Getting Africa banked

Mike Quinn is CEO of Zoona (Picture: Supplied)
Mike Quinn is CEO of Zoona (Picture: Supplied)

In 2009, Zambian-born brothers Brad and Brett Magrath launched Zoona in Zambia, together with current CEO Mike Quinn. Zoona was initially aimed at trying to solve the problem of payments in the agricultural sector. At the time, Zambia’s cash economy saw 85% of the adult population unbanked.

Meanwhile, in Kenya, mobile money player M-Pesa started taking off and the Magraths looked at the possible opportunity of also introducing money transfers in the Zambian market. 

“We officially launched in April 2009 with a couple of products, one being farmer payments and the other a money transfer product that would help people send money within the country,” Quinn tells finweek.

In order to facilitate this, Zoona started setting up agents next to post offices, bus stops and border posts and would work with young entrepreneurs – and people looking for jobs straight out of high school – and provide them with a kiosk. 

“We would provide all the funding for working capital that they needed to run their business, and then give them an account on the technology platform we built so that consumers could walk up to these kiosks to send and receive money transfers for any reason that would require them to move money around in the cash economy, such as paying school fees or medical bills,” explains Quinn. 

Getting the funding 

Over the next three years, they integrated the model, and in 2012 Zoona received a $4m Series A investment, at which point the focus turned to the money transfer business, which had really taken off.   

“We had about 35 000 customers a month and 75 agents at that point. We doubled down and really focused on expanding our agent network by identifying young entrepreneurs and setting them up for small business.”

Fast-forward a few years and Zoona has just successfully raised $15m in a second round of financing. 

“The main challenge with the B round [second round of investments] was that we went through a massive economic shock last year where the Zambian kwacha depreciated tremendously in just a few months. Most of our revenue is earned in kwacha and a large portion of our expenses is in rand. So at the time our revenue just got completely obliterated… That said, the fundamentals of the business were really strong, the transfers were growing quickly, more than 40% in quarter four of last year,” according to Quinn. 

Given the economic climate at the time, including China’s economic slowdown and the commodity price slump, Africa was “clearly on a downward slope in terms of investor perception”.

But Zoona managed to turn this around thanks to an experienced management team that was able to weather the storm, a business model that was strong and “a group of series-A investors that bridged us through that period by putting a bit more money into the company when we were going through the shock, showing they are completely committed to the company”, says Quinn. 

Zoona was able to secure the International Finance Corporation (IFC) as a lead investor, which was a huge coup.

“[This] global fintech investor has a network and infrastructure across Africa and also has very deep pockets, with a huge balance sheet, and will be able to continue participating in future investment rounds,” says Quinn.

Another funding milestone was independent venture capital firm 4Di Capital – the first South African investor to come on board – bringing with it local knowledge, “a great sense of the tech industry and the talents in SA, and potential companies in their portfolio that we might even be able to work with in the future”, adds Quinn. 

The company also brought onboard long-time adviser and recently retired chief financial officer of Google, Patrick Pichette, as an investor.

Future frontiers

Quinn explains that Zoona has an organic growth strategy, which looks at markets that agree with, border with and trade with Zambia.  

In 2014, Zoona entered its first new market when it launched in Malawi, expanding the network operating in Zambia and Malawi to 1 000 agent entrepreneurs, 1 500 outlets and about 1.5m active customers who are sending and receiving money on the platform today. 

In terms of further expansion, Zoona is launching in Mozambique in the fourth quarter of this year and is looking at the southern region of the Democratic Republic of the Congo (DRC). Further, they are also looking to broaden their product mix to include “things like paying of international remittances from South Africa or Europe into Africa, and looking at opportunities in financial services, such as savings particularly”, according to Quinn. 

The other region they are interested in is West Africa. Quinn states that there are no immediate plans to make this move, but they are starting to look at it. 

“In East Africa the mobile money industry is quite well established, while in West Africa there are some really interesting growth opportunities.”

Quinn is careful not to be country-specific but points out that with current plans, Zoona will be present in Zambia, Malawi, (southern) DRC, Mozambique, and thus trading in Portuguese, English and French. This will provide them with a good platform to expand into English-French West Africa and potentially look at countries like Angola after Mozambique. They will also look at Southern Africa as expansion continues.

This is a shortened version of a story that originally appeared in the 1 September edition of finweek. Buy and download the magazine here

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