2023 Episode #5: Joseph Mucheru - President, JUMO

Speaker A: Foreign. Good morning, good afternoon and good evening. Thank you for tuning into this week's edition of the Africa Fintech Rising podcast. My name is Andrew Bard and I'm the lead organizer and content director for the Africa Fintech Summit. Today I'm joined by Mr. Joseph Muchiru, President Tajumo and former cabinet Secretary for the Ministry of ICT Innovation and Youth affairs in Kenya. Jomo is a market leading banking as a service platform that provides real time access to funds at the lowest possible operating cost. Joomo's platform serves financial products including loans and savings to a large proportion of unbanked individuals and msmes in partnership with capital providers such as banks and E Money operators such as telecommunications companies. Today our episode is brought to you by our partners at Joomo and produced by uh, by our friends at the Kenyan Wall Street. Without further ado, please enjoy the conversation.

Speaker B: Mr. Richer, thank you so much for joining us here today. Now you are the former cabinet secretary of the Ministry of Information and Communications.

Speaker C: You served Act Innovation and Youth Affairs.

Speaker B: Youth affairs, sorry, forgive me. Um, you served under President Uru Kenyatta's administration, uh, from 2015 to 2022.

Speaker C: Correct.

Speaker B: Now you are here working in the private sector, speaking to us today from the position of President of Jumo. What has that transition been like for you?

Speaker C: I believe first, uh, transition from private sector, where I was uh, heading Google in Africa was private sector and then getting into government, that was a huge step where you don't understand a lot of the politics, a lot of the issues that need to be dealt with, um, within government. The scope is endless. You know, you deal with everybody and everything when it comes to information or communication, then it's, it's everything now moving from that, um, where you're dealing with every person, every youth and all the issues and challenges that uh, the country is having, trying to develop. And then coming back to private sector is actually easier because then you have a much more uh, focused view of uh, the society and the things that you need to do within that. Uh, so it's easier because it's focused. Uh, but you know, you want to have still the same kind of impact that you'd have had in government.

Speaker B: Okay. And I'm sure you have more pre time for family stuff.

Speaker C: Yeah, you can engage your family. Um, I don't, you know, it's not political anymore. You don't have to stop and engage with everybody. Um, there's less uh, social media attacks on anything that you say. I think it just seemed naturally. Well, I would say then it was the Office as opposed to the individual. Because now I'm still the same person but less uh, attacks on social media.

Speaker B: Okay.

Speaker C: So happy that uh, a more peaceful life family is okay. Less rasmat, as I would say.

Speaker A: Okay.

Speaker C: Okay.

Speaker B: And so now as the president of Jumo, what can you tell us about uh, Jumo? What does the company do?

Speaker C: So, so first the, the reason I joined Juma is uh, I've had this intention, you know, in life to want to put money into people's pocket, to find ways of uh, ensuring more and more Africans have access to services. And so Jumo is one of those companies that is, you know, taking both finance and technology, which are now major passions in mind. And what uh, Jumo does is actually provide the infrastructure, the banking infrastructure that uh, banks and financial partners, service providers, the ecosystem providers, such as mobile money, the GSM M the can use to now reach those applicants and those people that need access. So um, it's a great company. So providing technology that reduces more occupied either loans, providing savings facilities for individuals at the micro level and businesses and at the same time, uh, providing new revenue stream for either the ecosystem providers or for the banks who are uh, really our partners. Okay. Okay.

Speaker B: Now Jumo was founded almost 10 years ago, correct?

Speaker C: It's about seven, eight years ago.

Speaker B: Seven, eight years ago. Okay. In that short period of time you've processed over $5 billion worth of loans to 22 million different individuals and small businesses. You know, this is a considerable volume of loans for a company that's not even 10 years old.

Speaker C: Right.

Speaker B: Very impressive achievement. Now if you had to single out two or three factors that have led to Jumo's uh, rapid growth and expansion over the years, what would they be?

Speaker C: I think the first thing I have learned over the many years I've been working is that leadership is always normal leadership and vision. And then I would say Andrew, our uh, ce, the founder but of the business, has been very determined to have impact on the country. I think he's uh, one of the early technologists, has been involved in banking. And so one of the things he told me, because we met in 2015 actually I was to join him then and opted uh, well to join President Kenyatta first and his drive to ensure there is financial inclusion, making change and impact for a lot of the people in Africa, that drive is very important. And then being able to recruit the best uh, technologists and then uh, managing with the partners and I would say the biggest of them all the drivers, is actually the demand, the need by the individuals and small businesses for access to either, uh, credit or savings facilities where they can actually be able to get into the financial space which they've otherwise been excluded from for a long time. So I would say really it's the team, the leadership and vision that, um, we have, and the fact that there's a huge demand in the market which until today is still largely unmanned.

Speaker B: Yes, and this leads into my next question. But there are millions of African SMEs who have no means to access finance, to grow their business, to expand, um, and to you know, make their families more financially, uh, better off right now, you know, in servicing SMEs. What are the biggest challenges to address this lack of finance that's available?

Speaker C: So I think the first thing, uh, if you look at the west and all other places, it's not that the consumers or the SMEs there are the ones who went and pushed the industry to give them access. Actually the businesses organize themselves to find ways of how they can provide their services to the market. So again, here on the continent we have a lot of people who actually are bankable, but on African standards, as opposed to in the west, uh, where the kind of standards they use haven't yet fully developed, uh, on the continent. So access to people's data, credit, ah, scoring, those have been the key challenges. So for us, um, what we do is we have to find the individual, see what data we can get about those individuals, to then start providing them the services that they need. Um, initially the governments and the regulators were not fully engaging, so you didn't need to be regulated and licensed. So you found many people coming into this space. But now the regulators are also coming in and managing to ensure that nobody's taken advantage of, you know, for a lot of people, they believe that when you give credit to somebody, um, if they don't pay, then they've defaulted, then, you know, you move on to the next person. But at Jumo, we know that if that person has defaulted, it means they will not be able to get access to money again. So they're almost worse off than they were when we started, before they even had access to the financial services. So the key thing is to make sure that one, the consumer is well educated and understands how they can use this system to be able to grow their business or individual needs. And at the same time, the regulator understands the partners that we have with the bank or the ecosystem providers. So you have an ecosystem that generates good income, uh, for, for everybody, and access to finance for the individuals and their businesses.

Speaker B: Okay, okay, now Jumo, you're currently in six markets at the moment. Uh, Kenya, Uganda, Tanzania, Zambia, Ivory Coast, Cotova, and, uh, Ghana.

Speaker C: Right.

Speaker B: I noticed on your website you have three new countries that you're looking to expand to in the near future. These are Nigeria, Cameroon and Benin.

Speaker C: Right.

Speaker B: When your team is exploring new markets to expand to, what factors do you take into account, uh, in deciding where to expand?

Speaker C: So I think first the, the maturity of the mobile money payment system. So gsm, of course, is, is a given without, uh, the mobile. Because Jumo is, um, actually just mobile. It's. We started off, you know, looking at things from the mobile perspective because that's where most of the people on the continent, uh, you can access. So we make sure that, um, there's also good regulation, um, in some countries, uh, now other than the, you know, central bank regulations, uh, you also now have the data protection. So just making sure the environment is quite clear. Um, we have found that, uh, at the moment, the list of, uh, countries that we need to go to are very many. We just need to. Now it's a process. What can we execute fast enough? The relationship with our partners, whether it is the financial partners, which are the bank, or with the mobile providers, the ecosystem providers for mobile money payment. So if we can get those signed up quickly enough and have the full capital to actually roll out in the market, then we will do that.

Speaker A: Okay.

Speaker C: But it always seems to just the legal regulation process is what seems to take time. Over the seven years or so Jomo has existed, most of the tech has been done. Um, so, you know, in terms of scaling the cloud services and the scoring services, those can actually be scaled quite easily. Uh, the last one would be also some of the, uh, partners are also in the different market. So it may be easier to go into a market because already both partners are already in that market. They want to expand. So we also listen to what they want and we move with them, uh, into this market. And it's my hope that, uh, we'll cover the whole continent, uh, soon under the Africa Continental Free Trade Area, uh, and then, you know, have a sizable, uh, change and impact on the continent for the SMVs you're talking about and the individual.

Speaker B: Okay, okay. Now it's no lie that banking as a service is an extremely competitive space. And that is what Jumo does. Now, when you're having discussions with potential customers for financial services products, how do you sell them on becoming a Jumo customer over another country, another company.

Speaker C: So there are two things. One, for all of us, the partnerships that we have, we provide finance to the SME and to the individual consumer. So those are the things you call the banks that we work with or the mobile operators, those are our partners. So what we do is we usually have tri partner clearly. So you go and you have a bank, you've got a mobile operator and ourselves, we provide the technology that then allows for, if you take uh, a bank for example, their ability to provide credit, uh, to small uh, businesses and individuals and at ah, scale they've not built that capability. So Jomo has taken time, we have built that capability, um, and we are able to do it at possibly the lowest cost, uh, on the continent and with the fastest time and with the best accuracy. You know, we call a thin file, which is just the basic data that uh, an individual would have, you know, their mobile calling, uh, mobile money data and so on. We have that and we're able to say with significant confidence over 90, uh 5, 98% confidence that uh, this person on this pass loan, they'll be able to. So the advantage we have as Jumo is that we've existed for a while and uh, artificial intelligence, which is really what we use to be able to do the scoring, to know that this person um, is a good person to lend to. So we are able to work on what level of risk can we manage. So artificial intelligence is data, uh, over time. So we've been able to get that. And I believe we started off early. So when we sit down then with our partners, we are able to demonstrate to them the reality with the lender. You've seen it's over 5.2 billion we've lent. It's over, uh, it's over 360 loans, sorry, 160 million loans that we've given. So we have a lot of experience in the space and that's partly why then we have these partnerships.

Speaker B: Okay, yeah. One of my questions was about artificial intelligence, uh, and how Jumo is using it. But you've sort of answered that already. I um, think it's really special that you guys have been out there before. AI has taken this current trend. It's on. Everyone's talking about AI now. Yeah, but you guys were doing it before anyone was talking about it.

Speaker C: Essentially we had to. Because if you look at uh, the scale, I mean you've got over 700 million um, mobile phone customers in Africa. You know, you're talking of the maybe 350 million mobile money customers and many of those um, are ah, potential uh, consumers of the credits and savings products that journeymat provides. And to be able to do the analysis, to be able to scale the scoring that needs to be done, you cannot do it without artificial intelligence. You have to really be able to focus on each individual and then do that whole thing at scale. And so that's why we've been uh, working in that way. The second thing is most people's data. Um, if you look at the traditional banking methods, you bring your bank statements, you see how this have been, your utility bills and so on. But for most of uh, the people on the continent, whether it's the business or individual, they don't have that uh, history. But if you use artificial intelligence, you'll be able to know what are their, uh, spending habits, what kind of network do they have, which people do they engage with, um, what patterns emerge in terms of when they've taken loads, do they repay, and so on and so forth. So you have to put all this together. And that's where machine learning, artificial intelligence becomes uh, critical. And we see that that space is moving. It also helps us in being able to focus, uh, what to expect as we go forward. And our data teams are amazing, ah, in their focusing you can always see everything, uh, what to expect. Um, and so use of data has been critical for us and we believe we'll continue to use AI uh into the future.

Speaker B: Okay, yeah, I'm with you on that. Uh, you know, the artificial or not artificial, but the alternative credit scoring methods that have to be used here on the continent are drastically different than, you know, in the United States, Canada, Europe and so forth. Um, now when you're doing this credit scoring, how do you make sure that your model is inclusive of all the particularities of each of your markets?

Speaker C: So we have the, we have several factors that we look at. So first, the financial service provider or the partner that we have says this is the kind of return they're expecting. So you've got those that are, uh, fair profit businesses that want to get uh, as much profit as possible. That's one. You also have others that are impact investing. They want to see can we uh, make a change, uh, for SMEs in, in say the agricultural space or in the energy or health space and so on. And so they're willing to, you know, take less in terms of their returns. So, so with the kind of mandate that we take, we then analyze the various, you know, the customers that will be working. So initially you might say you only want, uh, the customers that, you know, they will repay and this, the amount they can debug. But for those who want to increase, um, I would say include more people. They will say let's take more risk. So we have a system, a model which is risk adjusted. So depending on the kind of risk the financial partner wants, we can get a certain segment. And we're happy that we have different aspects and different services, uh, financial providers that allow us to keep increasing the eligibility. So um, you have data that says this person uh, is say 90% willing to pay. There are those who will be willing, but there are those who come and say, look, we're happy to lend to those who are 50% likely to pay. And what we have found is that as ah, people take that risk, uh, and as it's adjusted, more people are getting financially included. And that's what uh, our learning models have been helping us be able to achieve. And so we're able to increase the eligibility. Um, and so if we increase the amount of capital that's available to be able to reach people, I think ah, over time this market is going to be much, much larger on this mobile money services than actually in the formal financial services.

Speaker B: Okay, now help me understand something. When you give loans out, is it your FSP partner who manages making sure that repayment comes through or is that on uh, Jumo's to do list?

Speaker C: So that's our to do list.

Speaker A: Okay.

Speaker C: So actually what the financial service provider does is they give us the money, we do the whole process on their behalf. And then uh, uh, depending on the product, they may want to have their brand, uh, upfront or the mobile operator, whichever we're very flexible with, partner underwrites it. Right, okay. Yeah, so, so, so we work from that uh, perspective, but we run the, the full service. So it's a banking as a service both for the credit as well as for savings. And, and in some cases some people in their savings they also want to bring in some investment. So, so just providing the full suite of financial services. Okay, yeah.

Speaker B: Now are there any new products or anything you can hint at or uh, tell us about today or.

Speaker C: No, uh, no. I think at the moment the demand for just the existing products is so high. And so our focus really is to see how best to scale and reach as many people as possible. Post Covid. Uh, you know, a lot of businesses have, they suffered and they really need a quick, crisp and clear way of being able to run their finances and so on. And so we are really looking at expanding the market as much as possible to ensure that um, our partners as well as the consumers who we are providing the services to especially the small businesses that employ people, that everybody is benefiting in growth. So some innovations, uh, will come, they are on the way. But for now consumers are just saying please give us access. Uh, we want money, uh, we want more money. Because initially obviously depending on your scoring you don't always get the large amounts. Large amounts come as you build your credit history. So that's the process that we're working on. But I would say the innovation that I think is critical is where you're able to lend, well, lend money from multiple different financial services providers to multiple different ah, consumers. So at any one time being able to match one to another and ensuring that that is working and ensuring that the repayments continue, uh, those are very um, difficult algorithms or technology that you need to put in place. Uh because if I've taken three loans from three providers, then you know, what if I default on one, which one will it be? So the innovation in making sure that uh, all that is managed, uh, be working on this.

Speaker B: Okay. I think this is a very uh, very good strategy. Oftentimes you know, I've noticed with some entrepreneurs they get bogged down with almost over innovating their product and then they're either spreading their team out too wide or you know, they can't find good product market fit. So I think this is a, a great strategy.

Speaker C: Yeah, we're just at the beginning and we must, uh, we must, the demand is huge. So if you're talking of uh, say with the current partners we have is over 130 million um, subscribers that, that we can actually engage with. And right now we are about 22 million. Like it's, it's, it's huge. We need to scale as fast, uh, and as much as possible.

Speaker B: Okay, and now for a young person, say you know, recently graduated university, how do they build a credit score within your system or how do they, you know, over years kind of become able to access more and more credit.

Speaker C: I think like anything else, so long as you're able to repay, um, that's usually the key. So if they're able to access the first loan and they continue to repay, then you're able to build your credit history. Um, all this other data and information. Yes, comes to support um, that initial uh, step. Um, what's important to understand is that uh, as joomo, we do not take any guarantee. It's all unsecured loan. Um, so the security that we have is based on your data and your information. So have the right information, have the right data. Uh, and it's not in a sense, uh, unique because that's what even in uh, the west they've always used or in the traditional method, it's only that now we can use, you know, 5,000, 10,000 data points to be able to understand you much better. But so long as you're able to be paid, I think that's uh, critical and the most important.

Speaker B: Okay, perfect. Now we're coming toward the end of our conversation today. I have a few kind of quick fire questions for you. Um, so yeah, let's go. Which trends will define the future of Africa's fintech industry?

Speaker C: It's going to be artificial intelligence. Um, the ability for people to use the AI to do credit scoring and to know which people to provide their services to. That is going to be the future.

Speaker B: Okay, what is the best investment you ever made in yourself?

Speaker C: Uh, I think it's the Stanford Executive Program, uh, that would be beginning to understand scale, understand how big businesses and how you can reach the masses. I think that was one of the best. But in that health was, uh, primarily, I would say, one of the things we were taught. Take care of your body, take care of your health, eat well, exercise. And so far that has been uh, so feeling healthy, being able to work as well as, uh, then understanding how you work in the markets. Go to resume.

Speaker B: Okay.

Speaker C: Yeah.

Speaker B: When you received your first paycheck of your career, what did you spend it on?

Speaker C: Uh, I'm embarrassed to say, but it was a chips and sausage.

Speaker B: Okay.

Speaker C: Because at the time that was the, the, the hardest thing to, to get and the sweetest. So, so that's what I started.

Speaker B: Okay.

Speaker C: Um, maybe it wasn't the most healthy thing, but it was. I enjoyed food.

Speaker B: Okay, me as well. I enjoy food. What advice would you give to a young professional aspiring to build a career in the fintech industry?

Speaker C: I would say to them they need to understand the society, they need to understand the needs of society. What does society want? And how can data and technology be used to change and solve some of the big challenges, uh, that are there? Of course, uh, as I mentioned earlier, AI is uh, going to change everything. I think at the moment the artificial intelligence is getting to our level. You're talking of machines that have so much of our history and data and they're able to come up with multiple choices, but we're getting to a point where these machines are going to become super intelligent. They're going to know more or can process and analyze more than we humans can.

Speaker B: Yes.

Speaker C: So what are we going to do then? So if you're going into technology now, please understand how you're going to deal with that kind of new area where you have, for lack of a better word, beings that are more intelligent than, uh, humans. We've been at the top of the food chain for the longest, but as we move now, we're creating something that's going to know more than us, do more than us. How are we going to deal with that? First of all, that's what they need to look at.

Speaker B: Figure out, uh, the human touch, as you could say.

Speaker C: Correct.

Speaker B: All right, Mr. Muccero, is a pleasure meeting you and speaking with you.

Speaker C: Thank you so much, Andrew. I enjoyed that.

Speaker A: Thank you so much for tuning into the Africa fintech Rising podcast today. If you enjoyed this episode, don't hesitate to hit the subscribe button, as every few weeks we have a new addition. Again, my guest today was former CS Joseph Mujere, the president of Jumo. If you're interested in viewing the full video interview, visit our YouTube channel or check out our partners at the Kenyan Wall street, who most graciously enabled us to fully produce today's episode. Thank you and have a great rest of your.