BD Insider 167: Visa's long-standing interest in African fintech

Letter 167 explores Visa's plan to invest in African fintech startups, ThriveAgric's journey: From a turbulent 2020 to an incredible 2022 and unification of the exchange rate.

BD Insider 167: Visa's long-standing interest in African fintech
Central Bank of Kenya Governor during the inauguration of the Visa studio in Kenya

Two days after we published an article explaining the implications of the unified exchange rate, the Central Bank of Nigeria (CBN) released a letter to all Deposit Money Banks (DMBs) providing further guidance on the Foreign Exchange (Fx) Market.

Shameless plug: Here is unsolicited but greatly appreciated feedback from a reputable Nigerian investor and founder, Yele Bademosi, on our article

Thanks, Yele, for the shout-out! Everyone else should read the article and turn on tweet notifications on our Twitter profile.

That said, a key takeaway from the CBN Fx guidance of June 16, 2023, is that residents with domiciliary accounts in Nigeria can now access their Fx more freely.

During Emefiele's regime as CBN Governor, the subject of dollars—accessing and purchasing it—was often confusing due to the incessant policy updates from the CBN. We've already talked extensively about the hassle of purchasing dollars in Nigeria. So, let's talk about accessing the dollars you already have in your domiciliary account.

There are three major ways of accessing money in your account; withdrawal (e.g. over-the-counter), transfers to another account in a similar currency, online spending via card, etc.

For many Nigerian banks, mobile Fx transfers simply do not work from their app. Thus, if you must transfer, you must fill out a paper-based FCY transfer form—a less convenient option. If you get to the bank and fill out the form, the amount you can send depends on how the deposits were made into your accounts—via wire transfer or cash. So, if you got money via a wire, you can spend it freely. But if you deposited cash into your domiciliary account, you'd be restricted in your withdrawals and transfers. Here is a May 2021 article from a national daily, Punch, depicting the situation.

It was a real hassle to transfer your own money.

Next, the withdrawal option. Due to the limited supply of dollars, each bank branch receives, the amount of cash withdrawal a domiciliary account holder can make is often restricted to only a few dollars (e.g. less than $5,000). So, you usually don't get all the cash you need from one trip to the bank. Similarly, withdrawing cash wasn't ideal.

Finally, the online spending of your Fx. This is the most convenient of all options. You can get a MasterCard or Visa card from your bank. Many banks issue debit and prepaid cards, which you can use for online spending or withdrawals overseas. Unlike when a naira cardholder tries to make an international payment and is subjected to the $20 limit, users of domiciliary accounts can spend up to $5,000.

With this recent update, the CBN says that domiciliary account holders can now withdraw, spend or transfer up to $10,000 daily, even if the money was deposited via cash.

This will be well received because long-time domiciliary account holders who have had their Fx trapped in Nigeria can now utilise it as needed. But it could also encourage others to deposit their dollars in domiciliary accounts instead of offshore USD accounts.

Let's listen to an Insider's PoV to complement our thoughts on the recent CBN guidance on the restrictions on cash deposit withdrawals.

💭 Insider's PoV

Today's PoV is from Joshua Ishola, a Financial Consultant and Global markets professional with experience at Deloitte and Coronation Merchant Bank.

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This is a positive sign if they nail the implementation.

The dilemma is that the policy only works if there is a steady supply of dollars.

And we know that’s not the case right now, so one can only assume that they either have dollar supply or want to create an impression that the country is more open for business.

Joshua was also a co-author of our piece on Unifying Nigeria's exchange rate: The journey here and its Implications.


That was just an introduction to this week's newsletter.  

Here are the stories that we are following:

  • ThriveAgric's journey: From a turbulent 2020 to an incredible 2022
  • Another fintech accelerator for African startups, launched by Visa

And other noteworthy information like:

  • the latest African Tech Startup Deals
  • book recommendation, opportunities, interesting reads and more

The big stories

ThriveAgric increased farmers' reach by 150.73% in 2022

The scene: From struggling to pay retail investors in 2020 due to the impact of the coronavirus pandemic, Nigerian agritech ThriveAgric has paid off the debts, raised funding and expanded its operations across Africa.

"Like the rest of the world, ThriveAgric was adversely hit by COVID-19... but we overcame it!" ThriveAgric co-founders Uka Eje (CEO) and Ayodeji Arikawe (CTO) wrote. "2022 was a successful year!" For instance, between 2017 and 2021, the agritech had only 205,000 farmers; the number has grown to 514,000—a 150.73% increase.

ThriveAgric pivoted from dealing with retail investors to institutional investors as part of an initial attempt to enable its comeback. The company also doubled down on its Agricultural Operating System (AOS), a tool that creates efficiency in its processes.

To complement its existing technologies, AOS and Tradr, ThriveAgric built an Inventory Management System (IMS) in 2022 to manage the inventory of its operations barriers.

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The Tradr app provides farmers and businesses that do not farm with ThriveAgric with the opportunity to interact and trade with other players within the agriculture supply chain

Milestones in numbers: Per ThriveAgric's 2022 impact report, the agritech achieved the following:

  • Connecting with over 514,000 smallholder farmers in more than 2900 communities
  • Pilot operations in five regions of Ghana and six counties in Kenya
  • Invested over $100 million in financing
  • Produced 1.5 million+ metric tonnes of grains
  • 153.3% year-on-year increase in the number of women impacted
  • 80% increase in youth impact in communities
ThriveAgric's pan-African growth

Within this period, ThriveAgric raised $56.4 million in debt funding and emerged as the regional champion for Central Europe, the Middle East and Africa in the Visa Everywhere Initiative (VEI). Last December, the agritech was made the global winner of the VEI 2022 with a $100,000 prize.

Earlier this year, ThriveAgric won $1 million as the regional winner of the 2022 AYuTe Africa Challenge.

What's next? ThriveAgric aims to provide $500 million in credit to 10 million smallholder farmers across Nigeria, Ghana, and Kenya in 2027 and to double this outcome by 2050.

The company will also be working with organisations that leverage its AOS to provide access to loans for their farmers and is currently onboarding partners. With the food crisis projected by the United Nations to rise to a record 310 million Africans by 2030, ThriveAgric has planned expansions into Tanzania, Egypt and Zambia to alleviate the potential impact.

ThriveAgric's expansion plan

Visa's long-standing interest in African fintech

The news: A few weeks after Amazon Web Services selected 25 African startups for its fintech accelerator, another global company unveiled an accelerator targeting fintech companies on the continent.

Last week, during the Bloomberg New Economy Gateway Africa in Marrakech, Morocco, Visa announced the launch of Visa Africa Fintech Accelerator, a program that will back about 40 startups annually to accelerate and grow through a three-month intensive learning program focused on business growth and mentoring.

Why it matters: "Africa has one of the most exciting and admired fintech ecosystems in the world, bringing outstanding entrepreneurial talent to a young digital-first population that is growing fast,” says Alfred F. Kelly Jr., Executive Chairman, Visa, Inc. "Visa has been increasing our investments in Africa for decades and strengthening partnerships throughout the continent to support the next wave of innovation and growth. Our new Fintech Accelerator will bring expertise, connections, and investment to Africa’s best fintech startups so they can grow at scale."

Payments have remained the most funded sector in the African tech ecosystem, raising about 36.11% of the total venture funding in 2022.

A foretaste: This is not Visa's first attempt to invest directly in African fintech startups.

In 2018, Visa invested in Paystack's Series A. The following year, they acquired a 20% stake in Interswitch. In 2020, they participated in Flutterwave's $35 million Series B raise.

Last year, Bloom, a Sudanese fintech startup secured a $6.5 million seed to expand across the Anglo-East African region; Visa participated in the round. Bloom has since switched its cards from Mastercard to Visa.

In 2022, Kelly Jr. disclosed that the global payment company will invest $1 billion in Africa by 2027. To this end, Visa has launched Sub-Saharan Africa Innovation Studio in Nairobi, Kenya and has established ten offices across the continent.

Zoom in: Fintech startups throughout Africa can apply to be part of the program through two application phases each year, starting from July 2023.

With over 1,000 African fintech startups participating in the Visa Everywhere Initiative (VEI) competition in 2022, finalists from African country editions this year will be invited to join the accelerator program.

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ThriveAgric emerged as the winner of both the regional and global editions of VEI in 2022.

💰 State of funding in Africa

Barely three months after it participated in the seed round of Lagos-based logistics startup Fez Delivery, Egypt's Acasia Ventures, formerly Cairo Angels, has opened an office in Lagos to expand the firm's reach and scope in Nigeria.

"We have our heritage in Egypt, but we believe in the future of the whole continent," Acasia Ventures General Partner Biola Alabi said. "That is why our new office in Lagos should provide a platform to deepen our relationships with the market, by having an in-person presence in Nigeria." Aside from Fez, the VC firm has invested in 11 other African companies, including Nigerian fintech Credpal.

With this expansion, it's safe to say that Acasia will be making more investments in Nigerian tech startups in the coming months. While we wait for that, find below a summary of the funding that was raised by startups last week.

BD Funding Tracker 

📚 Noteworthy

Here are other important stories in the media:

  • Binance CEO CZ declares "Binance Nigeria Limited" a scam operation: A few weeks ago, the Securities and Exchange Commission declared that the activities of Binance in Nigeria are illegal. However, CZ says the entity operating in Nigeria is not associated with Binance.
  • Spotify reveals how Afrobeats is breaking ground in Asia and the Middle East: Afrobeats superstars are topping the streaming charts in the Middle East and North Africa region according to data from Spotify
  • Flutterwave clarifies Kenyan bank accounts freeze: Contrary to several media reports, Flutterwave's spokesperson, Yewande Akomolafe-Kalu says the account freeze was a civil case procedural step and nothing more.
  • MTN says asset seizure in Cameroon threatens operations: For 10 months, MTN has not been able to access its bank accounts worth over $23 million over a matter not related to the telecom provider, ITWebs reports.
  • Tracking Africa's billion-dollar companies: Out of the 345 companies in Africa that each generate $1 billion or more in annual revenues, 230 were started in an African country and the founder is often an African, according to a report by McKinsey.

💼 Opportunities

Jobs

We carefully curate open opportunities in Product & Design, Data & Engineering, and Admin & Growth every week.

Product & Design

Data & Engineering

Admin & Growth


📖 Book recommendation

Our recommendation for this week is the Unfair Advantage by Ash Ali & Hassan Kubba. Drawing on over 20 years of experience building startups and coaching entrepreneurs, Ali and Kubba describe the mindset you must adopt and the steps you must take to achieve startup success—from identifying a viable business idea to building a winning team.

This recommendation is inspired by Fola Olatunji-David's conversation about the role of luck in his life and career. Drawing from his submissions, unfair advantages can, aside from being inherent, they can be created.


Have a great week!

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