Episode Transcript
Julia: Hello and welcome to the Be Inspired series of the London Stock Exchange. And today I'm joined by Jesse Moore, who is the founder and CEO of M-KOPA. Jesse, welcome to the Be Inspired series.
Jesse: Thanks Julia, great to be here.
Julia: One of the things that strikes me about this series, and one of the reasons I love doing it, is every CEO I meet has had some problem statement that they have come across in their lives, and there's been a passion to resolve and a passion to solve. M-KOPA feels to me like it's even more of that, or that on steroids in a way. Now, can you talk a little bit about what that purpose is behind M-KOPA, but also what took you from Canada to Kenya in order to address it?
Jesse: Happy to tell you that story. And indeed I grew up in Canada, but I spent most of my early career in my 20s in the not for profit international development and humanitarian sector. 20 years ago or so, I was in Kenya for the charity, and we had a project that over several years was helping a number of very low income farmers. What was amazing though, was that having been to meet these farmers before, when I went back to see them, every one of twelve or so farmers suddenly had a mobile phone in their hands.
Julia: Right.
Jesse: Now maybe that doesn't sound remarkable today, to say that these farmers had mobile phones in their hands, but as a Canadian kid at the time, my parents, who would have been in their early 60s then, they didn't have a mobile phone yet.
Julia: They were still using a landline.
Jesse: Yeah, they didn't really see the need. So a mobile phone was something that if they wanted to get they could have had one, but they had a landline and there was email, and there wasn't this need for a mobile phone. And here I was with these twelve farmers who were quite still poor, and they had all purchased a phone. And so it led me to ask them what became a very influential sort of question and answer in my career path was, hey guys you have all these phones now. What's more important to you going forward? The charity that has helped you for the last multiple years, or these devices? And I will never forget the chairman of the group basically got pushed to talk first,
Julia: You say it, you say it..
Jesse: Well, actually, this is more important to me. And as long as I've got this technology in my hands, I can do a lot with it, so this is what I want going forward.
Julia: It's that digital leap that happened in Africa that we didn't go through in Canada or in the UK because we had landlines in between.
Jess: Exactly. And so as a basically as a Canadian, you know, at the time who wanted to spend my career assisting farmers to improve their livelihoods, to have them tell me what the best way you can help me, is help me get a smartphone or a mobile phone. That was a big sort of career change moment, and it led me into the path to start M-KOPA, which, today serves nearly 5 million customers with life changing technology like mobile phones.
Julia: And let's talk a little bit about what that life changing technology is and what that evolution is as well. Because if I think of the purpose as I articulate what M-KOPA does, it's that, it's that vision thing of that recognition of the digital leap, the facilitation that that can provide to people who are otherwise potentially in isolated or quite distanced communities, but undertaking economic activity. It's then giving them the access to those assets through small micropayments that mean that they can pay it back. But the thing I've been fascinated by watching M-KOPA is the evolution of what that service is that you've undertaken as a company. How do you think about the crafting of the provision, and can we talk a little bit just to get into the business model of it? What are you doing when you're serving a customer or a client in in Kenya let's say, as an example?
Jesse: Well there's two parts to that answer I think. The first one is that mobile technology and technology generally, but mobile technology in particular, can have this transformative and immediate impact on people's livelihoods; accessing information, accessing markets, accessing so much that otherwise you don't have. And so this leap as you called it from 0 to 100, happens very regularly in markets like Kenya and Nigeria and Ghana where we operate. And it's very exciting to see that leapfrog of technology from again, no phones, no internet, to mobile computers in people's hands and the impact that that can have. So in a way that is the, that's the problem we're trying to solve, but the actual business problem, or the business model that is needed to allow that to happen, is how to make those devices and services affordable to people. And so at M-KOPA the mission of our company is to finance progress. And when we talk about financing progress, we are very focussed on a particular customer group which in the African context is the wide majority of adults, who we call 'everyday earners'. Unpacking that a little bit further, what we mean by everyday earners, is the lion's share of adults who work every single day and earn an income every single day, but they don't have a job in the formal sense like those farmers.
Julia: They can't go to a bank and say, here's my contract.
Jesse: Exactly. And like Lydia, who's one of our you know sort of celebrated recent customers who sells porridge door to door in her low-income community in Nairobi. She has a job, but it's a job that she has created, and she is earning $3 today, $5 today, maybe nothing tomorrow, and then something again the next day. And so everyday earners it turns out, are not very visible to the conventional financial system.
Julia: You're excluded.
Jesse: That's right. But it doesn't mean that those people aren't deeply economically active. It doesn't mean that they aren't hugely productive in what they're doing. But it does mean that a different approach needs to be taken to bring them into the financial ecosystem. And that is the problem that we are really trying to solve. So to the other question you asked of what is the business model? We are a company that finances smartphones to underbanked customers or everyday earners, because a smartphone is a relatively expensive product. What's exciting however, is that becomes the building blocks for a deeper financial relationship with the customer. So that same customer like Lydia, Lydia can get a device with us and quickly establish a credit score through the repayment that she's making for the device, which can in turn make her eligible for other financial services. We have lately partnered with a wonderful insure tech company that's across Africa called Turaco. And with Turaco, what we can do is embed in Lydia's phone the availability of hospitalisation insurance. And the way that works is she's paying a certain fee of about 50 US cents equivalent for a day to use a device that she's progressively purchasing over time. Kind of like a mini mortgage. But if she wants to overlay insurance on her phone mortgage, she can elect to do that. And so it's the conversion of formal financial services like insurance and savings and lending that in the West, and in most conventional economies, work on a 30 day calendar and breaking those down into a daily proposition.
Julia: Micropayments.
Jesse: Micropayments that suits the needs of everyday earners.
Julia: And not on a static schedule, but on a as and when can?
Jesse: I'm glad you've asked. And that's been an important and indeed different part of our model. In building the model I think we have really prioritised focusing on what the customer's true reality is, and building a business model that suits that reality, rather than saying, you know, change your reality to suit the business model. We've always scheduled products to allow customers to take a day off when they need it in order to get through because their income is a little bit unpredictable. It is really important in our case, to apply a different methodology and figure out ways to work within the customer's constraints for a proposition that still works for everyone.
Julia: Because that's the point about these people can be incredibly reliable payers, and want to be, and are working incredibly hard, but have constraints that mean that they can't turn themselves around to meet a classic schedule. And that is a critical, that's a remarkably different way of looking at it than most institutions do.
Jesse: Yeah.
Julia: But you can't service that community without thinking about it that way.
Jesse: You can't service it without thinking differently and then applying technology. So let's bring it back to the sort of mobile phone revolution. In our firm, yes we provide mobile phones to thousands of people on a daily basis, but it's really the financial delivery which is the innovation.
Julia: Yeah.
Jesse: And our innovation relies on another innovation, which is mobile payments.
Julia: Yes. I was going to ask about that.
Jesse: You know, cash under the mattress was literally the way people would save value. Literally in the course of a decade, the majority of the underbanked population of Africa has gone digital, in a way that's faster again than my, you know, relatives in Canada would have seen. And it's lovely to live in Kenya and have people come from the UK or come from North America or come from Japan and they say, 'you can move money that way here? Why can't I do that back home?'
Julia: Yeah, exactly. It's amazing. Now you can track that digitally, understand their journey, get a sense of their credit worthiness, and give them the capacity to take that credit worthiness and leverage it into other services and other products that they might need to enhance their economic agency. I guess that's, that's a way of thinking about it. So you talked about the insurance piece, but you you're doing other things as well, so not only have you got the M-KOPA mobile phone itself,.
Jesse: Yes.
Julia: But there's the insurance product, and now you're teaming up with other providers of other services. Is that you thinking increasingly about the capability to deliver those yourself, or about teaming up with people who can then buy those services over, over your platform? How do you think about that scaling?
Jesse: Yeah, that's a very good question. And so indeed our vision from the beginning was the phone is a gateway to a financial relationship. So to put in numbers in very simple terms, in 2024 we are tracking to sell 2 million smartphones on the year. Financed smartphones across Kenya, Uganda, Nigeria, Ghana and now South Africa. We will also though sell over 1 million financial services products to customers who have those devices.
Julia: Right
Jesse: And as the business gets bigger and more mature, the number of overlay products, or retention products will actually exceed the number of phones. And so it's worth, hitting on this point, but we are now in the business of developing our own branded device in partnership with HMD, which is a great mobile phone equipment manufacturer and designer. But we have started to brand devices in order to distinguish that these phones come with financial services to the end user as well as get a cost advantage to make them even more affordable.
Julia: They're pretty cool devices as well.
Jesse: And they are pretty cool devices, they're selling really well. This is the first quarter we've been doing that, but I think this is now the future for the way we will do that business. We then run a massive distribution arm. And that distribution arm involves us having now 30,000 active sales agents across our five operating markets. So being able to create that volume of employment opportunities for so many people, you know it was 2,000 five years ago, it's 30,000 now. We project it could be 100,000 in another three or four years. That sort of employment creation is terrific, but it's actually just the best way to build our business. And in addition, then we are bankrolling millions of devices. We do that in partnership with leading banks and financial institutions.
Julia: What you've just articulated illustrates both the innovation that's taken place in your business model as M-KOPA has evolved, but also the pace at which it has happened. How do you take your people and indeed you shareholders on that journey and adjust to kind of running a business that is growing at a phenomenal rate?
Jesse: Well, I think it's fair to say our business is born from innovation. And that's something that's attractive to the team and the people that you know, have stayed with us a long time. The pace of change is significant, but most folks who enjoy that sort of challenge and change you know, want to be a part of innovation and want to be a part of something new. And the investors I think also recognise, particularly because we've been successful more often than we've you know failed, and hey we've failed, everybody fails, that's the part of innovation that we all understand. But that we've been able to successfully innovate, fail, innovate and fail and then figure out what's working and scale, has given our investors I think a lot of comfort that there's something good going on in this and it's.
Julia: It's working.
Jesse: Yeah, it's working and why not do it again? And indeed, we have recently not spun out, but created a subsidiary company of M-KOPA, which is not dealing in smartphone financing but is dealing in electric motorcycle financing. And we've just crossed the 1,000 motorbikes on the road threshold in Nairobi. That represents the majority of electric two wheelers in the country today. And we want to continue to be the financier of choice for electric two wheeled vehicles in a market where there's a lot of demand for those services. It's obviously a different product. It's an electric motorbike or a smartphone.
Julia: But it's still the same enabler.
Jesse: Exactly. And a similar demographic of customers. You know, and as I overly simplify it sometimes I say, well look we're still talking about financing a lithium ion battery with some clever technology wrapped around it.
Julia: Just a just some wheels attached as well.
Jesse: Exactly.
Julia: Now you've also started producing an impact report. It would be lovely to get a sense of what drove you to start doing that as a private company. What did you learn from the process of doing it, and was there anything that it taught you about the company that you weren't as conscious of in terms of what impact you were having?
Jesse: Yeah. So we've been studying very carefully the impact on our customers forever. And I would say it comes from a tradition of regularly studying and surveying our customers to understand.
Julia: You need to solve their problems.
Jesse: And look, in a pure business sense, whilst we have a huge mission in our business, if our customers are not benefiting from the products that we are providing them, we are on a very short road to nowhere.
Julia: Yeah.
Jesse: So it is critical to the strategy of the business to understand that our customers are making more money through what we provide them than they are spending right? So the impact report, I think, is the external now expression of something that's going on internally a long time. And one of the big findings, no surprise, but one of the big findings was women are better customers than men, for us financially. And women are better sales agents that are men.
Julia: That's interesting.
Jesse: Across a number of dimensions. Men are also good. So this is not me saying that men aren't good customers, but if you look at the repayment performance of customers, and if you look at the sales productivity of the agents, women index better than men do. Which was very intuitive to most of us but.
Julia: It's a fundamental sort of philosophy of a lot of microfinance models.
Jesse: Indeed.
Julia: But you've got the empirical proof on a very big scale.
Jesse: I'd say that's a very good way to do it. We believed that was true, but we wanted to quantify it and we wanted to know by how much are they better. We have that data now. And the team is therefore busy building commercial strategies to deepen that gender impact.
Jesse: We do well on gender, but not as well as we could and should, both impact wise and commercially.
Julia: It just strikes me, because the gender piece on microfinance has been something that's been the sort of in the development parlance for a long time, but it strikes me you can also get insights into what are those cohorts of men and why who are more reliable than not, and think about addressing that side of the problem as much as pivoting towards focusing products on women as well. And that feels like societally even more powerful than just focusing on the female piece of it.
Jesse: Absolutely. Yeah. I mean, there's lots of depth to the to the impact report and the internal information that we're gathering all the time on all of our customers, men and women.
Julia: So one of the questions, you've been wholly, privately funded so far, and you've had a number of finance partners who've been with you now for a long time and care passionately about the project. How do you think about raising the capital that you need to expand and to grow, but also in almost choosing the right partners to have that shared vision for the way you want to go about running your business?
Jesse: The beauty of a private sector model is even if you can you know, make one pence of profit on each transaction, you're infinitely scalable.
Julia: Yeah.
Jesse: And so I think that the pursuit of building M-KOPA has been to find that infinitely scalable, commercially sustainable model.
Julia: Find that glide path.
Jesse: Exactly. And now I feel like we're very much on that. You know, hundreds of millions of revenue. We're growing at over 50% year over year, reaching millions of customers per year. To answer your other question around accessing capital. We have been very fortunate, but also, I think, selective in working with private investors who have a long-term view. I very much think in you know, a few more years’ time we will be a multi-billion dollar revenue business, where we're going to need the support from long-term, deep pocketed capital markets and investors. We look forward to finding those right investors as we grow in our journey.
Julia: I think the thing for me is you've got that fundamental purpose. There's a there's a through line, through everything that you've done. There's a core to both the technology, the approach, the model, which is working and proven and now proven in multiple countries. And as you say, has that capacity to expand the product suite and everything else. And I think it is an incredibly powerful story. Jesse, thank you. It's been fascinating. I felt I knew M-KOPA reasonably well and I know I've learned a great deal more as a consequence. I know the people watching the series will be fascinated as well, so thank you very much for joining us.
Jesse: Thank you too.
