How innovative business models are impacting in Africa

There is an ongoing trend to spur the economic growth that is already on a positive trend in Africa to greater heights, and more so to impact on people’s lives in meaningful ways. This was apparent at the Innovating Economies Summit, one of the many initiatives around the world under the aegis of The Economist. The summit, held in Nairobi earlier this week, noted how Africa is innovating for itself and facilitating home-grown innovations. It sought to explore how the continent can more effectively navigate towards relevant solutions, given the many infrastructural challenges. While it had many strands of discussion – from increasing productivity and efficiency, including in health care, to financing and linkages to the global knowledge economy – one of the most illustrative as I sat in the audience was a segment dwelling on strengthening the continent’s innovation ecosystems, and of which there are ample examples of how they are impacting people’s lives around the region. Take the pay-as-you-go solar energy services for off-grid homes which, in Rwanda, are being spearheaded by the likes of Mobisol. Its business model depends on mobile money platforms, where a household pays a minimal amount daily to access its Solar Home Systems – the solar panels, battery, lighting and charging system – through a rent-to-own payment scheme. Depending on the service offered, whether including TV, fridges and other costlier amenities, the subscriber eventually owns the solar home system after completing payments over a given period of time. It is more than a symbiotic relationship. The solar system vendor relies on the telecoms to collect payments, while the telecoms lock in their subscribers as both service providers grow together in a monetary ecosystem that could include banks greatly benefiting the common mwananchi (citizen). So far, the numbers on the Mobisol website indicate that it has installed over 70,000 solar home systems for households and businesses in East Africa. But the example discussed at the Summit, demonstrating how mobile money technology combined with the latest solar systems have fuelled the rapid expansion “leapfrogging” East Africa’s poor infrastructure, was the multi-award winning M-Kopa that set the pace for the innovation and business model. The mobile money platforms enabled M-Kopa (kopa means borrow in Swahili) to “crack it,” thereby saving people in the lowest income bracket money they would have used to buy “kerosene to light their homes, batteries to power their torches and radios and a long trek to someone with power to charge their mobile phones.” With more than 400,000 households connected to solar power across Kenya, Uganda and Tanzania, it remains the leader globally and was the first to demonstrate the business model and convenience for the underserved in a situation of inadequate power infrastructure. As one prominent Nairobi-based investment analyst told the Financial Times, “M-Kopa […] has shown that you can take nickels and dimes from the bottom of the pyramid and build a substantial business.” As it is, most Africans still do not have access to proper loans, savings facilities or insurance, a situation mobile technology is already proving core anchor to exploit. The entrance of Commercial Bank of Africa in Rwanda is a case in point, aiming to offer savings and loans facilities to the underserved through mobile technology. The bank has already been quite successful with m-shwari, a savings facility with Kenya’s Safaricom, and moKash with Uganda’s MTN. It has done the same in Tanzania. Insurance is another area already being tapped through mobile technology in Tanzania and Uganda, as well as in Ghana and Senegal, by the multinational microfinance firm, Milvik, partnering with insurance businesses and telecoms providers. The Innovative Economies Summit was something of a mirror to ourselves on what it possible on the continent through home-grown solutions. But it was on the insistence that the challenges besetting the continent could be overcome. For instance, it noted how, by 2030, sub-Saharan Africa could be adding more working-age people to the global labour force than the rest of the world combined. Already, about 11 million young people are entering the African labour market each year. The unprecedented labour force could provide significant economic opportunities, but not without resourcing innovative solutions.

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How innovative business models are impacting in Africa