Archive for the ‘Kenya’ Category

Tips on managing African fake news articles and websites

Today, I was faced with the challenge of having to choose between two conflicting quotes attributed to the same spokesperson, during the same press conference. Attempting to uncover an authoritative source for the content in order to discern which of the two was authentic led me down a rabbit hole of fake news sites allegedly from Kenya. The exercise led me to write up my experience, and share my thoughts on navigating the minefield of fake news articles and entire websites, now that the issue has taken over African content as well.

The subject matter concerned China’s alleged takeover of Kenya’s Mombasa Port in case of default on the infrastructure loans for the Standard Gauge Railway (SGR). This has been making the headlines, together with Zambia’s purported problem with seized infrastructure. Matters came to a head today as yet another report – this time by the reasonably credible ZeroHedge – repeated the same messaging without digging further to check whether any of the anti-China allegations were, in fact, true.

At the same time, the daily news curation was churning up reports of a Chinese government spokesperson refuting the allegations that China was poised to take over the Port of Mombasa. So I went digging for more on the topic and churned up a news website that named the very same spokesperson as stating something outrageously unbelievable.

Note: All the sites linked below on How to spot fake from true have been vetted by me by reading through their advice, and their credentials. Someone has to watch the watchers!

Standard tips on distinguishing fake news from genuine tend to highlight two main points:

1. Is the article so outrageous that it makes you blind with anger? If so, it is very likely fake.

2. And, if so, check the website’s About page* to assess its credibility. This was the result when I followed through on the outrageous:

Sure looks like a credible source to me, no? Once I was able to identify the fake news website, I went looking for more authoritative sources to establish the credibility of the Chinese refutations, in case they, too, turned out to be faked.

An Embassy of China page offered the first data point that the refutations were indeed official, and later, on Twitter, Anzetse Were, linked directly to the Chinese Ministry of Foreign Affairs website, doubly ensuring that the refutations to the allegations of China’s take over were official and authentic.

Therefore, we can now state with confidence that China is NOT taking over the Port of Mombasa in case of default on the SGR loan*. And, we discover that the other African story used to support this one, that of Zambia’s ZESCO being taken over by China for default in loan payments is ALSO false, having been refuted by the Zambian government, and reported by a reasonably credible news source, in this case, Reuters.

This goes to show that the fake news problem in Africa has gone beyond electioneering, and social media, and invaded mainstream news media via search engines such as Google News. It thus behooves us to be doubly careful in ensuring that outrageous actions allegedly conducted by one global power or another are carefully verified and vetted before repeating them mindlessly like ZeroHedge had done.

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I am working on making up a list of the most common African news sites that show up in the popular news engines, like Google, to be wary of, or they are outright fakes.

* The Kenya Times was a genuine newspaper that closed in 2010. That makes this site doubly suspicious.

Emergence of a decentralized digital economy? Snippets from Nigeria and Kenya

Continuing the conversation from the recent posts on app enabled demand redistribution as well as digital platforms being used by informal sector economic actors to boost their own productivity and efficiency, I thought to share snippets from these two recent articles I just came across, as cases in point.

From Nigeria, West Africa: How WhatsApp groups are fostering collaboration in Ikeja Computer Village

“I stay because it has helped my business in so many ways. Right now, from the comfort of my shop, I can reach out to other vendors when I need an item so that when they respond, I know exactly where I’m going to get it.”

And, from Kenya, East Africa: Drivers’ group launches Bebabeba taxi app

As I mentioned in my previous post, anyone can afford to build their own app to manage demand and supply, and, spurred on by the introduction of global players like Uber or Taxify, local drivers’ associations are doing exactly that, except now, its on their terms.

Lessons from African Fintech for the Gig Economy

Earlier this week, I had the opportunity to share my research on the past decade of mobile ecosystem development across the African continent with Dr. Antti Saarnio, founder of Zippie; co-founder of Jolla (developers of the Sailfish OS, among other things).

“We want to test our product first and foremost in Africa because there is an extensive and established informal economy,” he said.

That captured my attention immediately, since few think of the Africa’s vast “informal” commercial operating environment as a strength to be leveraged for competitive advantage, preferring to hope against hope that it will disappear into thin air to be replaced by the more familiar structures of the formal and organized sectors.

And, it got me thinking about the African fintech space, and the lessons it may hold for the rapidly proliferating gig economy in the ‘developed’ world. And, since at this point of time, all I know of Zippie, Dr. Saarnio’s latest venture, is that it’s a blockchain based mobile OS – not the kind of thing that you’d expect to be piloting in Africa – I asked him to elaborate on his thinking a little further.

Easy, he said. Not only does the informal economy dominate, with established norms and coping mechanisms, but its a mobile first and mobile only environment where people are already comfortable with the exchange of value in digital form, be it airtime or currency. People are already incentivized to think about boosting their productivity through newfangled digital tools on their smartphones. More often than not, the younger urban population is educated and tech-savvy, and in places like Kenya, ready to try something new.

I couldn’t argue with his assessment. In fact, I’d take it a step further, based on my own decade’s worth of research into the informal sector’s financial behaviour and cash flow management practices. The developed world economy is beginning to show signs of convergence, in pattern and in the types of challenges faced when attempting to manage in highly uncertain situations, on irregular and unpredictable income streams, often with the very same elements of seasonality – time of abundance and scarcity – as seen in rural Phillipines or India or Malawi.

For instance, Finnish farmers are being driven to use high interest payday loans to tide over the lean times because few other coping mechanisms exist in Finland’s highly formal commercial operating environment. Wedded to the land, they face the same challenges as a farmer in India, Kenya, or The Philippines. Yet no microfinance institutions catering to farmer needs would dream of showing up in rural Finland. Similarly, in the UK, lower income workers, dependant heavily on gig economy apps to generate revenue, can face significant differences in their cash flows from month to month, but again have no recourse but to use their credit cards or high interest payday loans to tide them over. The systems in their operating environment are designed for the past generations’ periodic and regular wages and paychecks, and cannot cope with the irregular cash flow patterns, as prevalent in the informal economy.

That is, the characteristics of the gig economy and the informal economy, when seen from the perspective of the end-user, are more or less the same. Ironically, however, those in the developing world have numerous solutions available to them – albeit informal, social, local – available to them to cope with shocks and volatility. These coping mechanisms have developed over decades (and centuries, in the case of India), hence the well known resilience of the local rural or informal economy.

As uncertainty increases globally, there are numerous lessons to be learnt from the mostly ignored informal economies of the developing countries which have provided incomes and employment for the vast majority of their populations, in times of conflict or peace, making sure that food reaches the urban table from the farms out in the countryside, regardless of the adequacy and availability of either systems or infrastructure. This is one situation where the formal economy’s inbuilt rigidity and dependence on predictability and periodicity are its embedded weak spot at a time when flexibility and negotiability are required to ride the shocks and volatility.

The Quiet Digital Revolution: Indigenous Innovation in Intelligent Information Systems

Big data, machine learning, and artificial intelligence are the buzzwords of the day, along with the obligatory blockchain and bitcoin. Much is being written on their potential to solve Africa’s problems, or India’s challenges. In turn, each has been promoted as the next big thing to address poverty and its discontents. Yet, we note, that all of them, without exception, assume implicitly and some go as far as to articulate explicitly, that these future and potential solutions are the sole purview of the first world’s silicon centers. “We know best, and we are the experts in this, as in so many other things, when it comes to the context and conditions of developing countries.”

However there’s a quieter digital revolution taking place, using much the same cutting edge technologies and techniques. One which is emerging from the deep contextual knowledge of local needs and local challenges, tapping into opportunities in relevant and accessible ways. I found two exemplars of this ongoing trend worth highlighting here, one from Kenya and one from India.

From Kenya, technology enabled livestock insurance

Andrew Mude, a senior economist at the International Livestock Research Institute (ILRI), created a program that protects pastoralists against losses from drought, an increasing scourge for nomadic communities in northern Kenya and southern Ethiopia. The index-based insurance uses satellite imagery revealing how much foliage has been lost to calculate the projected impact on the herds. It eliminates the need for an actual census of dead animals. More than 3 million pastoralist households in northern Kenya depend on goats, cows, sheep, and camels, and the high rate of livestock losses during droughts is a major cause of childhood malnutrition. With their households constantly on the move, the payments give families enough money to survive economic downturns without having to sell off their herds. Foreign aid programs from several nations help subsidize the cost of the insurance.

Mude, 39, says his interest in finding new tools for economic development comes from his parents, who were the first boy and girl from the Marsabit district of northern Kenya to attend high school and who later helped other villagers acquire an education.

Dr Mude won the 2016 Norman Borlaug Award from the World Food Prize for his innovative program that provides pastoralists with livestock insurance.

From India, Data Intelligence Drives Microtargeted Development in 290 Villages

SocialCops partnered with the Tata Trusts and Government of Maharashtra to drive rapid development in Chandrapur. The story behind this pioneering initiative of the Maharashtra government required the data-mapping of three blocks of the district at an unprecedented level. In this remote, inhospitable setting, a mammoth task was conducted —a survey to gather data in villages on every single individual.

The objective: setting up a real-time data system that can help the authorities and communities plan at the local level according to their specific needs.

Computing power and data intelligence allows for a customizable, human centered approach to social and economic development at scale, and India, with her vast population and their myriads of unmet needs, is showing us how to do it right, for future scale.

As their blogpost says, a quiet digital revolution is underway.

From the Caterpillar to the Butterfly: Africa’s Mobile Boom Years Are Over, Here’s What Next

For the past 15 years, Africa watchers have been waiting for her mobile phone industry to reach a critical landmark – almost full saturation of the market. This milestone may be close at hand, as recent news and data show. In June 2018, Kenyan mobile subscriptions reached 98% penetration, a 13% jump over the previous year, the highest ever recorded, even with all the caveats of youthful demographics and many users owning more than one line.

And, it isn’t just Kenya, long known to be early adopters of innovation and technology. The African mobile market, as a whole, maybe reaching saturation point as the latest IDC data shows. Phone sales continue to show signs of decline. Unlike previous slowdowns of smartphone sales1 which were economy related and feature phones continued selling, this time the decline can be seen in both categories, implying the great African mobile subscriptions growth boom may now be over.

Even Nigeria, recently found to have more people living below the poverty line than India, has achieved more than 80% mobile phone penetration, with hopes that the end of 2018 will see 100%.

The number of mobile subscribers grew astronomically in 2017 and its penetration increased to 84% in comparison with 53% in 2016. With an increase in the number of affordable phones entering the Nigerian market and looking at the trajectory of growth between 2016 & 2017 (31% growth year-on-year), there is a strong indication that by the end of 2018, there might be a 100% penetration of mobile subscriptions.2

Healthier West African economies such as Ghana and Ivory Coast have already crossed the magic 100% threshold, as has conflict riven Mali.

Achieving this landmark has not been consistent across the continent, and some countries like Malawi and Chad are still below the halfway mark. However, it is known that Africa may never achieve the same level of penetration as seen elsewhere, given that 40% of the continent’s population is under the age of 163. And so, the current decline in new phone sales can already be considered the signal of a mature market, showing signs of saturation.

From the caterpillar to the butterfly

In a very short generation, Africans have gone from being mostly isolated – from each other, and the rest of the world – to being plugged in, all because of this very powerful device in their hands. The decline of phone sales, or the slowing down of subscriber growth numbers, should be cause for jubilation. The continent is now connected to the rest of the world, and Africans are talking to African across the span of mountains and deserts. Traditional pastoralists receive satellite data informing them of the best locations for forage for their livestock, and they can access insurance in times of famine and drought. Urban youth are trading bitcoins, while their mothers gather in social media groups to trade in goods and information. The entire operating environment of the African economic ecosystem has been transformed.

Where just over ten years ago, Nokia’s greatest concern was how to design ever more affordable and robust mobile devices which could connect people across languages and literacy barriers, now we have a population that has a decade of experience in information technology, regardless of their education levels. Even the most remote or marginalized have seen the phone, and can access its use, through intermediaries and access points. Digital Africa has become a daily matter of fact rather than an unusual achievement for the development crowd. You can see it in the tenor of the research articles, and read the difference between the way the growth of the mobile ecosystem was covered in 20054 and the way its taken for granted now.

The end of an era – double digit growth of the African mobile market – signals the beginning of a whole new phase of development and opportunity – a connected continent, ready for commerce and communication with the world.

Ten years of transformation

Over the past decade, mobile phone ownership has gone from a novelty to commonplace. It has bridged the rural – urban divide, strengthening linkages, both social and commercial. In turn, innovation diffusion pathways have proliferated from the urban centers, and the adoption of new ideas and goods has accelerated, changing aspirations and expectations, particularly among the younger generation. The global African does not need to leave her childhood village in order to speak to the rest of the world or be recognized for her achievements. Social media is there to give him a voice, and a platform.

It is this new reality that has not yet be recognized by the long established experts on Africa and its many varied challenges and unmet needs. The mindset, worldviews, and the consumer culture have changed far more rapidly than the now obsolete snapshot of the poverty stricken, marginalized African that media and researchers base their assumptions and their writing on. Policymakers and programme designers are even less in the know, and the gap between generations has never been wider.

On the upside is a whole new playing ground – my friend and colleague Michael Kimani calls it the informal economy’s digital generation. Young people like himself, graduating with university degrees into a business landscape without the jobs to hire them, are turning to the platform made available by their smartphones to establish themselves and earn a living. In the four short years I’ve known Michael, I’ve seen him grown and evolve into the voice of African blockchain and cryptocurrency, soon to be an educator on the subject, and already organized as the Chairman of the Blockchain Association of Kenya.

“What a great time to be alive,” Michael’s joyful voice still rings in my ear after our call last week. The digital future is all around him, a playground for him to build and make whatever his mind’s eye can envision.

The end of the world for a caterpillar (the decline of sales & subscriptions) is the birth of a whole new one for a butterfly (the global digital African with a powerful computer in his hands).

We need to throw a party and celebrate!

 

1 Smartphone sales, driven by more affordable Chinese brands, may continue to see growth, but as the IDC states, this growth may come from those transitioning from featurephones.
2 Jumia Mobile Report 2018 in Nigeria
3 The Mobile Economy: Sub-Saharan Africa 2018, GSMA Intelligence
4 Cellphones Catapult Rural Africa to 21st Century, August 2005, New York Times

Primer on African Fintech: Myths, Misconceptions, Opportunities, Hotspots and Roadblocks

As we prepare to start work for our third African fintech client, I thought it was time to quickly and briefly introduce the opportunity space and clear up some misunderstandings around fintech in Africa.

  • The first point is the common confusion between Fintech and financial inclusion. Investopedia’s definition of Fintech says financial inclusion, that is, affordable and accessible financial services to the underserved and unbanked is only one of the many areas fintech is actively addressing. While technology helps provide cheaper solutions for emerging markets such as those on the African continent, all fintech cannot be said to be equivalent to financial inclusion.
  • This leads us to a clarification on what exactly is Fintech. I prefer to quote Investopedia since the entry in Wikipedia defines it as the industry itself. “Fintech is a portmanteau of financial technology that describes an emerging financial services sector in the 21st century. Originally, the term applied to technology applied to the back-end of established consumer and trade financial institutions. Since the end of the first decade of the 21st century, the term has expanded to include any technological innovation in the financial sector, including innovations in financial literacy and education, retail banking, investment and even crypto-currencies.
  • Thus, while financial inclusion is a key untapped opportunity space for fintech innovation of all kinds, there are numerous other opportunities along the entire value chain of financial service provision both B2B and B2C, including intermediary services, which are ripe for disruption in the African context.
  • Beyond the conventional preference for disruption of the existing context, there are as many if not more opportunities for meeting the unmet needs of African businesses and consumers. History, geography, economics and conventional wisdom have together combined to create a vacuum of solutions and services that address the unique circumstances of the African operating environment which still tends to be heavily cash dependent and is described commonly as “informal”. And this commercial environment has lagged in custom designed tools and services for small business productivity or household enterprise management.
  • Hotspots: Kenya overwhelming leads in mindshare as the leading fintech innovation market on the continent, and grabs the lion’s share of investments in East Africa. However, the GSMA’s latest report implies West Africa is rapidly catching up, and may outspend East Africa. The WAEMU region is a hidden hotspot, and Ghana leads the anglophone countries.
  • The largest market opportunity, by population, remains a challenge however, for a variety of reasons including policy and regulation. Nigeria’s payments innovators have made a name for themselves but their domestic market has not felt the impact of their efforts. Even mobile money, introduced more than 5 years ago, has only achieved 1% penetration. On the other hand, it took India years and years before digital payments reached visibly transformational critical mass. There’s hope.
  • Lastly, Chinese investment has just entered the African fintech space, talking up financial inclusion – a clear sign of its economic importance for the future development of trade and industry.

Implications of Mobile Money Interoperability in Kenya?

Mobile money pioneer Kenya, has finally gone live this month with account to account interoperability between mobile money services. Neighbouring Tanzania pioneered interoperability between the mobile money services offered by local telcos with a soft launch back in 2014. Fears of cannibalization and zero sum scenarios were unfounded, as documented in an early evaluation report by the GSMA. On the other hand, perhaps that assessment of impact was far too early as little else is mentioned in the rather thin report. Fellow East African Community member Rwanda too has had interoperability for a couple of years now. Now, its Kenya’s turn.

In a market where mPesa services posted a market share of 80.8%, what, if any, will be the impact of this newfound ability to send money directly from wallet to wallet without cashing out?

Talking points in news media articles and various interested non profit bodies point to “increase in financial inclusion” and “increase in competitiveness” with lower transaction costs as the benefits to end users, but these seem to be just that, talking points.

Safaricom, the telco behind mPesa, has long maintained a stranglehold on the market, and even now continues raising barriers to frictionless payments. In the decade since mPesa’s launch and unchallenged dominance, the vast majority of Kenyans have had no choice but to set up their own account even if it means using a separate SIM*.

In a different market, such a move would be cause for a celebration- the potential benefits clearly outweighing any drawbacks to individual service operators, and the future potential for digital commerce and trade enabled by a frictionless payments platform to be realized in time. In fact, mobile money usage is only growing in both Tanzania and Rwanda, though in each the numbers of subscribers is less unevenly distributed across the telcos.

But in Kenya, beyond providing ~20% of mobile subscribers with the ability to send money to mPesa (more or less) seamlessly, the overall impact on platform and service innovation within the local economy is likely to remain limited. Providing the service takes the edge off Safaricom’s issues with monopolization of the market but will in no way change much of the daily transactional reality on the ground. Habits are hard to break. And mPesa has become a Kenyan habit.

 

*  mPesa has a penetration rate of ~81% as compared to Safaricom subscriber penetration of ~72%, as of January 2018

 

Why is the Kenyan mobile loan industry facing just a digital version of India’s MFI problems?

When you make fast, easy, short term loans available on the phone to anyone with a need for quick money, why is it a surprise when high levels of consumer debt are the result?

A recent survey by financial inclusion giants like FSD and CGAP discovers that low income Kenyans have not been helped by the plethora of easy access mobile loans introduced in the market in the name of financial inclusion and ‘access to finance’.

“The rise of the digital credit market has raised concerns about the risk of excessive borrowing and over-indebtedness among lower-income households. Digital loans are easy to obtain, short-term, carry a high interest rate and are available from numerous bank and non-banking institutions,” states the report

The same pattern of behaviour is emerging as did in India during the peak of the MFI small loan boom almost a decade or so ago. People are borrowing from one loan to pay off the other, and livelihoods are hurting while some face challenges putting food on the table. The year 2017 might have been economically challenging for Kenya, but the design of repayment plans are also a factor.

“Digital credit is not reaching everyone and remains ill-suited for most of the population, such as farmers and casual workers, whose livelihoods are characterized by irregular cash flows,” says the phone survey.

The attractiveness of the market opportunity however is such that new loans served through the mobile phone are still being launched every other month in Kenya. Whose responsibility is it to ensure that programmes meant to benefit the lower income population don’t end simply perpetuating the same problems seen before, albeit as profitably?

Mobile First Africa: Social Media’s Boost to Rural Productivity in Kenya

Now in business for just six months, he also uses social media pages to sell his products, improving his customer reach.

“Through Facebook posts I receive enquiries and orders from Kenyans in the diaspora living in the US, South Korea, South Sudan, UK, Switzerland and Botswana who want the splits to be delivered to their families in Kenya,” he said.

“I also use the page to educate farmers and friends more about brachiaria grass.” ~ How farmers look for new markets every season

Continuing with yesterday’s theme of business productivity in mobile first Africa, this story caught my attention for the way this farmer leveraged the reach and discoverability of social media to grow his business.

Social biashara such as this is diffusing outwards from the urban centers where it first began. Expect to see many more such stories emerge from the unexpected places.