Episode Transcript
[00:00:00] Speaker A: Hello, guys. Welcome to the Techpoint Africa podcast.
Your usual host, Oluwani Femi, will not be joining us today, but she will definitely be available next week. On today's podcast, we'll be discussing some rather interesting stories. The first is Tanzania's plan to ban unlicensed lending apps. And secondly, we'll be looking at Bosun Tijani's plan around recent announcement where he said Nigeria now has a startup house in San Francisco, USA. We'll be looking at what that really means and what it means for Nigeria's startup ecosystem. And lastly, we'll be looking at paystacks reports from church 23. That gives us an idea of how people use different payment channels. And as usual, I have with me Jim Gozerim.
We'll be looking at all these stories together.
All right, let's start with Tanzania. So, Tanzania is facing some issues with lending platforms. And as you can imagine, the major problem is, is these unlicensed lending platforms engaging on ethical habits of getting their money back, their money back from their customers. So they threaten, they do all sorts of things to get their money back. And the government wants to ban these platforms, right? Yes. But one thing that I'm curious about is how big of an issue is this in Tanzania, talking about unlicensed loan apps?
[00:01:57] Speaker B: Very big, apparently, but.
So this isn't exactly banning.
I guess ban is not the right word here. It's not exactly a ban. It's basically a secular by the bank of Tanzania saying don't, don't. Basically don't do business with unlicensed loan apps. And it's. The reasons are very obvious.
The same problems we have in Nigeria, in Kenya are the same problems that we face in Tanzania. Okay, maybe not always on the same scale, but it's sort of the same where you have, um, first, very low access to credit. And if you have low access to credit and economy isn't going so well, then you are almost always living paycheck to paycheck. That's even assuming you have a job. So there's a huge problem with access to credit across Africa. Tanzania isn't left out, and as a result, people are resorting to loan apps. So something I saw was the same strategies are used in Nigeria. Shaming people, calling their, calling people on their contact list, colleagues, relatives, and all of that is literally the same playbook. And he had me wondering, like, could it be just the same group of people who are running similar rockets across Africa? So, yeah, that's. That's my.
[00:03:23] Speaker A: I just remember that someone. Someone called you that they used. They used you as a guarantee?
[00:03:28] Speaker B: Yes. Yes.
[00:03:30] Speaker A: And they said they were going to post.
[00:03:32] Speaker B: Yeah, they said they were going to post business obituary. And I'm like, bro, I'm not. You like, did you know the person that they were calling me for? Oh, yes, I did. Someone I know. But that was a terrible time to call me because I was pissed off about something else. So I transferred the aggression to the person that was threatening me. She's such a badass move when you think about it. But then where was I? With Tanzania. Yeah. So you have cases where people go take loans, and then they have, like, really crazy terms.
I read of one where they basically had to pay 60% interest rate.
[00:04:09] Speaker A: What?
[00:04:09] Speaker B: Yes, they had to pay 60% interest rate. So the thing was, that person took the loan and they read the terms and conditions, at least according to what they said. They read the terms and conditions. It was bad, but they needed money badly, so they were like, you know what?
Uh, let's do it. And a couple of days later, the loan was up. They needed to repay, they couldn't pay. So those guys came for him, and he's like, come on, it's really bad. So, yeah, it's a very big problem in Tanzania.
[00:04:40] Speaker A: So I really don't see how.
I mean, if you ban the apps, but I think people will still find a way to go to this platform, because, like you said, access to credit is a very big issue in Africa. In Africa. So shouldn't the government try fixing access to credit? Which I also think there are people that can go through the right means of providing those credits, but they are also afraid that if I don't resort to threatening people, I might not get my money back.
It seems like the problem is really to tackle the access to credit.
[00:05:20] Speaker B: Yes. That's if. I mean, if you tackle access to credit, you reduce predatory lending by.
You reduce it significantly. So, yes, the government can say they want to tackle access to credit, but it's. It's tough, to be honest. Yeah, but, yeah, that's. That's one way to fix it.
One problem is that it's not just loan apps. Loan apps are very easy, which is why there's a focus on that. I don't even remember, I think two or three weeks ago on a bike, and I told you, I don't know if it was you or no. Okay. I don't know what. Yeah. Like, in our neighborhood, and I saw a small shark, maybe not exactly shark. Let's call it the small shop where someone was advertising loan services and it had me thinking, it's not just those guys with funny names on Google Play store anymore. It's also the person on your street who is doing that. Now, I, of course, I don't know the details of the operation, but they are very unlikely to be. To be licensed by anybody. And if they are unlicensed, it means that they could. I mean, we've always known about loan sharks. Loan sharks didn't come with. With the Internet, to be fair. So there are. That's another issue. But your question about fixing access to credit, I mean, yes, it's very important.
First, you need to incentivize people to lend, which means you need to build out an entire credit infrastructure a lot of people do not have access to. Like, they don't have credit. Their information on credit bureaus. There's also no. I don't know if I'll call it the justice mechanism for defaulters. And I know people say that Nigerians are bad borrowers, but I just think it's a case of no. No consequence leading to that. Because really, who do you really think wants to repay a loan when he could use his money to do something like and anywhere in the world? So I think if you had those mechanisms to. To make you pay every time you default, you could have a. You could have a better credit system. But until we fix that, and that's the problem, government keeps on saying they want to do this, but how are we, like, what are we doing? We are not seeing.
You're not seeing any concrete evidence that you're doing something. So we've talked. I mean, everyone has talked about making it harder for you to default on your loans. And can you link it to something that is very, very important? So you are owing, and then we say you can't renew your international passport, for example, or you're owing. And we say you can't. So, because you're owing, for example, we say the loan that other people are getting at the 15% interest rate, now you have to get it at 25% because you have a high, like, your credit risk or it's linked to your ability to rent a house. But to be.
Now you don't even, in fact, see, the problem is, first of all, we do not have a very good national database or national. Yeah, national database of Nigerians. We don't even know how many are in this country. Government doesn't know. We don't know how many people are in the financial system, for example. Okay. We do know that. Like, we don't. We don't have synergized data on Nigerians. And if you don't have that data.
[00:08:44] Speaker A: Is this something we can get like a private sector to fix like the same way did nibs. If you can have like someone fix something like that, like people have credit system. There's this credit current system.
[00:08:59] Speaker B: No. So, okay, yes to a part of it. We could have the private sector build out the infrastructure, but the, the part where people who default have to pay for defaulting.
How does the private sector enforce it without a regulatory backing? Because, yeah, like for example, we have GSI which the CBN bucks makes it easy for a bank or a financial institution to penalize you or to take their money back from any account. But if you don't have something similar gets difficult. So yes, the private sector can build out infrastructure, but the disciplinary measures has to be backed by regulator.
[00:09:43] Speaker A: Okay. All right. Yeah, I just, I really hope Africa can, you know, get a grip on this whole credit stuff because it will really, if you look at how easily, how it makes people outside the country, how they can easily purchase things like houses and a lot of things that they need, you see how much, how it really makes sense. And then there's also the question of people now living in debt all their life.
[00:10:15] Speaker B: Those are just those a lot of issues, different conversations. At least let us, let a good number of us have access to credit. Then let's worry about the, let's worry about debt alongside. But let's start with that.
[00:10:32] Speaker A: A quick one.
[00:10:33] Speaker B: If you're listening to us on Spotify.
[00:10:35] Speaker A: Or Apple podcasts, please leave us a review. So today's insight of the week brought to you by intel point is about how much the telecom industry has contributed to Nigeria's gdp.
So the insight says that the telecoms industry has contributed 15% to Nigeria's gdp twice in five years. Now we'll move to a recent announcement by Bosun Si Chani, the minister of communications, innovation and digital economy. So he announced something called a startup house. So this startup house is basically, it's a former, it's a nigerian property in San Francisco but now is saying.
[00:11:23] Speaker B: There.
[00:11:24] Speaker A: Has been an approval to convert that nigerian property in San Francisco and turn it into a startup house. Right? So he's saying this startup house will facilitate investments in nigerian startups because most of our investments come from the US, right. Specifically San Francisco. So we'll be looking at what exactly does this mean and how exactly does it facilitate investment in Nigeria? Startups. So single zoom.
Lester, what do you make of this?
[00:12:00] Speaker B: What do I make of it?
[00:12:03] Speaker A: Do you think it will facilitate or attract investments like the.
[00:12:13] Speaker B: I don't know, can it? Yes. So there are two different things.
The, and the reason I say it is. Okay, first of all, digital innovation exchange digital innovation exchange program digital technology Digital technology exchange program hub first of all, that name is too long and makes it difficult for me to understand what, like, it's difficult for me to say it, but yes, it's too long. So maybe you should try and reduce it. But that aside, I don't know, it feels like a sort of an unnecessary move.
Right?
And the reason I say it is, it's not exactly your place as the minister for technology, all of that to be trying to drive investments, like directly trying to drive investments mainly. So here's the thing, the idea on its own is good. When you look at it at face value, anything that increases investment and facilitates collaboration is perfect. Usually if the government is backing something like this, it kind of lends more legitimacy and the participating startups would typically take it more seriously than maybe a private sector body taking the lead on this. So yes, on the face of it, it's good. So my question would now be, are you, are we duplicating the functions of other ministries? Yeah, other ministries or other arms of the government? We have a ministry of trade.
Yeah, trade investments, I can't remember the last name, but we have a ministry dedicated to facilitating trade and investments in Nigeria.
What would their job be? Or are you saying they should do like they should facilitate trade investment in every other sector of the economy except technology startups, which now, I don't know, anywhere that goes except in specific cases. And then they're like, oh, come, let's focus on just this sector. So I think in some ways a duplication of function, but like I said, it can facilitate that. However we are, if you ask me, I will say it will not.
And the reason is that while it's a good idea, we have huge problems that are affecting the way our startups perform. And no exchange program is going to fix that. Right?
You have a situation where someone's revenues, in naira terms has grown, but because he's raising from these investors that you want to cut, he's raising from them in dollars. And now in dollar terms, his revenue has dropped significantly and something that could have taken him ten years to achieve is now going to take him maybe 1215 years to achieve. So how does the exchange program solve a problem like that? Yes, someone asked me. So do you say he should not do it? Yes, don't do it. Um, go focus on other things that can move the needle in some way. So he, alongside the startup house, he talked about the SPV for digital infrastructure.
[00:15:56] Speaker A: Yes.
[00:15:57] Speaker B: Now that is a more commendable move if you ask me, because if you improve fiber coverage or broadband coverage in Nigeria, you are directly adding more people to the digital economy. So that makes a lot of sense. But you saying you want to go cut Silicon Valley investors who are pulling back because your economy is not very good.
I don't know how you want to achieve it except you have some silver wand or that you are going to wave and then every other thing works.
[00:16:31] Speaker A: Okay. So for those that don't know, the special purpose vehicle Chingozrim is talking about is going to build 90,000 terrestrial fiber optic cable in Nigeria. So basically that means more Internet access for Nigeria. So the minister mentioned that currently we have about 35,000 fiber optic cables, but this could take it to over a hundred. Right. And then Nigeria now becomes like, um, the third. Yeah, he said become the third behind I think, Egypt and one of the african country, the third largest in Africa that has like, you know, significant Internet access on the continent, which is commendable. But going back to the, what you said about duplicating functions, I think the minister, based on his background, might know more about attracting investments for tech than the Ministry of Trade and Investments, don't you? Maybe they could come together and collaborate.
[00:17:45] Speaker B: Yes. He's going to do consulting work for them, ask them to pay. Why, is that it?
Yes, he may have more experience attracting tech investments, but really attracting tech investments is not that much difficult from attracting overall investments in agriculture.
As an investor, who is not nigerian, even if you're nigerian, as an investor, I'm looking for very, very clear things. Do you have a market? Yes, Nigeria is a market. I don't think anybody debates that anymore. But then can your market buy what your people are producing? Right. If your market cannot buy. So what do you want to do with investments? Do you want to give credit? And then people, people do what with the credit? Like what exactly are you going to do?
[00:18:37] Speaker A: The problem of attracting investments is, I think there are larger overall problems that.
[00:18:44] Speaker B: Come back to see the thing is you're operating in a terrible macroeconomic environment. And how does going from, let's say, I think nigerian startups did about 1.21.3 billion last year. But how does going investments, sorry, it was way less than that. I think it was around 800, 800 to 900 depending on who you're talking to. But how does going from $800 to $800 million to, let's say billion dollars. How does it solve the problems? This money is going to the private sector, it doesn't solve the purchasing power that we have. Okay.
Yeah. NBS released inflation numbers for just I think yesterday or two days ago for last month and I think inflation is up at about 33%.
So that means my purchasing power has been depleted further.
How does getting extra investment to one fintech solve that fact? And now all of a sudden, yes, I have, okay, startup has, the startup has money, but you're marketing to people who cannot buy. You would be your marketing guys will be doing their work and you think that they are not doing anything. But people don't have money to buy. So yes, it's good to do that. To say you're looking for investment, I can't knock the effort, but that effort should be focused on the SPV. If you increase Internet access and hopefully along the way maybe reduce the price because telcos are also considering raising prices because it is expensive for them to deliver their services. So if you figure out the way to maybe not, I don't know, I can't, I can't say that telco shouldn't raise their prices because I'm not the one paying for the services that they need to run their business. But if you can in some way get more people on the Internet, I would take that over. You trying to get more investment. Really? And yes, it's going to sound counterintuitive, but yes, please let's focus on let the Ministry of Trade and whatever do their job. Let him do the one that we they sent him to do.
[00:21:00] Speaker A: So basically, I think my takeaway from everything is it's the same problem attracting general investments, the same problems you face when you try to attract general investments, the same problem you face when you're trying to attract tech investments. It's really a no brainer. I mean we see companies having revenues depleted because of the state of the naira, insecurity, security issues, inflation. Inflation.
[00:21:36] Speaker B: Why your startups are not doing well. So well.
[00:21:43] Speaker A: Personally I really hope something changes very soon. I don't have money for Japa.
Yes.
[00:21:49] Speaker B: So I have no intention, I mean.
[00:21:52] Speaker A: If I had the money I would because it just seems like, you know, you keep hearing bad news every day, but yeah, God will help us. Are you okay? Seems like what I said really struck.
Don't worry, it will be weird.
Just keep praying.
All right, so let's move away from Nigeria and its troubles and let's talk about peace. Tax recent that report really gives us an idea into how people think about payments in Nigeria. It gave a lot of insights into which payments people prefer, the ones they use the most and things like that. I'm thinking, what. Was there anything you found really surprising in that report?
[00:22:43] Speaker B: Surprisingly, um, for me, I think it.
[00:22:49] Speaker A: Was the fact that people preferred bank transfers, which I don't really get.
[00:22:55] Speaker B: I personally get it how like, well.
[00:22:58] Speaker A: You prefer bank transfer.
[00:22:59] Speaker B: So if you, if you use a traditional bank, yes, you would not prefer it. A lot of, a lot of index are really seamless. So a bank that shall not be named. Um, for me to do a transfer, I have to open the first page, impute, I think, account number, and then they will choose the bank. Then I go to second page and I impute, like, two more details. Then I go to the third page and I impute another detail. Then I now have to go impute a password that's four pages I have to go through before I complete a transaction. Like complete a transfer that's even if loads successfully. Yeah, exactly. So however, on some apps, all I need is like just one page and I put everything, like I'm filling out a form and then hit send, putting my password or whatever, and then that's about it. So if you are doing transfers on both, on two apps that are like these different interfaces, of course, you transfer on the person with four steps, and the one with just one page is not going to be the same. So I can understand why people want to do transfers, do more transfers than cards.
However, while the data is, like, interesting, I don't think it paints the full picture of how payments, digital payments are done in Nigeria. And I say that because for a very long time, pay stacks business was focused on, you have a business, you want to accept payments online, right? So there was nothing like a POS device, for example. And if you are, if you want to accept payments online, bank transfers are like a very common way for people. It's faster than card details because, sorry, it's faster than paying with card, because now you have to. If you don't have your card at that point, I don't know. Okay, well, some people say they save their card details on their, on their phones, but if you don't have your card at that point, you have to go find it. Whereas with bank transfer, all I need is who am I transferring it to? And that's it. Copy paste. And then I'm doing it. So I can understand why people who are doing online digital transactions, I don't know. Offline digital transactions is something I be, let it not be. I'm saying rubbish. But yeah, if I'm saying rubbish, you should correct me. But I think for online digital transactions, it makes sense that transfers are a.
[00:25:32] Speaker A: Preferred method, unlike moneypoint release.
[00:25:35] Speaker B: Exactly. If Moneypoint was to do that, it would be completely different because they started with an offline approach where they were providing POS devices, for example. And with the POS device, first thing, for a very long time, you could not do a transfer to a POS device. I think it was in last year that they introduced POS transfers. So if moneypoint to do that, I think they have about a million POS devices out in the market or so.
Okay. Yeah. So you can imagine if a money point is to release that report, it's going to look entirely different.
And yes, that's how I'm looking at it. It shows us that a lot of people are doing electronic transfers, but I don't think it captures the full picture of what digital transactions would look like or look like in Nigeria.
[00:26:30] Speaker A: Okay. So I think another thing that really stuck out for me is the fact that it's really, you can't really, is there really any, should I say, predictions we can make on what payments would look like in a few years based on what Paystack released on these reports that paystack has released doesn't mean that some people using, does it mean that based on the service provider you're using, there's a payment method that you prefer?
Is there like a general prediction? We can make that. Okay. Based on this, people probably tilt more towards this.
[00:27:20] Speaker B: Okay. So I don't know that we can make predictions, but what we can do is infer how people make payments. So like I said earlier, if you are, if you go to a just right or a shoprite, for example, you may not. The chances that you'll be using transfers is probably slim compared to using your card. And here's the thing. Like, a lot of people who own bank accounts in Nigeria have debit cards. Of. Yeah, they have debit cards. Right. So many of the times when you want to buy stuff, you also go in with these debit cards. However, if you were trying to place an order for food and like online, now, if you wanted to make an order, you may or may not be with your card, which means you're going to be using, you're going to, you're most likely going to be doing a transfer. So in cases where people are not, there's no fiscal touchpoint, they are more likely to use.
Yeah, they're more likely to use transfers. I mean, it just makes sense. Like if I go to, sometimes when I go to stores, it's easier for me to pull out my card, give them savings account, and I'm paying, by the way, I don't know why they're always asking savings, but it's easier for me to pull out my card, give them and make a payment. Whereas if I have to do a transfer, I now have to start asking. And not everyone displays an account number boldly. Some of them have several accounts. And one problem too I have with the account.
The transfer bit is, yes, we have guys like up moneypoint kind of making it almost instant for you to discover. But for a very long time, I avoided doing transfers at, in fact, anytime I needed to do anything, if I didn't have my card, I would not, I would not make a payment because card payments can. They are instant.
The person who you're paying to gets it instantly. But with online transfers, God help you, you're using certain banks. Your online, your transfer could, sorry, did you say 15 minutes? Maybe getting the transfer may be getting to the best city next year. I mean, um, you've probably tried to pay for Uber with transfer, and then you're sitting down in the car and maybe the issue was so cold you wanted to get down, but you cannot get down because if you, you get down, it's going to look like you want to run. And you cannot be embarrassed in this Lagos.
[00:29:52] Speaker A: Before people know what's going on.
[00:29:54] Speaker B: You can't take that chance.
So I think it depends on the kind of transaction that you're making.
[00:30:05] Speaker A: The funny thing is that for me, even though there is no physical touch point, still prefer maybe because, maybe, because maybe it's based on the type of online transactions I do.
[00:30:17] Speaker B: So you prefer transfers?
[00:30:20] Speaker A: No, I prefer card. So, on a lot of platforms, on global, for example, I already have my card on global.
[00:30:29] Speaker B: Okay.
[00:30:29] Speaker A: So I don't really.
[00:30:31] Speaker B: I like that you have mine do, which is another part of the problem.
[00:30:35] Speaker A: Okay.
[00:30:35] Speaker B: Or I don't know if it's a problem, but it's under part of what informs how, how people pay. Right? So, um, when I got a boat, like when I signed up on boat, um, I used it for like, maybe a few weeks. Nothing. There was no problem. I put my card, actually, um, I use it for a few weeks. There was no problem. But then one day I, I booked a ride and the ride never, it never happened. But later on I got like, I was debited and, sorry, not, you can't possibly be debuting me one, five, for which time this was 20, 2021 or 2022. Right? And they debuted me. For whatever reason. I tried to dispute it, but the, I don't, either I wasn't explaining myself well, or the person just did not, did not get what I was saying. But then I was like, you know, let's read. I don't have the, I can't be doing this for so long. And my decision was, you know, let's just take my card out. I'll do transfers whenever I have to use boat or Uber.
It's been two years now. My card has not entered that platform again, like, not even for a few days.
So that's the same, that's the same behavior I have across every platform that requires me to put apart from, let's say, my subscription, my subscriptions. Because I don't want a situation where I hear that the card did not work, because you know how virtual cards can be.
Except those cases where you don't know whether the card I work today will work tomorrow. Those ones, I just keep the card there so that I don't have to hear stories. But when it comes to service providers Nigeria, my card is not there. And I suspect that's the same, uh, I don't know about that. I suspect it's the same scenario for me because I've had people who complain that my car doesn't in this platform, the service wasn't delivered and I was still debited. So I think, I mean, there's a whole lot of, it's a nuanced conversation, to be honest.
[00:32:48] Speaker A: But if I, if I would guess right, right. If I would make a prediction based on what I've heard a lot of people say, based on what you've said, I would say that anything like you said, when there's no physical touchpoint, when it's an online transaction and you have to pay online.
[00:33:07] Speaker B: Yeah.
[00:33:08] Speaker A: I think most people will tilt towards transfer. I think we'll see transfer grow in that, on that end, and we'll see card growing when people go to, like, a store, for example. I think, I think that's because it just makes sense because I don't want to put nobody out of mind like me and put their card on global. And one day you just see.
[00:33:30] Speaker B: Yes. So, okay. Especially for this, like, service providers, one problem is, what if you don't get, like, satisfactory service? I could hold back my payment. If you're doing pay on delivery, maybe you deliver food that I did not ask. You can hold back my payment. But if I have already made a card. Like, if my card was there and you've already paid me for, like, I've already paid you for it, then I now have to start doing a lot of back and forth to get my money back. And to be honest, I don't have this time for that.
[00:34:00] Speaker A: All right, so that's all we can take on the podcast for today. I hope you find, I hope you found it very interesting. There's a lot of stories, a lot of things happened in tech across Africa this week. Just go to Techpoint Africa and you see tons, loads and loads of stories and things that happened. Another way to, you know, stay abreast of everything going on in tech in Africa is to subscribe to our flagship newsletter, the Tech Point Digest. It's a newsletter that comes into your email 05:00 a.m. In the morning and tells you everything that happened in tech the day before in a very interesting and, you know, in a manner that I'm sure you really enjoy.
If you don't really want everything tech, you don't want the old general tech info, you can subscribe to Equity merchants. If what you want is you want to know about startups, you want to know about investments, equity merchants will give you enough info about that Tim Gozim uncles, that newsletter and yeah, he really knows what he's talking about. If your own, if your concern is about work, you want to work in tech. You're an employer, you're an employee. You want to know what the latest trends are when it comes to, you know, employing staff or getting hired or what you sign, what you should not sign. Pitch a tent with Oluwani Femi. She has a newsletter called Workplace african newsletter that will teach you everything you need to know about that.
Yes, for all our listeners, listeners, whether you're listening on Google Podcast, Apple Podcast, Spotify, anywhere, please make sure to share this. Like it it. Leave a review if you can and let other people find this podcast. Thanks again for joining us today. My name is Bolu and I will see you in the next one.
