The Africa SMME Tech Report

Issue No. 3. AME small business tech news for 10 May 2021. This edition features Lami Technologies, OKO Finance, OysterPay, ImaliPay, and more...

Fresh Funding for Africa’s Rising Insuretech Space

Two African startups focused on insuretech have announced seed funding rounds over the past week. This shines a fresh light on a space that is poised to grow, driven by the same force driving much of the region’s fintechs startup investment. Unmet need.

A recent roundup in the Fintech Times, citing McKinsey data, estimates that Africa’s insurance market is worth $68 billion, as measured in gross total premiums. This compares with $157 billion in Latin America and $200 billion for Asia (excluding China). This gap suggests a sizable upside in Africa.

However, the continent remains largely under-insured. According to the Fintech Times report, even in South Africa, which accounts for 80% of the $68 billion, only 35% of the cars on the road are insured. McKinsey estimates Africa’s overall insurance penetration is just 3%.

The insuretech industry, considered a subset of fintech, is emerging to fill this void, using modern technology to make insurance more affordable and accessible to consumers and small businesses, from farmers to small merchants.

The two most recently funded startups are focused on insurance for those previously shut out of the insurance market. Lami Technology and OKO Finance, announced funding rounds of $1.8 million and $1.2 million, respectively.

Nairobi-based Lami Technologies, founded in 2018 by Oxford MBA Jihan Abass, is a platform that allows banks, technology companies, and others to offer digital insurance products through its API. The company has sold more than 5,000 policies to date and has partnered with 25 underwriters. Its insurance products include auto, medical, employee benefits, and device insurance.

The company plans to use its round, led by Accion Venture Labs, to hire more people and invest in building out its product and expanding within the continent.

“At Lami, our vision is to help improve the financial resilience of millions by making insurance products more accessible and affordable for underserved populations,” Abass said in a company blog post announcing the round.

“By enabling our business partners to offer customized insurance solutions, we are helping them provide more value to their customers while enabling large volumes of users to access insurance, often for the first time.”

OKO was founded in Mali in 2017 to provide crop insurance for smallholder farms using modern technology like satellite imagery, mobile payments, and advanced weather forecasting to automate the claims process and reduce the cost of insurance. Its target market is farmers impacted by climate-related events like droughts and floods.

The company’s $1.2 million round was led by Newfund and ResiliAnce. Mercy Corps Ventures, Techstars, ImpactAssets, and RaSa also participated in the round.

OKO plans to deploy its capital to strengthen its offering in Mali and Uganda while also expanding to new markets in Africa. Ivory Coast is first on the list.

To date, the company has 7,000 paying customers in Mali and has paid out claims to more than 1,000 farmers.

Insuretech Are Filling the Gaps

Insuretech is following the same financial inclusion trail as other fintechs that are addressing the point of sale, payments, lending, and other sectors. They are filling a market need where traditional players have either been unwilling or unable.

This passage from Lami’s blog post announcing the seed round summarizes the opportunity created by the failure of traditional players to serve the market. And they are using advanced technology to break the logjam.

“Most insurance providers on the continent fail to offer flexible, affordable and tailored insurance coverage to provide a safety net for the African consumer. Low insurance uptake is partly due to the traditional distribution and administration of policies, mainly relying on brick-and-mortar channels where policies are sold and processed manually. This results in a longer processing cycle, poor customer satisfaction, and higher distribution costs.

“Lami’s digital insurance platform leverages cloud computing, automation, and third-party service providers such as emergency and valuation, or identity and asset verification databases, to offer a comprehensive ecosystem for the businesses they partner with to develop, distribute and manage highly streamlined and competitive insurance products that are designed to meet their customers’ needs.”

More Inclusion Products for Workers on Tap

We’ve been covering the growing list of players offering various flavors of financial inclusion products designed to help lower-wage and non-traditional workers gain access to financial services.

We’ve seen startups emerge to deliver payments and banking solutions designed for migrant workers in the Gulf region (e.g., Now Money, Rise). And we’ve also witnessed growth in startups that offer workers advances on earned wages at non-usurious terms (e.g., SmartWage, Floatpays, Paymenow, FlexxPay).

A new company called OysterPay (whose app is set to launch this year) plans to bring financial inclusion to another underserved segment of the labor market. Gig workers. Those ride-hailing and delivery app drivers that are now ubiquitous in urban settings worldwide. OysterPay plans, at least initially, to focus on South Africa’s thriving gig economy.

OysterPay was recently named to AlphaCode’s fintech support program. This is a pre-incubator program where 10 companies receive an R150,000 grant, mentorship, and a chance to compete for a slot in a 6-month step-up program.

The startup, led by CEO Scele Makhatini and his co-founder Atif Muhammed, has identified a number of pain points unique to gig workers that it plans to address through its platform.

The first is that as non-traditional workers, gig workers cannot access traditional banking services.

OysterPay plans to address this with a simplified process and the use of a pre-paid model to reduce its own risk. Users apply by uploading an image of their passport plus a selfie for verification. The user is then sent a prepaid debit card and mobile app that allows them to access OysterPay.

Another pain point for gig workers is the lack of access to traditional forms of credit, or the ability to save and invest, again because of their murky employments status. Gig workers are generally considered self-employed, even if they generate all of their income through a single platform.

OysterPay is also addressing these challenges. The startup has integrated a short-term credit facility into its offering. This provides gig workers with small loans for day-to-day work-related expenses like fuel and data.

And OysterPay lets its users opt into a savings program that rounds up their transactions to the nearest rand to create savings every time they transact. This latter feature reminds us of Acorns, the U.S.-based fintech that helps consumers save using a similar process.

OysterPay is not alone in addressing the African gig economy with financial inclusion products. Kenya’s ImaliPay bills itself as a “financial health platform” for Africa’s informal and gig economy workers. The company was launched in 2020 by co-founders Tatenda Furusa and Oluwasanmi Akinmusire. The company raised a pre-seed funding round in February.

Another interesting company in the wider space of financial inclusion for underserved communities is Leaf Global Fintech. Rather than addressing underserved workers, however, Leaf provides an eWallet that allows refugees to carry digital cash. The company currently operates in Kenya, Uganda, and Rwanda.

The company was the winner of the developing world technology category in Fast Company’s 2021 World Changing Ideas Awards.

In Case You Missed It…

The Big Money Keeps Flowing into Frothy MENA Buy Now, PayLater Market

The Saudi-based buy now, pay later platform Tamara has been on a rapid trajectory since it launched last year on the eve of the pandemic.

The company recently closed an impressive $110 million Series A round. This dwarfs the $6 million seed round it closed in January. That’s an impressive amount of money raised by such a young. It says a lot about investors’ bullishness not just on the region’s BNPL market in the region, but the broader eCommerce market as well.

it also gives Tamara a distinct edge in a BNPL market where multiple players have poured into the region just waiting the past two years. The race for dominance in the MENA market may go to the player who raises the most money and gets to scale fastest.

Tamara hasn’t revealed its valuation. The current benchmark in the region is the Egyptian fintech Fawry, a BNPL perform with a valuation of more than $2 billion.

VISA has projected the MENA region’s eCommerce market, of which BNPL is a subset, will reach $48 billion by 2022. Globally, companies like Affirm, Afterpay, and Klarna have valuations in the tens of billions.

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Ghost Kitchens Finding a Home in AME

The Gulf region’s embrace of the ghost kitchen concept drew global attention in November 2019. That’s when the PIF, the Saudi sovereign wealth fund, invested $400 million in Travis Kalanick’s CloudKitchens startup.

Kalanick is of course best known as Uber’s founder and the embodiment of the Silicon Valley “tech bro”. In 2016, following his ouster from Uber, Kalanick launched CloudKitchens as a platform for entrepreneurs to create “virtual restaurants”.

Since that PIF investment (and in some cases before), companies serving the MENA market, especially the UAE and KSA, have proliferated and have themselves raised substantial amounts of capital.

More on this phenomenon a bit later. First, a brief primer on ghost kitchens.

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Recent Episodes from The BIG5D Podcast

Episode 16: Firas Ahmad, AzamPay

Episode16 features an interview originally aired at our virtual BigFive Small Business Fintech Summit. Firas Ahmad is the Co-founder and Group CEO of AzamPay, a payments platform based in East Africa that is a division of Azam Group, a major East African industrial conglomerate.

Firas is a deep thinker about fintech in Africa and our conversation centered around his views on mobile money

Firas argues that the success of mobile money on the continent is also in some respects a curse because there isn’t sufficient incentive to innovate. And the lack of continuous innovation threatens to hold back on the development of fintech in Africa.

Listen to the Podcast

Episode 15: Katharine Budd, NOW Money

The BIG5D Podcast talks to Katharine Budd about NOW Money, the Dubai-based company she co-founded in 2016.

Kat, a former data analyst and banking executive, launched NOW Money in 2016 with her former university classmate Ian Dillon, who was working as an investment banker in Dubai.

Kat and Ian saw a huge opportunity in helping the overwhelming number of migrant workers in the Gulf region gain access to banking services. And in the process of giving migrant workers access to financial services, NOW Money gains the ability to earn fees off of the Gulf region’s enormous outbound remittances market.

Listen to the Podcast