A World Bank report released earlier this year revealed that more than 60 percent of Nigerians are unbanked, i.e. a lot of Nigerians don’t use formal banks or semi-formal microfinance institutions to save or borrow money. This creates a problem since it implies that many Nigerians don’t have access to savings or loans, and are not prepared for financial emergencies. Giving these unbanked Nigerians access to formal and semi-formal finance institutions, especially through FinTech will drive financial inclusion, and give them greater control over their money, savings, securing business loans, and insurance. It also has the potential of reducing poverty in Nigeria, especially if FinTech platforms can offer services that traditional banking institutions don’t offer to Nigerians.
One of the platforms providing solutions through FinTech in Nigeria is CowryWise, a digital platform that allows people to save and invest securely to meet financial goals, like a personal wealth manager. Since its inception in 2017, the platform has processed more than $1.5 million in savings for thousands of users in Nigeria. The startup was recently accepted into the summer 2018 Y-Combinator program.
Ventures Africa had a discussion with Razaq Ahmed, CEO/Co-founder CowryWise about how FinTech can be used to drive financial inclusion in Nigeria.
Ventures Africa (VA): Congratulations on your acceptance into the summer 2018 Y-Combinator accelerator program. Should Nigerians be expecting additional features and services from CowryWise, more engineers to be hired etc.?
Razaq Ahmed (RA): Thank you. It’s exciting being one of the 11 Nigerian startups that have gone through Y Combinator. Applying to and being accepted to YC has been transformational for the company. A lot more can still be done within the financial service space especially as it bothers on providing unfettered access neglected majority and making high-quality service available at fraction of the current cost. Many young people are saving and investing for the first time. Currently, we are expanding our engineering team and we are looking for engineers who share our vision to help build out the platform and tools that enable anyone to have access to how to plan, save and invest, no matter how small, towards meeting their financial goals. Last week, we launched our iOS app broadening our service channels to four: Web app, android app, and Facebook ChatBot. In the coming weeks, we will be rolling out new product offerings and strategic partnerships to further strengthen our position in meeting the demands of our growing customers.
VA: What was your motivation for creating CowryWise?
RA: CowryWise was born out of necessity; the necessity to meet the demand of people who want to be more financially responsible by having access to simple financial planning tools, high-quality savings and investments opportunities. The major pain point has always been limited access to quality savings and investment opportunity and the challenges of scaling existing operating models to the mass market in a cost-effective way. It has been crystal clear to us that the answer to that question of scaling and cost structure lies in the marriage of investment management and technology. That answer is what we are crafting with CowryWise.
VA: What is the interest rate on money saved in CowryWise, and how does CowryWise generate these interests?
RA: There are different savings and investment products currently and the interest rate obtainable is anchored on the overall interest rate on financial instruments within the financial system. Currently, rates on money market instruments range from10% to 15% per annum. These financial instruments are the sources of returns to our customer’s savings and investments. You can see our savings products as treasury-bill backed notes made available with our platform to the everyday person. Besides the underlying interest, a key value proposition lies in the planning tools and money management functions that CowryWise offers compared to what other financial services companies provide.
VA: What role do you think CowryWise can play in the banking industry, especially now when Nigerian banks are increasingly unable to satisfy customer demands?
RA: The banking industry has grown tremendously over the past 10 years. However, this growth seems remarkable because of a low base effect. The growth came from a base when millions of people barely had access to financial services. The industry still has a lot of miles to cover. This also applies to the investment management industry. Barely a handful of Nigerians participate in the capital market. Building an inclusive financial service industry that generates shared prosperity means millions of underbanked, underserved and unbanked must be reached, served and brought into the financial service industry with a cost-effective and scalable platform. That role is what CowryWise is playing.
VA: Do you have plans to make CowryWise accessible to people who aren’t tech-savvy, or computer-literate enough to use the app?
RA: Yes. This speaks to the inclusive growth of the financial service industry I mentioned above. Everyone matters. We are addressing this gap with two important tools: financial education and an easily accessible channel.
VA: People say what differentiates the rich from the poor is the decisions they make with their money. Do you think FinTech solutions like CowryWise can offer more options, and close the poverty gap in Nigeria?
RA: Financial inclusion breeds shared prosperity. Giving people access to financial planning tools and platform that makes savings and investing a lifestyle makes it possible for anyone to tick an important box in being financially responsible. Hence, because FinTech solutions like CowryWise make financial access easy to achieve at substantially cheaper cost, it is obviously an important contributor to poverty reduction and closing the poverty gap. Financial access provides tremendous financial opportunity.
VA: Looking at the CBN’S 2020 target of reducing the number of unbanked Nigerians to 20 percent, do you think it is possible?
RA: Reducing it to 20% is a noble goal. Realistically, I do not see that happening by 2020. However, there will be a remarkable reduction in the number of under-banked/underserved and unbanked people in Nigeria by 2020.
VA: What roles will FinTech startups like CowryWise play in banking unbanked Nigerians, i.e. if they believe they have a role to play?
RA: This is simple. We make it easy to reduce the time taken to bring millions of the underbanked/unbanked into the mainstream financial system using scalable and cost-effective technology-driven platforms. Layered on this, is a tailored customer service touch points that prioritize the need of every customer as an important element of the company’s vision.
