partnered with MobiMagic to launch Nanobank, a micro-lending service focused on emerging markets. According to Q2 earnings presentation, Opera will be spinning off its micro-lending arm into this new venture and will leverage MobiMagic existing distribution and shared technology practices. Nanobank is also expected to expand into Mexico later this year.  Kenyan Wall Street

Opera's current micro-lending business includes CashBean in India (which already leveraged MobiMagic as a technology partner), OPesa in Kenya and Okash in Nigeria. The latter which operates as a feature on OPay and also a standalone app was notably not mentioned during the earnings presentation when talking about existing key Nanobank markets. It is therefore not clear how this new venture will affect its Nigerian operations. 
EgyptThndr receives Egypt's first brokerage license in ten years. Thndr, a Cairo-based investment startup has obtained a brokerage license, the first issued by Egypt’s Financial Regulatory Authority since 2008. This newly obtained license will allow traders to create trading accounts and invest in stocks on the Egyptian Exchange (EGX) via a mobile app. The transactions are commission-free but there are different subscription tiers ranging from a free-tier to a paid-tier starting from EGP 15 (~$1)/month. The startup also just concluded its pre-seed round and got accepted into Y Combinator's latest S20 cohort. Menabytes

Thndr customers can currently only trade Egyptian equities on EGX with plans to open up to trading on international exchanges. While this current offering seems limited compared to similar startups in other African markets, it is important to note that as of the time of writing, the Egyptian Stock Exchange had a market capitalisation of EGP 659 billion (~$41.4 billion) with about EGP 1.9 (~$120m) was traded daily. Providing an easy on-ramp for retail investors to invest in the local market could still present a huge opportunity while they figure out how to provide international investment options. 
EgyptFawry crosses 1 billion dollar valuation on EGX. Fawry, an Egyptian-based electronic payments company, crossed the $1bn valuation on the Egyptian Exchange. The stock price which debuted last year on EGX at a price of EGP 6.46 has since soared about 300% to EGP 22.69. This comes after a strong 2020 half-year earnings report that saw the company's revenue and net profit increase 47% and 135% to EGP 549.26m (~$34.41 m) and EGP 85.9m (~$5.38 m) respectively from last year. Menabytes

At the time of its IPO, Fawry was the first tech company to list on EGX. Despite increased capital inflow into the African tech ecosystem, successful exit stories have been few and far between. This billion-dollar valuation driven by an accelerating e-commerce trend is therefore a welcome exit story and one to watch going forward. 
South AfricaFundrr partners with Telkom Business to provide SME financing. Fundrr partners with Telkom Business to provide SME financing. Fundrr, an SME digital lender is partnering with Telkom Business, the B2B arm of Telkom SA, to provide working capital loans to merchants on Yellow Pages, their business directory, and marketing support service. Fundrr will provide loans of between ZAR20k ($1,400) to ZAR500k ($35,000) for a duration of 3 to 12 months. Disrupt Africa

This partnership should provide significant distribution to Fundrr while allowing Telkom Business to deepen engagement with their SMEs on Yellow Pages and possibly increase revenue. There seems to be a recent focus by South African (SA) telcos on value-added financial services like lending and e-commerce. In Issue 65, we reported on Vodacom, the largest telco in the country, partnering with Alipay to develop super-app capabilities. Other providers like Nedbank and MTN also have similar applications as well.

It is important to note that unlike their counterparts (which are mostly subsidiaries) in other sub-Saharan markets, SA telcos seemed to have abandoned the bottoms-up mobile money approach in favour of more provider-agnostic digital services that capture non-customers as well. This might be because SA already has one of the highest financial inclusion rates in SSA - about 4 out of 5 South Africans have a bank account. This limits the demand for basic cash-in/cash-out mobile money services as evidenced in the failed M-PESA launch months ago.

Hence, the goal does not seem to be to entrench or expand existing mobile network distribution but to diversify top-line revenue as income from voice and data continues to fall.
TwitterThe minds and hands behind the Machine. Chijioke Dozie (@ChijiokeD), the co-founder of Carbon, emphasises in this tweet, the semi-manual back office finance that supports the UX-friendly technology of many fintech operations.  Chijioke on Twitter

Here's a Medium article from King Makanjuola, an Associate PM at Paystack, that brilliantly articulates the back-office fintech operations in more detail. 
Banking & Finance
NigeriaAgents offering bank account openings have decreased by about 50% since 2015. According to a financial survey report released by Enhancing Financial Innovation & Access (EFInA), the percentage of agents offering account openings have decreased by from about 68% in 2015 to just 19% in 2020. This is in stark contrast to the 95% of agents who engage in Cash-in/Cash-out activities which have seen a 30% rise in the same period. Business Day

This could be interpreted to mean that while actual agency banking activity is increasing, the number of accounts being opened by these agents is reducing. It is also concerning that consumer demand for these services, which make up the top service request, increased in inverse proportion to supply. The reason for this gap is not clear - It is possible some of these customers are now being on-boarded via their mobile phones but the extant demand at the point of the agent still suggests an unmet need. This could potentially dampen forecasts for financial inclusion goals set by CBN to make 95% of the population banked by 2024.

It is also important to note that the interviews for this survey were done in February 2020, months before the peak of COVID-19 impacts. According to another EFInA survey on the COVID-19 impact on bank agents, the average revenue per agent dropped from about NGN 54.6k pre-COVID to NGN 27.9k during the pandemic, an 89% decrease in income. As we have come to see, the pandemic disrupted a lot of patterns and we would have to observe how it has also affected agency banking in the coming months. 
NigeriaNigerian banks recovered NGN 50m in 7 days with GSI. According to Kevin Amugo, Director of financial policy and regulation at the Central Bank of Nigeria (CBN), banks recovered N50.32 million in bad loans from debtors within nine days of the commencement of the Global Standing Instruction (GSI).  The Cable

As we reported in issue 64, the CBN issued guidelines on GSI, an initiative that would allow banks to recover loans from defaulting borrowers across all their bank accounts tied to a single BVN. This went live on August 1 and it seems like the results are positive. For context, Kevin also reported that the apex bank was looking into 27 about 26,057 cases of bad debt from individuals valued at NGN 1.6 billion.

However, in that same issue, we also argued that GSI should be extended to fintech startups like Carbon and FairMoney who're doing most of the risky unsecured retail lending in the country. For example, Carbon reported about NGN 3.1bn in net impairment losses in their 2019 annual report. If we estimate that most of these are written-off bad debts then that is almost 100% the above amount triggered as bad debts by the banks. 
KenyaAbsa Bank to phase out cheque payments by 2020. Kenya's Absa Bank will be discontinuing cheques as a means of payment by 2020. According to the Bongiwe Gangeni, Head of Retail and Business Banking at ABSA group, cheque usage has fallen about 80%. He also cited fraud and abuse as one of the reasons. Going forward, customers will also be directed to adopt digital alternatives as preferred means of payments.  Kenyan Wall Street

This is another case of software eating the world, or more specifically, fintech eating finance. Considering the high level of mobile money penetration in Kenya that has deepened even further during COVID-19, cheques seem like another victim of a pandemic- accelerated transition to digital financial services. 
GhanaFinnfund provides US$10 million debt financing to FNB Ghana. Finnfund, a Finnish development finance company and impact investor has provided $10 million senior loans to First National Bank Ghana Ltd. The investment will be focused on SME and mortgage financing.  Business 24 Online

First National Bank Ghana (FNB Ghana) recently acquired a 100% stake in GHL Bank. According to this 2016 report by the Centre for Affordable Housing Finance in Africa (CAHF), GHL Bank was the sole financier for residential mortgages in Ghana. The report also pegs the book value of home loans in Ghana at $200 million which represents just 0.5% of total GDP as of 2013. Combining all this with an estimated housing deficit of 1.5 million homes, then it becomes clear what the opportunity here is for the players involved.

However, it is important to note that housing deficits don't typically translate to monetisable demand. Also, adverse effect of COVID-19 on all forms of consumer earning, and hence lending cannot be overlooked. 
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