On Remittances and Payments in Africa

Yesterday, I listened to a podcast by featuring Ham Serunjogi, the founder of Chipper Cash, an intra-Africa money transfer service. I here share a few notes and thoughts since it is an area I am interested in. By the way, relatably, Ham is Ugandan and went to school at Aga Khan, Mombasa, Kenya (I am proudly Kenyan 😉

What sucks? Sending money within Africa. Intra-Africa money transfer is a pain point. At 8.9% of the money sent, Africa has the highest remittance costs in the world. For every 100 dollars sent, around 9 dollars ends up as a cost. 

Source: Migration and Development Brief 32

It is sad to note that the most costly places to send money to and from within Africa are countries like Ghana and Nigeria which are very close. 

Source: Migration and Development Brief 32

The good thing is that as money transfer goes digital, those costs are declining. 

Raising capital as a person of color is tough. There is a potent mix of things that made it difficult in this specific case for him to raise cash. There were also visa issues to work through.  While raising funds, he did close to 30 calls per day to fundraise with a deck and no prototype. He underestimated how difficult it was to raise cash as he now acknowledges.

All it takes though is a firm belief from one person. In his case, it is people like Joe Montana, co-founder of 500 Startups and Liquid 2 Ventures, who have became a firm supporter. 

M-Pesa: One can’t really talk about money transfer in Africa without mentioning the significant role played by M-Pesa. I hope someday soon to write more about Mpesa. It remains one of the most innovative products in Africa allowing people without smartphones to send and receive money. Even Ham positions Chipper as one that does not compete with MPesa but rather one that builds on the platform provided by Mpesa.  

Covid-19: Another notable point is that the need for cash transfer has increased significantly during the pandemic. If the app is down now people want it back up as soon as possible. The urgency and need for it have grown. He has noted that Covid has accelerated the move away from cash even in Africa. The user base grew 100% growth in June. 

Fraud: Fraud is an issue here just as it is everywhere in the world but most of the people sending and receiving money (9 of 10 people) are genuine. It is important to put in place measures to ensure that fraud does not happen (1/10). Chipper cash has hired a compliance officer to help them in this area. 

A thumbnails sketch of the history of Chipper Cash: 

      • Launched in 2018
      • The founders are Ugandan Ham Serunjogi and Ghanaian Maijid Moujaled.
      • Serunjogi left Facebook and Moujaled left Flickr and Yahoo!
      • They have a merchant-focused side that is fee-based and a P2P one that is 100%. The merchant side raises the revenues to support the P2P side. 
      • Entered into a partnership with Visa earlier this year.
      • Just finalized raising a $13.8M Series A round of VC funding.
      • Currently works in 7 countries: Ghana, Uganda, Nigeria, Tanzania, Rwanda, South Africa & Kenya.
      • Over 1m users so far
      • Running a volume of over $100m per month
I tried the app today and the onboarding experience was seamless. If you want to know more about Ham, here is a different podcast where he appeared in. 

Author: Mokaya

I am a learning investor who writes to make my thoughts clearer. I am interested in investment research and analysis, financial modelling and portfolio management.

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