Financing Progress in Africa with M-KOPA

STARTUP MONDAY

Editor’s Note

Welcome to our first edition of StartUp Mondays for 2024.

Africa is a continent teeming with potential. It is brimming with challenges which are also opportunities for savvy entrepreneurs.

Look around you; hear the whispers of need, the yearnings for progress, the dreams waiting to be kindled. Every problem – from access to education to healthcare delivery, from financial inclusion to clean energy – holds the spark of innovation, the embers of a business waiting to be built.

This year, 2024, let's rewrite the narrative. Let's stop being mere observers and become architects. Let's be the writers of our own stories.

Don't be daunted by the enormity of the task. Start small, listen to your community, and build solutions that resonate. Be nimble, be adaptable, and be relentless in your pursuit of progress.

There's no time for hesitation. So, light your entrepreneurial fire, tap into the boundless potential of this continent, and illuminate a brighter future not just for yourself, but for generations to come.

This year, let Africa witness the rise of a new breed of entrepreneurs – driven, innovative, and fueled by a passion to change the course of history. You are the changemakers and the problem solvers.

For our first Startup Monday of 2024 we are spotlighting M-KOPA. The story of M-KOPA is a beacon of hope and a testament to the transformative power of innovation.

M-KOPA’s impact isn't confined to the screens of smartphones. It's a clarion call, a challenge to every aspiring entrepreneur to find their own M-KOPA moment

Be inspired and happy hustlin’

STARTUP OF THE WEEK: M-KOPA

Startup Spotlight

Founded in 2011, M-KOPA is a fintech platform that provides digital financial services to underbanked consumers. Headquartered in Nairobi, the company leverages data to combine digital micropayments with the Internet of Things [IoT] technology.

With operations in Kenya, Uganda, Nigeria, Ghana and South Africa, M-KOPA’s platform has provided over $1 billion in credit and enabled over 3 million customers to access smartphones, electric motorcycles, solar power systems, digital loans and health insurance.

The company directly employs nearly 2,000 people across Africa and has created over 15,000 roles for active sales agents.

Founded with a bold mission to empower financially excluded communities through access to life-changing essentials, M-KOPA has revolutionized the way people live, learn, and thrive.

Beyond products, M-KOPA provides crucial financial services like micro-loans and savings plans, building creditworthiness and financial literacy.

The company has received numerous awards for its innovation, impact and scale: including winning the prestigious Zayed Future Energy Prize, making the coveted MIT Technology Review 50 Smartest Companies list, and being listed by Fortune Magazine as one of the Top 50 Companies Changing the World.

Investors in M-KOPA include Generation Investment Management, CDC Group and Standard Bank, as well as esteemed entrepreneurs such as Virgin Founder Sir Richard Branson and AOL founder Steve Case.

M-KOPA is also a partner of the United Nations’ Sustainable Development Goals and supports several of them, such as:

Goal 1: No Poverty
Goal 7: Affordable and Clean Energy
Goal 8: Decent Work and Economic Growth
Goal 9: Industry, Innovation, and Infrastructure
Goal 10: Reduced Inequalities
Goal 13: Climate Action

Background

In 2010, Chad Larson, alongside Moore and Hughes, established a startup in Nairobi that would later evolve into M-Kopa in the following year.

In 2011, Signal Point Partners provided incubation funding for M-Kopa. Noteworthy backers, including Richard Branson, Generation Investment Management, Blue Haven Initiative, and LGT Venture Philanthropy—an investment entity linked to the Princely Family of Liechtenstein—contributed to the startup. M-Kopa officially launched its commercial operations in late 2012.

By 2015, M-Kopa claimed to have empowered 150,000 households in Kenya, Uganda, and Tanzania, facilitating approximately 10,000 daily mobile payments through its cloud platform, M-Kopanet. The company boasted a revenue exceeding $40 million by the end of 2015, and it estimated that 80% of its clientele lived on less than $2 a day.

The company had successfully connected over 300,000 homes in East Africa to solar power by early January 2016. In 2016, under CEO Jesse Moore, M-Kopa sold 30,000 solar TVs in Kenya, with plans to integrate internet access. By December 2016, the company had distributed around 400,000 systems in Kenya, Tanzania, and Uganda since its inception in 2011, with intentions to commence local manufacturing.

As of January 2018, M-Kopa had electrified a minimum of 500,000 homes and sold approximately 90,000 solar rechargeable televisions. In 2018, it was reported that M-Kopa was set to procure an additional 500,000 photovoltaic solar panels in collaboration with Solinc East Africa. In February 2018, a funding round led by CDC, with participation from FinDev Canada, LGT Venture Philanthropy, and Generation Investment Management, injected $10 million into M-Kopa.

Founder Spotlight

The company's success owes much to its visionary founders, Nick Hughes, Jesse Moore and Chad Larson.

Jesse Moore

Jesse Moore is the CEO and Co-Founder of M-KOPA. Jesse moved to Kenya in 2010 to start M-KOPA and has overseen the company’s growth. Originally from Toronto, Canada, Jesse holds an MBA from Oxford University (Skoll Scholar) and a BA from the University of North Carolina (Morehead Scholar). He was selected by the World Economic Forum as one of the 100 Young Global Leaders in 2017.

Before co-founding M-KOPA, Jesse was the Director at the GSM Association in London, where he worked with mobile network operators in Africa and Asia to adopt new business models that drive business growth and benefit low-income consumers, such as mobile money. Jesse’s early career included working with the international development charity CARE and as a strategy consultant for Monitor Group.

Nick Hughes

Renowned for initiating and expanding innovative mobile-based solutions that tackle real-world challenges, Nick played a pivotal role in launching the groundbreaking mobile payment service, M-PESA. He co-founded M-KOPA and more recently, he has co-founded 4R Digital Ltd, a B2B services company aimed at collaborating with clients and partners to incubate fresh digital business models, products, and services. While maintaining a select number of advisory roles, he serves as a founding Board member of bKash, a rapidly expanding mobile payments business in Bangladesh. Additionally, he holds the position of Executive Fellow at London Business School, collaborating with the Wheeler Institute for Business & Development to drive digital innovation.

Chad Larson

Chad has previously served as the CFO of Mecene Investment, the fund manager of the Africap Microfinance Investment Fund in Johannesburg. He is a CFA charterholder and has an MBA with distinction from Oxford University, as well as 10 years of investment banking experience at Bank of America. Chad co-founded M-KOPA and dutifully served in the positions of Chief Financial Officer, Chief Credit Officer, and Senior Board Advisor. Currently, Chad is working as CEO of Kopo Kopo Inc. Kopo Kopo's software powers the largest independent merchant network in the mobile money industry.

Our Analysis

Business model:

M-KOPA's core offering lies in its innovative pay-as-you-go financing model. This empowers individuals to own M-Kopa products. M-KOPA customers can unlock access to a wider range of products and services when they finish paying for their initial product on time. These include solar home systems, TVs and fridges.

M-KOPA's success can be attributed to its micropayment system. Customers make small, affordable daily or weekly payments through their mobile phones, gradually owning the product and building a credit history. This removes the barrier of large upfront costs, making progress accessible to even the most financially disadvantaged.

M-Kopa has several partners supporting its operations. Mobile network operators, including Safaricom, have partnered with M-Kopa to facilitate mobile money transactions and offer value-added services. Manufacturers and brands are also partnering with M-Kopa to provide a platform for market entry, financing and last-mile access. Payments companies, such as Mastercard, and challenger banks recognize the disruptive power of M-Kopa's platform on traditional brick-and-mortar banking.

Technology:

Some of the technologies used by M-KOPA include:

Machine-to-machine technology (M2M): This technology allows M-KOPA to remotely monitor and control the devices that it provides to its customers, such as solar home systems and smartphones. M2M technology enables M-KOPA to track the usage, performance, and payment status of each device, and to lock or unlock them accordingly.

Mobile Money and Digital Payments: M-KOPA leverages the power of digital micropayments and GSM connectivity to make its financing model possible. Customers can pay for their products using mobile money platforms such as M-Pesa, MTN Mobile Money, or Airtel Money. M-KOPA’s platform processes over 500 digital payments per minute and uses data analytics and machine learning to optimize its credit scoring and risk management

Azure Machine Learning: M-KOPA uses Azure Machine Learning, a cloud-based service from Microsoft, to analyze the data collected from its devices and customers, and to generate insights and predictions that can help improve its products and services. Azure Machine Learning also helps M-KOPA to automate some of its processes and optimize its operations.

Prospects: 

M-KOPA's prospects are promising. With a $250 million+ funding boost in 2023, they're poised for expansion into new markets and product categories. Their commitment to sustainability through solar energy and circular economy initiatives is commendable.

Hustle Opinion

M-KOPA’s vision is to make life-enhancing assets more accessible to the financially excluded. According to the World Bank, there are over 1.7 billion people who lack access to formal financial services, such as bank accounts, credit cards, or loans. These people often face barriers to accessing essential products and services that can improve their quality of life, such as smartphones, electricity, education, or health care.

M-KOPA’s innovative financing model addresses this gap by providing customers with affordable and convenient payment plans that suit their needs and budgets. By doing so, M-KOPA empowers its customers to achieve progress in their lives and contribute to the social and economic development of their communities.

Takeaways for the African Hustler

Offer small, decentralized solutions: M-KOPA has bypassed the need for large and costly infrastructure by delivering personalized and portable solutions directly to customers, such as solar home systems and smartphones. This enables M-KOPA to reach more people, especially in rural areas, and to adapt to their needs and preferences.

Leverage mobile money and digital payments: M-KOPA has utilized the widespread adoption of mobile money and other digital payment platforms in Africa, such as M-Pesa, to enable its customers to make easy and convenient micropayments for their products and services.

Harness the power of data and machine learning: M-KOPA has used Azure Machine Learning, a cloud-based service from Microsoft, to analyze the data collected from its devices and customers, and to generate insights and predictions that can help improve its products and services. This also helps M-KOPA to automate some of its processes and optimize its operations.

Have a social and environmental impact: M-KOPA has not only created a profitable and scalable business model but also a high-impact one that improves the lives of millions of low-income and underbanked consumers in Africa. M-KOPA has provided them with access to essential products and services, such as energy, communication, and mobility, that enhance their health, wealth, and productivity. M-KOPA has also reduced greenhouse gas emissions and promoted women’s financial inclusion through its products and services.

AND THAT’S A WRAP