Digitizing Community Banking with Kwara's Cynthia Wandia

February 18, 2021

In this episode, we talk about savings and credit cooperative societies, or SACCOs, and the outsize role these member-owned community banks play in African and emerging markets. While millions of Africans belong to SACCOs, it's an industry that Kwara's Cynthia Wandia calls "as analog as it gets". Kwara is a Kenyan startup building software to digitize SACCOs, and in this episode, we talk to Cynthia about the role SACCOs play in these markets, the product and design principles employed to ensure proper utilization of the platform, Kwara's impact for members, the company's origin story, and more.

[04:23] - First question, what are SACCOs, and why are these types of member-owned community institutions so prevalent in markets like Kenya?

[10:20] - An introduction to Kwara and its products.

[16:54] - What product and design considerations went into building Kwara to ensure high utilization of the platform?

[21:06] - On Kwara's SACCO onboarding processes.

[27:42] - We explore Cynthia's background and Kwara's origin story.

[36:34] - Looking ahead, how does Kwara look at product and geographic expansion, and the opportunity to be an embedded finance platform?

This episode is part of our conversational series sponsored by MFS Africa. MFS Africa's competition is with cash, and throughout this series, we'll feature other startups and entrepreneurs who are digitizing, better organizing, and aggregating analog and fragmented industries.

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Cynthia Wandia [00:12]: Everybody wants to serve the underbanked, but it's super difficult to get to that last mile.

Justin Norman [00:17]: That's Cynthia Wandia, the co-founder and CEO of Kwara, based in Nairobi, Kenya.

Cynthia Wandia [00:22]: And what we're doing is making building wealth together frictionless. And we're doing that by digitizing corporative financial institutions, which are sort of, member-owned banks or small versions of banks where people can pool capital together in order to lend it back to their members or make investments together.

Justin Norman [00:43]: These savings and credit cooperative societies, or SACCOs play a large role in the lives of not only Kenyans or Africans, but also groups of people across both the global South and developed countries, who are brought together by a common bond, such as their occupation. And in an environment with low formal banking penetration, SACCOs are a great vehicle to reach and service a hard-to-reach end consumer. However, these organizations also lack infrastructure.

Cynthia Wandia [01:07]: SACCOs have pooled people together, but then it's super difficult to deliver any value to the institutions or their members in the absence of any infrastructure.

Justin Norman [01:17]: Cynthia and Kwara are doing just that. Building the software and digital infrastructure for SACCOs and their members. As we continue our exploration into the entrepreneurs and startups digitizing formal and analog industries, this episode takes a deep dive into how to build products for an industry that Cynthia calls as analog as it gets. Cynthia and I talk about the role SACCOs play in the markets in which Kwara is operating, we talk about product and design, user onboarding, embedded finance, and more.

Justin Norman [01:43]: Before we start, we'd like to thank MFS Africa for their sponsorship of the entirety of this conversational series of episodes. Last season, we explored the MFS Africa acquisition of another fintech, Beyonic, a startup building multi-market digital payments tools for SMEs accepting mobile money payments across the continent. And together the combined company is making it easier to make and accept payments across the fragmented mobile money and banking ecosystem on the continent. So to get an idea of the impact, I talked to Maria Nantayi, the finance manager at the global NGO, Save the Children in Uganda. Before Beyonic, Save the Children, had to hire drivers and security to send physical cash for projects across the country.

Maria Nantayi [02:19]: If you were to get a vehicle to go and transport a lot of cash to a particular area, you need to get someone to drive it. You need to get fuel for that vehicle, you need to get security. So it's a lot cheaper. Looking at the work involved in the hiring of a vehicle to transport money, that was an additional cost, of which just looking at if we were to make an online payment that would come at close to, let me say, less than 1% of the cost that was incurred. I don't want to limit it to just the cash or the outflow, but looking at staff safety, looking at the real-time nature of the transactions, there is less fraud involved. Less or even actually none because you're able to reconcile your accounts and everything. So it's cheaper in that whole aspect.

Maria Nantayi [03:06]: We actually started going digital, that is using mobile money, around 2015. The main thought process, the thought process really behind this was Save the Children was growing. The numbers were growing. And in very many instances, dealing with so many people, money passing through different hands was also a hindrance. We wanted our donors to have that confidence that this money is reaching these people that it's intended to reach. So basically we just wanted to make our systems more transparent and more attractive to prospective donors, but also to ensure that our beneficiaries were reached real time, to ensure that we didn't have any breakages in our service delivery.

Justin Norman [03:48]: Later in the show, we'll hear more from Maria on the needs of small businesses and nonprofits like Save the Children in Uganda. One more thing before we start. Every Sunday, we publish a weekly newsletter called The Flip Notes in which we share bite-sized insights and thoughts from around the ecosystem. If you like the podcast, we think you'd like the newsletter as well. You can subscribe at theflip.africa/newsletter. Now without any further ado, here's Cynthia Wandia.

VO: You’re listening to The Flip. The podcast exploring more contextually relevant stories from entrepreneurs around Africa.

Justin Norman [04:23]: I'd like to start before we get into Kwara and before we get into the product and the business, talking a little bit about the landscape in which you're operating and the market in which you're operating, and the importance and impact of accessible financial institutions like SACCOs and like community banking and member organizations that you're serving. So can you tell us just a little bit about the landscape in which you're building your business?

Cynthia Wandia [04:48]: Sure. So we're operating in a context where at a broad level, over three billion people have reduced access to financial services. You could say they're un or underbanked, but more specifically there's a context where people turn to alternative financial institutions to access those financial services or to get their needs met. One example of this is the savings and credit co-operative, which just sort of allows people to pool their capital together, as I said to be able to share it out. And this is in the context of where the penetration from the formal financial sector has not gotten as far as people would like. It also in a context where a certain infrastructure has not reached the farthest corners, let's say of every country, and where as well alternatives to finance have usually turned out to err on the slightly more predatory side because as you can imagine where there's an unmet need and a relatively weak level of financial security, it's a bit prime for some predatory options.

Cynthia Wandia [05:52]: So within that context, we find people coming together and trying to build their wealth or build their financial situation up. And within that context, we just saw a gap between the evolution of technology across multiple sectors, including the formal financial sector, and this particular, let's say cooperative financial sector.   What we're looking to do is just close that gap.

Justin Norman [06:17]: So savings organizations and cooperatives, what did they look like in terms of the member makeup, in terms of how they are run? And maybe we can then use that to lead into the opportunities that you shot to build technology and software to further enable all that they're doing as well.

Cynthia Wandia [06:34]: So what that looks like is a group of people with something that brings them together, what they call a common bond, will find each other and come together to achieve a common goal. It could start off as obviously, or as simply as a group of farmers of a certain crop in a certain region coming together to invest in some joint infrastructure, like a tractor or a coffee washing plant. And that joint structure, that joint organization, also becomes a vehicle possibly to access markets together because they might be small holder farmers. Over time, they can evolve to enabling circular or shared, pooled access of services among the members. And over time they can even open up that membership to, let's say, members who are not part of the original common bond.

Cynthia Wandia [07:26]: So a typical savings and credit cooperative, now taking Kenya as an example, you might find one that started off as the cooperative for all teachers in a certain region. They pool their money together. They save and they borrow. And over time they've grown to a membership exceeding, a couple of thousand or tens of thousands of people, primarily teachers, but also other people in the areas that they operate. And those members are able to access services like, well, they're able to save, that's usually the prerequisite, but they can access affordable loans as well as the joint investment opportunities offered by the SACCO.

Justin Norman [08:04]: And the types of interest rates or from a lending perspective, it's much better or much more accessible and affordable than a typical bank in Kenya. Is that accurate?

Cynthia Wandia [08:16]: That is accurate. And that's embedded in the nature of a SACCO or of a cooperative because it's owned by its members. Part of your savings actually goes towards buying you a little bit of share capital within the organization. So you become a shareholder. And what that means is that, you as a depositor and you as a shareholder, you're the same. And that creates a sort of incentive-aligned financial institution where the interest rates will never go below what is required to earn some income for the shareholder, which is paid out in the form of a dividend at the end of the year. But also never go too high, so as to present the borrower, who is also a member, with an overly expensive interest rate. So it sort of keeps this natural check and balance. And as a result of this, one, the members do get, let's say the SACCO is almost like a nonprofit, all of its profits go back to the members.Cynthia Wandia [09:13]: But at the same time, this is also the reason that keeps them a bit resource-constrained. Because unlike banks, they're not necessarily generating the high amounts of revenue that can just go into the institution itself and pay for a super expensive digitization and so on. They also individually, keeping in mind they're made up of the people with a certain common bond - it could be a group of teachers or a group of farmers or employees of a certain sector  - they might not necessarily have experience in running a bank. It just, over time, capitalizes enough such that it's operating like a bank. But it doesn't necessarily have the sort of inbuilt technical and financial know how to run it.
Cynthia Wandia [09:59]:And those resource constraints from offering affordable loans sometimes do come back and limit the options they have to advance in terms of being able to afford the latest tech or the latest core banking or the latest mobile banking or the latest credit decisioning, right? So it works for the members, but to an extent.

Justin Norman [10:20]: Well, that was a perfect segue. I'd love to get right into Kwara and how you are helping given the context that you just shared. So can you talk a little bit about the business and the product and the gap that you're filling there?

Cynthia Wandia [10:31]: Sure. So what we noticed is we've got the banks on one side, you've got the much smaller, informal investment clubs, we can call them, on the other side. Maybe a group of five to ten members who meet regularly in a social context and sort of help each other out with finances. And in between there is this cooperative that is semi-institutional or completely institutionalized, but not necessarily operating at a bank level. And the solutions for them to improve service delivery or make better decisions or secure their members data and secure their members funds, the options available are just not as robust as are available to a bank. And certainly not as affordable.

Cynthia Wandia [11:13]: So what we decided to do and what we brought to the market is a way for the cooperative to actually turn itself into a digital bank by using our platform, which means that the institution itself can automate its operations in terms of CRM and member origination and loan origination, portfolio management, but also at the member level, they actually have their account in their hands. So anyone who's used mobile banking from your regular commercial bank might take this as a given. But the alternative was that someone wants to deposit money, they have to head out to their nearest branch, which could be a couple of miles away. If they want a loan, there's this paper process, they might have to wait a couple of weeks for those to be processed.

Cynthia Wandia [12:01]: And we just wanted to take all the advancements that have happened in tech - especially around SaaS and the affordability of that level of pricing, as well as the benefits of data analysis that happens when you actually properly keep records - and provide this to the SACCOs, so that they can enhance the delivery of services to their members, but also over time grow, become more investible, become safer, and ultimately just encourage people to join and build their wealth together. So that's sort of how we saw an opportunity to participate in the market.

Justin Norman [12:41]: And in terms of impact, there was a stat you have on your website comparing, I think it was using Kwara versus Excel, you talked about there being 30% more efficiency, or I think one of your users said that there was a 30% greater efficiency when you went through Kwara. Can you talk about what does that actually mean to be 30% more efficient? And what does that mean, I guess, downstream to the members as well?

Cynthia Wandia [13:02]: Yeah, so there's a number of ways we've measured the pure return on investment from the platform, but as well as the additional impact on the member. So there's some things like member applications. Being able to just review, well, facilitate a new member joining, the application process - the KYC process, verifying them and approving them and opening the accounts - which for some of our smaller SACCO customers would take, on a good run, maybe a week or seven days. And we've been able to automate that down to about 15 minutes. It's the same with loan origination, loan processing. And so just even in the back office, the ability to be able to pull all the member’s historical records and past performance and provide that to the appraisers, to make a decision, cuts down the amount of hours spent by an accountant where they usually would have to spend a whole day down to also within the half or half of an hour.

Cynthia Wandia [13:59]: And these costs, or let's say these time savings directly translate into a cost-saving because what we've seen for staff is while the cooperative is able to actually bring on a number of staff, most are usually tasked with just trying to process clerical work and don't have the opportunity to actually engage with the members and identify any gaps, innovate around new products and generally serve them better. So those are some of the efficiencies that we've measured. At the larger co-operative level, moving from on-premise server infrastructure and support-based pricing and huge upfront costs where they have to block out chunks of their CAPEX in order to just afford some kind of a system, all of that has gone away and they can subscribe and basically pay as they would a utility and preserve their capital to lend more to the members.

Cynthia Wandia [14:54]: And then that's where we see the benefits directly to the members. So if it was taking you a week to start saving and now it's 15 minutes, if your loans used to be processed in a couple of weeks, and now it's down to a couple of days or even instant, if the SACCO offers that product. And there's a huge impact on your well-being, because it's your most affordable source of financial services. And what was happening in the absence of that kind of digitization is they'll go for the next most available option, which could be a digital loan. But when we look at interest rates hovering anywhere from 150% APR and up, you see that there's a risk for sort of falling into a debt spiral, just because at the point of your need, your SACCO wasn't able to be there for you. Even if it was willing to do so. So those are some of the benefits the members have seen - just an exponential increase in the service delivery, which also has the benefit of knocking out predatory and more desperate measures that they've had to turn to before. But as well, we're formalizing their financial activity.

Cynthia Wandia [16:00]: So prior to Kwara, the SACCO may be keeping files. A member might have a really stellar record, but it's almost not legitimized because it's not accessible, it's not auditable. It's not very visible. And now what we're able to do is with the consent of the SACCO and the member, we can create and make available the financial profile of this member to third parties. So all of a sudden, your history in the SACCO, your good behavior in the SACCO becomes valid and you can transfer that. It becomes an asset in a way. So you can go to a third party and either get, it could be a different kind of investment opportunity. It could be a different kind of source of credit, but all of a sudden, because it's coming from a platform that's verified and trusted, your financial history also becomes legitimate.

Justin Norman [16:54]: From a digitization of analog products and services perspective, and that's sort of what the series of episodes is about. Like on one hand, there's maybe this lazy narrative around, well, mobile connectivity or digital literacy and some of these barriers to adoption. Then on the other hand, there's just people building bad products, right? Can we talk a little bit about, it seems to me like this is a product where if you just build something that actually fits for the type of customers that you're servicing and knowing that their needs are different than a bank's needs, for example, that is obviously easier said than done, but can you talk a little bit about that? What went into designing a product that would have the type of uptake that you're seeing, and are there certain considerations or certain things that your customers were telling you or have been telling you that went into the design of the product that has made it work well.

Cynthia Wandia [17:50]: There was indeed a ton of user research, customer research all the way from just sitting in a SACCO and just watching and seeing how long does it take to get things done, hearing how people interact with each other, between the SACCO and its members, between members themselves and so on. And it was really important for us to contextualize that within the product, because there's certain operating conditions that we had to take into account. As I mentioned, the membership, and therefore even the board of a SACCO might not ever have had a finance or banking background, per se. As I mentioned, if it's a group of teachers, if it's all people working in the public sector and so on, their common bond is one thing. But it's typically very parallel or separate from having a pure finance background.

Cynthia Wandia [18:40]: So we really had to contextualize the fact that within a non-banking environment, really core banking activities are happening. And how can you reconcile the two? How do you reconcile that cooperatives are much more member-focused than a bank might be towards its customers. The process of advisory, and then origination of a loan, or even what happens when a member is not able to pay. It's a completely different process than what happens in a bank. Same with the fact that cooperatives have or allow for social capital to be presented in lieu of assets. So if you can get a couple of other people within the cooperative to sort of guarantee you or sign off against you, you can actually access some leverage beyond your current assets. And that's really quite powerful because if you imagine someone who's completely asset poor, all they have is like the people who know them and what they're trying to do, and they kind of help each other get out of the situation they were in before.

Cynthia Wandia [19:44]: All of those are what we had to take into account, while never losing sight of the fact that, especially as they institutionalize, there's always a sort of long-term dream, maybe goal for a SACCO to become a bank. And a bank just more in the formal institutionalized way versus in the incentives actually diverging. So that's why we had to marry a product that was sophisticated enough, that the customer could see that if they achieve their ambitions and grow, that this product was fit for them. But it still met their needs as per where they are now.

Cynthia Wandia [20:23]: And the way that we were able to do that, not only from a pricing model perspective, but also just like from a design perspective is be able to show the example of, look at a very large co-operative, tons of assets, tons of turnover, tons of staff, and look at another nascent co-operative getting started, growing fast. But still getting, you know, on its feet and both of them are using our platform. So that's for us the proof point, let's say that we were able to sort of marry that balance between building something specifically for the SACCO sector, but also not excluding the sort of ambitions that they may have to turn more and more into formal financial institutions.

Justin Norman [21:06]: From either a product perspective or a design perspective, or even an operational or service perspective, are there any things that you've had to do that are unique or that are worth sharing in terms of onboarding, for example, this group of teachers or this group of farmers who, as you said before, may not have had like formal financial experience. I guess you wonder about the difficulty of utilizing a more sophisticated product when they weren't using anything prior. So what does that experience been like?

Cynthia Wandia [21:39]: I think the biggest strides have been made in the design territory because especially as trying to build a product-led company than most of our intentions and decisions are captured and expressed through the product, because if we design it poorly, we just create this high volume of, or high support requirement, let's say, which is sort of a barrier to scale. So it started off with the design, like very crisp design principles that took into account that the individuals using it, much as they've never run banks before, as with many people, they are interacting with the number of digital products. And many that they'd never had to be trained on, right? So maybe nobody taught them how to use WhatsApp or nobody taught me how to use Facebook or all of these different things. And we tried to look at what are some of the principles that make it possible for someone to actually learn how to use it and what is expected of them. And so that shows up a lot in the copy, in the workflows, in the error handling such that it becomes a safe environment to actually just execute on your task. Where your task is already defined even outside of the platform.

Cynthia Wandia [22:57]: So if before they were doing a certain level of accounting or they didn't understand how to run the sort of deposits and so on, all we just did is make the platform easy enough to use that there's just not a risk of that kind of failure. And when there's a risk of that, we just reinforce what intention, just double-check with the user, what they're trying to do and so on. So we could solve a lot by that. The second part with the onboarding is also quite critical and that's what has evolved for us the most over time, because it's started off being very much an exercise where we're getting to know the situation that they were in before. So you've got files, but you open some of the files, maybe they're empty, or you've got tons of Excel sheets, sort of fragmented and not really in one place.

Cynthia Wandia [23:23]: The second part with the onboarding is also quite critical and that's what has evolved for us the most over time, because it's started off being very much an exercise where we're getting to know the situation that they were in before. So you've got files, but you open some of the files, maybe they're empty, or you've got tons of Excel sheets, sort of fragmented and not really in one place. And over time, it's evolved into a very joint goal between us in the SACCO, where we've put in a timeline, we've got the sprint period of two weeks of which we both commit to like a pretty intensive, let's say 48-hour session, where we just tried to do that heavy lift together because unlike maybe many products, for this type of utility platform, the value is seen after quite a bit of heavy lifting. That first benefit is really seen when an application comes in and you can like click and approve it. But to do that, you do need all of this historical data in and so on. So that was sort of the next aspect is just like jointly taking on this migration or this shift together. And then underlying all of that has been a very high touch approach to training, which we feel is just valuable at the beginning, especially it's still a learning process for us.

Cynthia Wandia [24:41]: But it's helped to build the confidence that as a SACCO, I'm not too small to think about having a digitized platform. And for a member thinking like, well, there's no reason why I can't get instant loans from my SACCO, because my money is there. And they're willing to lend it to me. So Kwara is sort of connecting my goals with what the SACCO was anyway there to do. And all of that has been handled a lot through messaging as well prior to launching any kind of mobile banking with a SACCO. There's a period of time where we sort of communicate with the members and tell them, "Your account is now going to be in your hands. All of these things that you need are soon going to be available to you. And this is a good thing." It's a bit of a journey and every day we work to optimize it. But it does require just a lot of, yeah, there's a fair amount of teamwork, let's say, involved in making sure we get to achieve their goals.

Justin Norman [25:38]: Does that sort of requisite heavy lifting though, make a sale harder? For example, I mean, I'd imagine that the switching costs, even if the new option is so much better are quite high, right? So does it create a barrier to entry, so to speak?

Cynthia Wandia [25:54]: It does, on the one hand, that's also what makes it quite an attractive market as well is the switching costs are high. So if you do have a higher, you've got to climb a slightly higher mountain, then you're a bit more defensible there. But with the SACCOs, the beauty is at the end, when you can deliver direct value to the member. Remember the member is the shareholder. The member has a pretty powerful voice that they can, and often exercise on a regular basis, but even, especially on an annual basis where they sort of have a say in who the management of the co-operative or the SACCO will be, make any decisions if needed, like sometimes they might decide collectively, “We actually need to digitize. I can't keep coming and walking 20 kilometers to get loan. We need to solve this.” And what has helped us a lot is, as quickly as possible, showing that value to the member, because then the member immediately sees, “Oh, this is why this is a great idea for our SACCO to get this because I will directly get this benefit.”

Cynthia Wandia [26:59]: And I think that that's different from what had been done before. Before the benefit was largely limited to the staff at the cooperative. And they would then have to have that sort of mental reconciliation of the effort versus the benefit. But now we add a certain layer of persuasion, let's say from the member side where it then becomes worth it to invest in switching however that looks, even if it's from files or Excel, or like a legacy system or a competitor, there's that extra persuasion from the members where they say it's going to be worth it. Even if it costs us a little bit more in the beginning or takes a bit of time from our staff, it's going to be worth it to me as a member.

Justin Norman [27:42]: Yeah. So switching gears a little bit, I'd love to just chat a bit about you and your background, because I know that you had done some things in energy in the past. You're sort of a multifaceted entrepreneur. I'm curious to hear the origin story of Kwara and how you decided that for your next thing, that this was the problem that you were going to solve.

Cynthia Wandia [28:03]: Like most stories, it's got a long beginning. I think the easiest is or the fastest route to it is just having an opportunity to explore the intersection of entrepreneurship and at least what at the time was called, just social activities, let's say. So I had a period of time after college, where I had the chance to do that, which took me all the way from China back to rural Kenya then to Mexico. And after those two years, I was a bit of the opinion that perhaps it would have been valuable to join a sort of corporate or formal professional program that I could pick up certain levels of skills around business, as I understood it at the time, which I could then later actually translate towards solving a problem. And that's how I spent about four years with an energy company.

Cynthia Wandia [28:57]: And then around the time those four years ended, there was an opportunity to take on my first real attempt at entrepreneurship through a corporate venture capital program. That opportunity was actually in the form of an advisory business. So I co-founded or founded at the time, got some partners after, but I founded an advisory business that was looking to make it more affordable for power project developers across Africa to just get their projects over the line that'd be stuck for ages. And typically it was around the cost of assets. Now did this for three years, typically spending a couple of weeks per month in a different country in Africa, just trying to really get these projects over the line from an advisory perspective. And that was the first point where I realized, one, there's a limit to how much an advisory or consulting business can scale and two, sort of hitting the barriers of what it takes to actually carry out successful infrastructure projects in Africa, especially at the timeline level.

Cynthia Wandia [30:04]: So I think those two realizations are what made me pivot towards wanting to be more involved in a product-based venture, venture is not the right word. It's just like, I just thought it was possible to solve problems better and more at scale from a product basis than from an advisory basis. And two, just being open to other sectors than purely infrastructure and especially energy. And now the interesting thing is I'm back to infrastructure, but more tech infrastructure and building rails that allow this sort of transactions and financial services to get more accessible. But it's far more scalable than what I was doing before.

Cynthia Wandia [30:44]: And the story of Kwara and why I picked this particular challenge, it was a joint effort between myself and a co-founding investor who was looking at how we can actually improve the supply chain for smallholder farmers like coffee farmers.A nd why was it that they got $1 per kilo for their coffee, but then it was far more expensive when sold abroad. And in the course of looking at that problem  - which was particularly interesting for me because my grandmother, from my mom's side is a coffee farmer, a smallholder coffee farmer  - in looking through that problem, we identified the co-operative as the sort of first line of defense that someone like my grandma would have to access market, to access credit when she didn't have it, to maybe access investment opportunities. And then when we zoomed out and saw that this institution or this communal institution exists globally, and it was suffering from some of the inefficiencies that can be well solved by tech as it is now, and as it's evolving, so better internet penetration, more mobile, better money transfer and so on, then we thought, why not? Let's strengthen the co-operative with the view that it will have a direct impact on the people who rely on it, so the members, because of that incentive alignment. So that's how we came up with Kwara.

Justin Norman [32:08]: And so in the case of your grandmother, for example, or a comparable smallholder farmer is the hope or the goal that they will be able to access financing easier, for example, and they can scale, or they have more pricing power with their distributors. Or what's the outcome, I guess, the solution to the problem that you were discussing earlier has changed a little bit, but what's the sort of desired end state here?

Cynthia Wandia [32:31]: Yeah. So it's not so much that it's changed as it has a number of steps to get there, where we saw that just by making that first layer more robust, more auditable, more investible, and more linked with the formal sector, that we could then enable additional value to be created along those different verticals. So much as we might want to support a smallholder farmer to be able to access or demand more value from their produce, it's very difficult if there's not a clear way to, for example, demonstrate the quality along the whole production chain up until the point where those goods are sold and proven. It might even not be possible.

Cynthia Wandia [33:18]: So the other way could be what if my grandmother and her cooperative actually were able to own a roastery near Hamburg after her coffee has gone, and it's gone as a non-food product and it's been accepted, then it's washed and roasted and a good chunk of the value then gets realized, is it then possible for her and her cooperative to own that, and therefore participate in that value? And taking it backwards, then how would her cooperative ever be able to do that? They would have to be particularly investible by third parties for- and non-profit partners who see the value of making sure that the producers get their fair share. But the only way they would be investible is if there's a good way to actually track and trust the financial and operational processes of that cooperative. And the only way that exists is if the cooperative actually has the means to make that kind of transparency and accuracy possible. So it does come full circle in that particular case.

Cynthia Wandia [34:27]: We did see an opportunity for a broader scope where if we can make all, any group of people who want to build wealth together, if we can make it particularly easier for them to do that, then a lot of things can happen because for people to build wealth together, typically, as I said, the incentives are kind of on the same page. Either because they have a common bond and common experiences, or because they actually are participating in the benefits that they themselves are sort of enabling. So by building that first layer, it does become possible to enable or facilitate more value to be transferred to people who as a primary source will rely on an institution like a cooperative for their financial needs.

Justin Norman [35:15]: Yeah. And this is sort of implicit and goes without saying, but a huge benefit as well to the route that you've taken is it's a B2B2C play as well, right? So rather than having to touch everyone directly at the last mile, you can work with these cooperatives who have 10,000 or more members and a thousand people without having to deal with 10,000 people.

Cynthia Wandia [35:35]: Exactly. It does help us to actually deliver value faster by first providing value to the institution itself. So we digitize how the institution works. And as soon as that's done, with just a simple SMS send out of a link, all the members get online banking. And then the reach expands a couple of hundred or a thousandfold, which is quite powerful. It also with B2B, you have to demonstrate and provide value really quite soon and upfront. And especially because it's monetized, it also helps us, like you mentioned, there's a defensibility around the stickiness of the product. But it does also make it a bit harder to start off. So we have different challenges than a pure B2C company, but at the same time, we get to enjoy some of the benefits of a B2C company while also harnessing some benefits of B2B.

Justin Norman [36:34]: Definitely. And on a go-forward basis, what types of things are you thinking about? Be it geographic expansion, and I believe that you're looking outside of the continent as well, so I'd love to hear about that. Also, product expansion, adding additional products or services to the platform, depending on what sorts of things your customers are asking. But what are you thinking about for the near term and perhaps long-term as well?

Cynthia Wandia [36:57]: So from a geographical perspective from day one, we had a thesis about the similarities in both ambitions and goals, as well as pain points of the community or cooperative financial institutions. And we started to investigate that thesis as quickly as we could. And so we are very keen on markets outside of Africa, very broadly within Southeast Asia and as well as within Latin America, where we see a similar situation of commercial banks just having their relatively limited reach and then a gap, and then people kind of pooling together to help each other out. So we've been looking at whether just making sure we validate that the problem set is the same and therefore the potential for scale is the same. And I've always been a proponent of the earlier you innovate the easier it is to innovate, I think.

Cynthia Wandia [37:52]: Same with launching products, so we have three products starting off like there is the Core Banking and Core Admin platform for the institution, there's online and mobile banking through many channels for the member. And then there's access via an API for either anyone who wants to serve the sector, but also for any institution that wants to actually expand or customize its offering, we've open up our platform for them. So the earlier you innovate, I mean, you just learn as quickly as possible what it means to look for a new opportunity, serve it within the same scope, obviously, without losing focus on your core. Some of the things we'd love to see and enable and are working to do so is just, I think the value in making the co-operative financial sector attractive for - it is attractive - like everybody wants to serve the sort of under-banked, but it's super difficult to get to that last mile, as you said. And the cooperatives have already, sort of, SACCOs have pooled people together. But then it's super difficult to deliver any value to the institutions or their members in the absence of any infrastructure.

Cynthia Wandia [38:30]: Some of the things we'd love to see and enable and are working to do so is just, I think the value in making the co-operative financial sector attractive for - it is attractive - like everybody wants to serve the sort of under-banked, but it's super difficult to get to that last mile, as you said. And the cooperatives have already, sort of, SACCOs have pooled people together. But then it's super difficult to deliver any value to the institutions or their members in the absence of any infrastructure. So by building this level of infrastructure, we also do want to already show and enable that, it is quite attractive to offer something through us that can then be distributed to all the institutions and their members. And that can be agnostic to the core. Let's say the core functions of the SACCOs around savings and lending. But there's quite a few other needs that the members could have either that they've just not been able to take to the next level, could be just better credit scoring, could be insurance, could be all sorts of things that. We would love to facilitate anyone who's thinking about innovating around that space, just as attractive as it is to innovate for sometimes banks or companies and so on, we want to make it as easy and attractive to innovate for the SACCO sector globally, because you can actually access that market through the infrastructure we've built.

Justin Norman [40:01]: I didn't fully appreciate at the beginning, you saying, turning a SACCO into a digital bank until just then, because you think about embedded finance and the opportunity to leverage the brand and the trust at the consumer-facing level, and then you be the infrastructure underneath and maybe this is my own fault, but a lot of times I think about those consumer-facing brands being like the ride-hailing companies, for example, or other fintechs who are taking their own sort of API-first approach to serving customers. But it's very clear now based on everything that you just said, that even the most analog of consumer-facing organizations like a SACCO, if provided with requisite infrastructure can actually be an embedded finance player as well.

Cynthia Wandia [40:49]: Absolutely. And I think once we also prove it, as we continue to prove it with this particular sector, which is in some cases really as analog as it gets, where you've got people meeting, 30 people and a passbook and it is analog as it can get. And if you leverage what exists, mobile penetration, all these things, cheaper data, all these, you can actually provide that platform for yourself. But as well as others to embed and deliver their services and the conversation stops being around, would the uptake be there. Because I feel like take insurance as an example. The penetration is so low and I've heard anything from, it's just not as important in some markets. Whereas, I wonder about that. I wonder whether it's not important or just not accessible. And we would love to show that if you build the road, it's easier to bring stuff, let's say.

Cynthia Wandia [41:47]: Yeah. And that's what we'd really love to do and build a strong brand around the idea of building wealth together and the underlying ethos in a cooperative, which is quite inspiring, because a group of 10 people, a group of 30 people in 1960s can give birth to a 20, 30, 40,000 member institution today that is capitalized to the tune of a couple hundred million [dollars] and is really providing super affordable financial services. So because of that, we just want... Yeah, that's sort of what drives what we do.

Justin Norman [42:25]: And not withstanding the distribution as well, I'd have to imagine the trust in your cooperative savings community is unrivaled, right? So with infrastructure and with that trust already there a lot is absolutely possible.

Cynthia Wandia [42:40]: Yeah. That's true. Yeah.

Justin Norman [42:42]: And then last question is your grandmother's cooperative really going to open a roastery outside of Hamburg?

Cynthia Wandia [42:48]: I would love to see that. Unfortunately, she's not around to see it anymore, but I would absolutely love to see that because she planted and grew coffee for her whole life. She passed away at 92 and for her whole life, she just ran a small farm, was super timely with bringing the coffee to the washer and getting these coffee slips that could be used as school fees until the market paid and all these just lovely things, which are great. And then I'm a huge fan of coffee of, and every country has gotten to enjoy Kenyan coffee, let's say. But the price differential and the value differential always bothered me. So I think it would be really lovely to see the roastery just outside of Hamburg or just outside of Rotterdam being at least, even if it's 20, 30% owned by the Embu Coffee Growers Cooperative, that would be really, really lovely.

Justin Norman [43:50]: Thanks again to MFS Africa for their sponsorship of this series of episodes. Earlier in the show, we heard from Maria Nantayi, with Save the Children, Uganda on the NGO's endeavor to digitize their financial operations with Beyonic. And Maria and I spoke about the problems their organization was looking to solve.

Maria Nantayi [44:05]: So starting to use Beyonic, we actually got to know it from other NGOs that had started using it before us. So basically we wanted a system that granted us control over what we doing because we are paying over, let me say a thousand beneficiaries a day or so. So we wanted a system that we had control over. We also wanted a system that was able to validate payments. We wanted to ensure that before these payments go to these particular people, the payments were actually validated to match the name vis-a-vis the person to whom it was going. We wanted a system that was able to provide an audit trail. So we wanted a system that could be able to tell us, well, this is Maria who initiated, this is Justin who approved, or this is Doreen who was the second-level approval.

Maria Nantayi [44:53]: We also wanted an organization that would help us in case we had any issue, we wanted real-time support. We also wanted a relatively affordable system, right? So that cost aspect is always there. You cannot run away from it. So we appreciated the fact that obviously this would come at a cost initially, but in the long run we would benefit. So I would like to say because of our robust controls and systems, which some of these include the digital platforms, there has been growth. Because like I mentioned before, over the years from that time, Save the Children started using Beyonic among other digital platforms, there has been real growth actually seen. So I would say it has had a tremendously positive impact.

Justin Norman: That's it for this episode of The Flip. Next week we talk crypto.