An unfolding revolution

A New Wave Of Wealthtech Startups Are Jostling For Kenya’s Millennials & Gen Zs

By  |  March 24, 2022

Elphas Onamu, 25, is convinced the popular saying: “life begins at 40,” is no advice to kick back and relax but an admonition to make the most of one’s younger years so as to actually have a life in the latter days.

So when he’s not making cool stuff as a top creative at Gadgets Africa; one of Kenya’s leading new-age digital media platforms focused on consumer tech, he’s exploring ways to sow his present modest earnings in the hopes of a future bountiful harvest that his older self would be grateful for. But for Onamu, who lives in Nairobi, there haven’t always been that many convenient options.

“In Kenya, people put money in banks, government bonds, and cooperatives, even stocks of huge local firms like Safaricom and Kenya Airways, as well as real estate,” Onamu tells WeeTracker.

“Apart from the fact that some of those options are only suitable for higher-income classes, others seem outdated with tedious processes – lots of paperwork and so many back-and-forths. And the fees tend to be high which means returns are quite low,” he adds.

Saruni Maina, 27, a Kenyan consumer tech expert who is currently working at one of Africa’s tech unicorns, Chipper Cash, paints a similar picture; one that suggests there’s at least latent interest in savings and investments instruments in Kenya, though it’s hampered by the complicated nature of the incumbent platforms.

“It’s something that I have a keen interest in. We’re all trying to build wealth and that means investing the disposable income that we have. While banks, SACCOs, local stocks and government bonds have been viable options, many people are unable to participate due to the complexities and the lack of education on those options,” Maina says. Hence, the need for modern, frictionless options.

Out with the old, in with the new

In recent times, after years of straddling a lukewarm wealthtech segment in a somewhat subdued fintech industry singularly dominated by the famous Safaricom-backed M-Pesa mobile money service, Kenya is witnessing a proliferation of digital savings and investments platforms.

This wealthtech awakening has coincided with the resurgence of startup-led fintech endeavour in Kenya, after a long period of living under the shadow of M-Pesa. To put that in perspective, Kenyan fintech startups have raised more money in the first three months of 2022 than they did in the three years prior combined.

Designed for the average person, Kenya’s newest wealthtech solutions are not unlike the apps (PiggyVest and Cowrywise) that first sprung up in the continent’s unofficial wealthtech startup capital, Nigeria, in the mid-2010s and have yielded much success, with newer ones (Rise, Bamboo, and Chaka) joining the fray more recently to telling effect.

After starting as a media company known as  Kenyan Wallstreet which has become a well-known publisher of news on finance and investments, Erick Asuma and the team have gone on to launch Hisa; an app that enables any Kenyan with a smartphone to invest in U.S. stocks, as well as local equities.

“Over time, we conducted several surveys among our readers and we saw this huge gap on how to make it easier for ordinary people to invest in the stock market,” Asuma tells WeeTracker.

“Before Hisa, there wasn’t an easy-to-use mobile platform that could enable the average Kenyan to invest directly in the U.S. stock market as well as Kenyan stocks with minimal amounts,” he added.

The need for a digital savings/investments platform with seamless onboarding, while offering healthy returns and promoting financial literacy by eliminating technical financial jargon that most people do not understand, was key to launching Koa, according to its Co-Founder and COO, Delila Kidanu.

“Kenyans, especially millennials and Gen Z, have grown up in a digital world. They do not want to wait in line to fill out lengthy paperwork and wait weeks to open an account. They want everything now and from the comfort of their homes. They also want to be aware of what they are investing in, what the risk factors are, and how their money will grow. And this is what we are doing with Koa,” said Kidanu.

According to her, Koa’s fully digital app, which was launched in 2020, requires only a few minutes and zero paperwork to create an account, and seconds to make a deposit.

“We have also lowered the cost barrier to making an investment. You can start saving and investing with Koa with as little as 100 Kenyan shillings, making it an inclusive app for everyone, no matter where they are in their financial journey,” the Koa Co-Founder reiterated.

Another app known as Chumz, which is an effort by Moneto Ventures in partnership with a licensed fund manager; Nabo Capital of Centum Group, was launched recently with the aim of nudging Kenyans to save more and earn more, starting from as little as KES 5.00 (less than a dollar).

“At the onset, the team observed that a lot of fintech solutions were leaning towards lending and betting and not enough saving and investment solutions. The research we undertook showed that while Kenyans expressed the desire to invest, most were experiencing psychological barriers to investing including lack of commitment to a saving plan, being overwhelmed by expenses and forgoing saving for instant gratification,” says Wanjira Ng’ethe, who is handling Chumz’s Product Marketing.

“Plus the heavy investment jargon and the cumbersome processes by the financial sector makes potential clients shy away from investing. And the current solutions lack methods to keep the people engaged in saving such as feedback mechanisms, social nudges and reminders on when to save and invest,” she added.

Chumz is looking to win over large swathes of a Kenyan population that isn’t the most prolific when it comes to savings and investments, having the lowest saving and investing rate (14 percent) among East African countries despite boasting the largest economy in the sub-region, per data from Cashlet; which offers digital savings/investments products of its own. Another fintech company, Kwara, looking to digitise credit unions (such as SACCOs), closed a USD 4 M seed round last year.

Who wins in Kenya’s wealthtech boom?

The emergence of all these savings apps, as well as platforms like Hisa and Ndovu that enable fractional investments in U.S./local stocks – all of which boast strategic partnerships and the necessary approvals – wealthtech seems to finally be having a moment in Kenya, and locals seem pleased.

“Apart from the security concerns typical with any online financial transaction, the apps are a breath of fresh air. Most people, including myself, certainly like the idea of signing up, investing, and withdrawing digitally at any time,” says Onamu.

Although seemingly long overdue, Kenya’s now-unfolding wealthtech revolution appears to have been accelerated by a number of factors including the economic fallout of the pandemic and a softer regulatory environment.

“What has led to the rise of the wealthtech space in Kenya over the last few years is a mix of both a shift in culture, especially after the onset of Covid, as well as the proactive role that regulators are playing to encourage innovations in the capital markets industry. Kenya’s regulators have been very supportive and have even created a regulatory sandbox to allow fintechs to test and roll out new products,” Asuma explained. As it turns out, Koa, Chumz, and Cashlet are all products of that testbed.

It all seems to be looking up these days, but it wasn’t that long ago that many were calling out stiff regulations and protectionist agendas for the inactivity in the space and the lack of frictionless solutions.

From savings/investments platforms offered by banks some of which are now app-based to opportunities tied to stockbrokers and investment banks, as well as wealth management solutions powered by asset managers like Britam and Abacus, formal options for individual investments have always existed in Kenya.

However, the fundamentally esoteric, cumbersome, and expensive nature of those options means that they are effectively deemed exclusionary.

The less formal options, including group savings/contributions, managed by Savings and Credit Co-operatives (SACCOs) – while being more inclusive and accessible – lack convenience and flexibility, making it especially unappealing for Kenya’s 35+ million youths who have spent much of their adult life using mobile phones to move money.

In the face of dire economic realities that often trigger periodic currency devaluations and job losses, wealthtech startups and their apps might have a shot at changing how ordinary people think about savings and investments in Kenya.

With the possibility of Kenya’s dominant telco, Safaricom, joining the fray eventually with its own digital investment product, Mali (which was introduced in 2019 but is yet to launch due to unclear reasons), there’s likely to be a breathless jostling for places as similarly-motivated startups and identically-structured products compete for pole position.

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