Lessons from Kenya tech leap

A Day In The Life Of A Kenyan Startup: Lamudi Kenya Offices

By:Charu Sudan Kasturi

– Eyes on ideas that can be replicated in India

When Nikhil Nair left India’s technology capital Bangalore for Nairobi in 2014 to join a mobile phone app-driven solar energy start-up, his friends and family thought he was crazy.

The usual litany of stereotypes about Africa spilled out: Kenya was unsafe, and surely couldn’t match India either in the environment or infrastructure needed for new technology to prosper at big scales. Did Nairobi even have ATMs, one friend asked him?

But M-Kopa, the firm he left Bangalore to join in Nairobi, has managed in five years to provide 375,000 households – mostly in Kenya, but also in Tanzania and Uganda – reliable solar power using a meter reader never tried before anywhere: a SIM card. The idea could only have worked in east Africa since it is built on other technology start-ups that have grown from Kenya, like M-Pesa, the world’s first mobile money transaction service, developed in Nairobi in 2005.

A cocktail of factors from its high telecom penetration to its weak traditional banking systems appear to have powered Kenya’s innovation drive. Today, these Kenya-born start-ups are fuelling copycats across the world, and the Indian government and technology industry is wondering if they can be replicated in India.

Prime Minister Narendra Modi doffed his hat at Kenya’s successful start-up culture during his visit to the country last week.

Like India, Kenya has a massive young population: 70 per cent below the age of 30. Both countries face the challenge of providing services to large, distant, rural populations.

But in using the ubiquitous mobile phone to carry out financial transactions and deliver services, it is India, the larger country, that is now trying to catch up with Kenya.

“These are all strictly Kenyan, home-grown products,” Nair, in charge of M-Kopa’s business expansion plans for South Asia, told The Telegraph. “They’re a tribute to Kenya’s evolution as a technology start-up hub, a process India can learn a lot from too.”

It was M-Pesa in 2005 that started this wave of technology innovations in Kenya. The idea of mobile money was simple, yet controversial for regulators since a telecom firm was now also playing the role of a bank.

Users need to create an M-Pesa account and put in money – like they would for a pre-paid phone service – through any of the company’s hundreds of centres across Kenya. Then, they can use this money on their phones to pay for goods and services or transfer money to a son in college or an ailing parent in a faraway village. From taxi drivers to grocery shop owners, 40 per cent of the country’s GDP is transacted through this mobile phone application. Pesa in Swahili stands for money, among many words in the language that sound similar to their counterparts in Hindi or Urdu.

“Kenya’s climate,” Modi said during a lecture at the University of Nairobi during his visit, “provides the right ecosystem for appropriate technology and innovation-led growth.”

M-Pesa, Modi said, had “empowered and mainstreamed” those on the margins of traditional financial systems. “The idea took the world by storm,” Modi said, before referring to India’s decision only last year to allow a similar service through two banks. “We now have a version in India as well.”

But M-Pesa was only the first of a series of such start-ups that have brought the world’s attention to Kenya.

An innovation centre in Nairobi called iHub houses half a dozen start-ups, many of which focus on using mobile telephony to provide technology solutions.

Among them is M-Lab, which allows innovators to test new apps and mobile products in a state-of-the-art laboratory partially funded by the World Bank, and also trains young technology entrepreneurs. Started in 2011 as one of only five such centres globally, the Nairobi M-Lab hosts over 100 mobile devices on which entrepreneurs can test their products.

“Our focus is not only on encouraging them to develop apps but also to help them monetise these products,” Sheilah Birgen, chief executive officer of M-Lab, Nairobi, told this newspaper.

At the M-Kopa office, just a kilometre away from iHub, rows of employees sit with headphones on, analysing data and communicating with customers with intensity more common for a financial trading firm or a call centre.

The firm, started by three expatriate entrepreneurs in Nairobi, sells a solar unit – a panel, battery and the connections – for $200 (around Rs 13,500), but makes it affordable by allowing ordinary Kenyans to pay in daily instalments as low as 50 Kenyan Shillings or Rs 35 through M-Pesa. The company’s market research showed an ordinary Kenyan household spends 50 Kenyan shillings daily on household fuel.

The battery charged by the solar panel has a SIM that tracks payments. The user can make a lump sum payment – in which case a monitor on the battery shows the number of days of solar charge that the user has effectively bought.

If the user does not make his payments, the SIM switches off -and the battery stops charging. Once the user has paid back the entire cost, the SIM stops recording payments, and the user owns the device entirely.

“You’re paying what you would anyway but for cleaner fuel,” Nair said. “And once you’ve paid the cost, you don’t pay anything for your energy needs.”

The model of using a SIM card as a meter reader – or a loan officer – has also helped M-Kopa grow into a provider of other products: from electrical appliances to smartphones.

Using their payment record, the firm segregates customers into “giraffes” and “cheetahs” who are regular payers, and “tortoises” who are poor payers. “Giraffes” and “cheetahs” are offered the opportunity of buying an asset in exchange for charge on their solar battery.

M-Kopa is useful even for families that have regular electricity as they cover for Kenya’s frequent power outages. “It’s a great thing to have as your power back-up,” said John Njuguna, a taxi driver who lives in a Nairobi suburb. “It’s cheaper and cleaner than having an inverter or a generator.”

A young population and its willingness to experiment are important for technology innovations to thrive, Birgen said. But regulatory loopholes that allowed companies to test their limits in a way difficult in developed economies have also played a role, Nair said.

Kenya also offers a rare combination of high telecommunications penetration and a weak banking system: a series of top Kenyan banks collapsed earlier this year.

But there’s something more behind the country’s emergence as an unlikely hub for technology start-ups, said Birgen. “Kenyans are fundamentally entrepreneurial people,” Birgen said. “We just needed a chance.”

Source: http://www.telegraphindia.com\