Goldman Sachs-backed fintech Jumo set to expand in Cameroon, Nigeria, Benin

By David Whitehouse
Posted on Monday, 12 December 2022 09:57

Man trades U.S. dollars for Ghanaian cedis at a currency exchange office in Accra
African banks are held back by high customer acquisition costs. REUTERS/Francis Kokoroko

Banking as a service provider Jumo plans expansion into new African markets in the first half of 2023, CEO for Africa Buhle Goslar tells The Africa Report.

The company plans to launch in Cameroon in the first quarter, followed by Nigeria and Benin in the second quarter, Goslar says on the sidelines of the African Financial Industry Summit in Togo.

Jumo is also planning new merchant products in Uganda and Ghana in the first half, Goslar says, without elaborating.

Profit margins at African banks are in long-term decline, hurt by high customer acquisition costs and non-performing loans (NPLs).

Since 2016, according to McKinsey, profitability in Africa’s five biggest banking markets Egypt, Kenya, Morocco, Nigeria, and South Africa, has been steadily falling.

The African banking industry’s cost-to-income ratio is higher than in other emerging markets, McKinsey says, meaning different operating approaches are needed.

Banking as a service, which opens up banking functions for multiple financial institutions, is one possible solution.

Jumo’s platform allows partners to offer loans and savings to anyone with a cellphone or mobile wallet.

The company has served 20 million people and small businesses and the platform has been used to make 130 million individual loans, with more than $3bn of funds disbursed.

Revenue comes from fees charged to all platform users.

The company is led by founder and CEO Andrew Watkins-Ball. Absa and Ecobank are among the banking partners, and e-commerce players have approached Jumo to make loans via the platform.

Investors in the business include Goldman Sachs, Visa, Fidelity and LeapFrog. “Who you take money from changes what you can do,” Goslar says.

  • The company, she argues, has a role in expanding financial inclusion which banks are unable to meet. African banks have high customer acquisition costs, but Jumo can secure clients for $1 each.
  • “Loans are at the top of the needs hierarchy,” she says. “We help entrepreneurs to show up as the best version of themselves.”
  • More proactive regulation by African states on freedom of data movement, she argues, would help fintech expansion.
  • The continent, she says, needs a more harmonised approach. “Fintechs need scale. They need to be able to go into multiple markets.”

Merchant lending finance

The company is active in Ghana, Tanzania, Kenya, Uganda, Zambia, Côte d’Ivoire and Pakistan.

There are operational and tech hubs in Cape Town, Nairobi, Porto and London.

High levels of NPLs made by the banking industry in Africa, Goslar says, are a “symptom” of unpredictable incomes among borrowers.

Artificial intelligence and machine learning are used to reduce NPLs, and the company says its cost of risk is 4%.

Jumo continues to meet its performance mandates despite the Covid-19 pandemic and higher inflation, Goslar says. She credits big data: “we operate in the most data-rich context you can find in Africa.”

Jumo wants to raise money for merchant lending in markets such as Zambia, Uganda and Tanzania. There is “insane” demand for loans from merchants, Goslar says. “We don’t want to leave that opportunity on the table.”

  • Goslar wants to raise the money from sources such as impact investors, family offices and high-net-worth individuals, with a rough minimum ticket indication of $1m.
  • In merchant loans, there is a “supply problem, not a demand problem,” Goslar says. Investors who want to help provide the loans have the chance to “participate in democratising finance”.

Bottom line

If mass African financial inclusion is to become a reality, banking as a service platform will be part of the solution.

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