Betting On Africa’s Future
Earlier this year, Iyinoluwa Aboyeji’s Future Africa initiative launched an early-stage investment fund that will dole out as much as USD 50 K to 20 startups yearly. The fund came as an extension of Future Africa’s initial vision to be a training ground for African founders and their startups.
But even before Aboyeji — the co-founder of both Andela and Flutterwave who has since exited both companies — formally announced the Future Africa Fund, he and Nadayar Enegesi, also a co-founder of Andela and a fellow limited partner of the newly launched fund, had been busy forking out capital behind the scenes.
This is why even though the Future Africa initiative was only birthed towards the end of 2018 and the Future Africa Fund was only announced in January 2020, the fund has already backed 14 companies.
And among those 14 portfolio companies are three wealth management startups — Chaka, Bamboo, and Rise — that seem to exist for the same purpose; availing Nigerians of investment opportunities that have hitherto been out of reach.
So, Why’s Future Africa So Vested In Wealth-Tech Startups?
Wealth-tech startups are perhaps most popular in Nigeria than in any other African country.
Between 2016 and 2017, wealth management fintechs like PiggyVest (formerly Piggybank.ng) and Cowrywise launched in Nigeria, providing better rates to the low returns on savings accounts offered by traditional financial institutions.
With some 500,000 users between them, both platforms allow users to save on their platform, pooling funds to invest in government-backed monetary instruments with a higher ROI than the savings accounts.
Besides Cowrywise and PiggyVest, there are several other startups in Nigeria offering other local investment options in agriculture, transport, real-estate, including Farmcrowdy, ThriveAgric, and Plentywaka.
Now, here’s the thing — there is certainly a market for wealth-tech startups in Nigeria as is evident in the accomplishments of the just-mentioned startups, but Future Africa has chosen to back a new breed of wealth-techs that bring global, blue-chip stocks to the average Nigerian; startups whose investment funnels are shielded from the economic headwinds back home.
A majority of investments on the wealth management startups that Nigerians have come to embrace are denominated in the Naira and domiciled in Nigeria, so the flailing economy and inflation still influence investments negatively.
This is why Future Africa is backing innovators like Bamboo, Rise, and Chaka who are creating new investment options, such as those which allow just about any Nigerian with a bank account and a smartphone to invest in U.S. stocks including those of big firms like Facebook, Apple, Tesla and the likes, for as low as the Naira equivalent of USD 10.00 at the push of a button.
Is There Even Any Need For This?
As laid out in a recent post on the official Future Africa website, if Nigerians are to really cultivate wealth, they would need to look beyond the shores of the country as investing in the global economy is key.
“Investing in the global economy cannot be overemphasized. The United States is the world’s largest economy, with a GDP of approximately $20.513 trillion. Likewise, China is the second-largest economy in the world, with (GDP) growth averaging 9.5% through 2018,” the post reads.
“Innovators are looking to give Nigerians access to global financial assets. Three of our portfolio companies(Chaka, Bamboo, and Rise) are part of these innovators.”
A combination of far-too-often stock market crashes (the Nigerian Stock Exchange has crashed 4 times in 12 years), the declining value of the Naira owing to an oil-dependent economy, and unpredictable government policies, make investing in Nigeria a huge risk.
And this is not helped by the fact that the most valuable assets on the exchange are out of reach to the low-class and middle-class income earners because they are sold beyond their purchasing capacity.
“Also, the process of trading with the NSE is not favourable for the middle-class, as government requirements and high broker fees that usually require 2.5 percent of the threshold as payment have created a boundary,” emphasizes the post.
Picture this: The average savings account in Nigeria returns about 1-4 percent per annum. With an inflation rate around the upper boundaries of 11 percent, Nigerians with savings accounts get a real return of about -7 percent per annum.
While one may argue that the typical, standard Nigerian bank savings account is an opportunity to save and invest, the reality contradicts this because the returns are, in fact, negative.
All these factors point to a need for better, safer, and more profitable investment funnels that leverage financial technology to ease the process of investing.
Enter: Rise, Bamboo, and Chaka
Although Rise, Bamboo, and Chaka are working towards the same goal of wealth creation through investments for Nigerians, they all have different business models for achieving this goal.
However, a common feature among these three Future Africa portfolio companies is that they have all adopted an operating model that eliminates the boundaries that frustrating paperwork common with legacy financial institutions, high broker fees, and government regulations have created in the past – by simply allowing users to download the app, verify themselves based on the central bank’s KYC rules and invest.
Chaka has built a technology that allows Nigerians with a bank account to create trading accounts. These accounts give access to purchase global blue chip and local Nigerian stocks. Chaka’s roadmap includes not just equities, but other investment products like mutual funds, fixed income products, and eventually, cryptocurrencies.
Bamboo grants Nigerian users unrestricted access to over 3,000 stocks listed on the Nigerian and U.S. stock exchanges. This app curates top stocks, exchange-traded funds (ETFs) and American depositary receipts (ADRs) in the United States.
Rise allows users to make Dollar investments in U.S. real estate, stocks, and Eurobonds. The app allows users to create an investment plan, select an asset class and investment duration and fund the plan with as little as USD 10.00.
Additionally, Rise acts as a fund manager, helping its users carefully select assets based on their team expertise. There is also a free investment club where users can meet other investors and learn more about savings, investments and growing wealth.
Featured Image Courtesy: TechCabal