It’s widely acknowledged that one of the biggest prohibitions to the development of East Africa is lack of capital.
The global economy is premised on aggregating savings in, say, pension funds and then deploying it to areas where it will earn a return.
This investment is what generates economic activity – stimulating business growth and creating jobs.
It also generates a return for those running, say, the pension fund to disperse to their members.
Traditionally this large scale movement of money has happened only in developed markets.
Developed markets are structured in a way that allows finance professionals to calculate the riskiness of an investment, and therefore feel comfortable parting with their capital with an expectation it will be paid back.
Traditionally, the methodology for deciding whether to invest big pools of money in Africa has been done using the same framework as for developed markets.
This hasn’t bode well.
In short the techniques for deciding how much money to invest have meant that only small amounts could be safely deployed.
Lendable have taken a different approach.
They are a technology enabled debt platform created to help non banking lenders scale.
They use in-house software tools and algorithms to analyze loans and offer facilities that make sense for lenders based on their loan books.
It might sound simple, but this approach of a buying a loan book, rather than looking at the assets that a company has, is a paradigm shift towards creditworthiness and has meant the company has been
able to unlock millions of dollars of capital that, using the old frameworks, wouldn’t have been deployed.
Now, I appreciate that might all sound a bit technical and advanced but Daniel, Lendable’s CEO and I go into the details of how this works – as well as tales along the way of running their business through two Kenyan elections, and what it takes to attract US Hedge Funds to invest in Africa.
This is, for me at least, a great episode around how large scale impact can be achieved through facilitating the transfer of wealth from the developed to developing world.
Lessons & Insights
Biggest insight: when times are tough people spend more on electricity
Biggest lesson: by rethinking risk we can unlock millions of dollars for Africa
Website: Lendable Marketplace