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Fixing broken business financing in Africa with Ovamba startup

By Daniel Finnan

The ability of small and medium-sized businesses to access financing is described as one of the biggest challenges to economic growth in sub-Saharan Africa. One startup is trying to change the landscape using innovative technology to reach entrepreneurs who would otherwise miss out on funding by traditional banks and credit organisations.

“Ovamba provides small and medium enterprises with short-term capital to fund the purchase of inventory from both domestic and international sources,” Viola Llewellyn, co-founder of Ovamba, told Spotlight on Africa on the sidelines of the Afric@Tech event in Paris.

Q&A: Viola Llewellyn, co-founder of Ovamba

Traditional banks and microfinance credit organisations are too slow at decision making, says Llewellyn - “they're the bottleneck”. Ovamba currently operates in Cameroon and Cote d’Ivoire and has originated some 144 million euros in funding for small and medium-sized businesses.

The five-year-old startup’s first customer was a female pharmacist who could not get a loan to buy medication, including anti-retroviral drugs for HIV treatment. She was turned down by the banks because she was a woman and a scientist, says Llewellyn. Nevertheless, Ovamba provided 12,000 euros in funding and the entrepreneur returned a number of times for further financing.

Ovamba’s innovation lies in the way in which it assesses risk and compliance in an African context, says Llewellyn, outlining how Western financial institutions have created a system that does not necessarily fit to a continent with different cultures and societies. The startup instead concentrates on what it describes as “African data”.

“We look for information – anecdotal or otherwise – and run it through our machine learning, in order to test certain hypotheses to see whether or not they stand up honesty and repay-ability,” the Ovamba president says.

Llewellyn does not want to reveal Ovamba’s “secret sauce”, however, their analysis might for instance look at different ethnic groups’ relationship with authority or role in society. The startup, which is incorporated in Maryland, US, uses algorithms to recognise patterns in the data they collect.

“For example, you take a person who comes from a family or an ethnic group that has been purely involved in agriculture and they suddenly decide that they want to be in business – there are certain skills sets and hurdles, the way African societies are set up, that are going to have an impact on that,” says Llewellyn.

Llewellyn, who grew up in the UK with her Cameroonian parents, is keen to point out that Ovamba is not providing loans, it is funding the purchase of goods and taking ownership of them, with the business in question buying them back over time. It also boosts returns of more 15 per cent for investors.

“The need and the credit gap in Africa is very real,” says Llewellyn. A 2017 report by the International Finance Corporation, part of the World Bank group, estimates a 312 billion dollar shortfall in financing for micro, small and medium-sized enterprises in sub-Saharan Africa.

“Lack of access to finance is one of the biggest hurdles small businesses face that prevent them from growing and creating jobs,” Philippe Le Houérou, chief executive officer of the International Finance Corporation, says in the report.

The Ovamba co-founder says one of the businesses she is “truly excited” about at the moment is one providing supplies and parts for motorbikes and cars. She describes one entrepreneur who is on his “third or fourth transaction for 500,000 euros” providing engine oil.

“This guy was low on the totem pole and is accelerating and has shown 450 per cent growth,” says Llewellyn, describing a moment the entrepreneur’s rapid growth led to his Moroccan supplier getting in touch with Ovamba and asking - “who are you people?” – incredulous at the speed of the entrepreneur’s development.

Another business she likes is supplying tyres. “They were only ordering one case of tyres every two or three months,” Llewellyn says, “they’re now doing four every two months,” after receiving Ovamba funding.

The startup is looking at expanding into Sudan or Ghana. “Sudan is a key opportunity where they have to rebuild the banking sector.” The company's technology hub is based in India and its funds are domiciled in Mauritius.

Furthermore, Llewellyn says Ovamba provides a “pan-African solution” that works anywhere with “a formal or informal sector that has a problem with financial service access”. She says the startup has also had interest from Latin America where small and medium-sized businesses face similar challenges.

The Ovamba co-founder spoke to Spotlight on Africa following her participation in the Afric@Tech panel organised by VivaTech on 21 March. The French startup event organiser will hold its 2018 edition in Paris on 24-26 May at Porte de Versailles.

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