Tech

I have spent most of my working years thinking about Cloud services and offering them at Truehost Cloud. I have experienced great success and also failures. Now that it is the time of the year that I audit my life because I am turning one year older, I decided to share some lessons learnt through the journey.

Nothing special about 17; it is just that they came to that number. If I had some good time I would collapse them to fewer, or add more which would take more time to put in words. I hope you will relate with some of them in your business, or even in life.

Note: Not in the order of importance.

1. Cash is king. You need to have cash when you need it, otherwise you will stall. You can find innovative ways of minimizing your need for cash by having lean operations, but the moment the cash needed exceeds cash at hand, your growth will be impacted.
2. However, sometimes the need for cash may not be as critical as it appears, for many times cash shortage has forced people to innovate in ways they would not have thought possible.
3. A sale is very important. It doesn’t matter how great your product is if you are not selling. There are many great products out there which no one is buying, while some not very good products continue to dominate the market.
4. Execution is more important than the idea. It only matters a little how creative, smart, connected or even experienced you are. Only those who can execute what they envisage are successful. History is full of smart geniuses who died empty for they did nothing. So are entrepreneurs. Take the first step and get it working.
5. It might take a lifetime to get it right, but you have to keep doing it. The world also changes, and what worked yesterday might not work today, thus a need for one to be on the move, and to keep trying.
6. The customer is number one. Work for the customer and the mission will make sense for everybody else.
7. Dream big, but also wake up and work hard. There is so much one can achieve if only they can dream it possible.
8. Working smart is overrated, even for those born with a silver spoon in their mouth. You have to do a lot of work and get your hands dirty of you are to stay on top of the game.
9. There is a (big) place for luck in business, but it falls on those who try more. If you keep doing things, and learning, and trying again, and refining your strategy, you will get lucky.
10. You need a team. A team is hard to build, and a team is as strong as the weakest member. Build a strong team and you can take any challenge.
11. There is no substitute for knowledge and experience. Businesses collapse due to lack of knowledge. Get knowledge at all costs, and learn as much as you can.
12. The longer you do business, the better you become. Start early and rise up fast when you fail.
13. Your networks matter a lot. Build great networks and use them where possible. Your friends might be your first clients and your main marketing channels.
14. Entrepreneurship is hard for people who do not have a social safety net. This is because at some point you will fail and you will need a support system. However, if it is necessary, burn the ships and get in there headlong. I don’t promise that you won’t regret that move.
15. Some things excelled because they were launched at the right time. But even with timing being right, the other factors must also be right to survive.
16. Do not underestimate yourself. More important, do not overrate yourself. If you succeed, do not think you are good, while if you fail, do not think you cannot do it.
17. Learn from other people in business. You can learn a lot by asking other people who have been there and avoid repeating their mistakes while acquiring their best practices. Reinventing the wheel might good for experience and exposure, but stupid for your cash book.

Thanks to the team at Truehost Cloud for the support.

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Kenya is a first of many, but it is possibly the SACCO movement that stands tallest, although little talked about. In terms of savings, Kenya has the largest SACCO movement in Africa, and SACCOs have been the preferred source of credit for many people. But just like with any thriving industry, disruptions are always around the corner and while SACCOs depended on a good savings history to loan people money, a new form of lending that depends more on the reputation of the borrower more than their saving history has taken a big share of the market. The term for it is digital loans.

Growth of digital Lending in Kenya

With the advent of mobile phones and increased internet penetration, borrowing of money has been shifting from the traditional channels to electronic channels. Financial institutions started digitizing their services and started taking advantage of the digital economy. One of those steps was to make financial transactions faster and lending more efficient. However, it was not until 7 years ago that digital lending became popular with the launch of M-Shwari (a partnership between Safaricom’s Mpesa and Commercial Bank of Africa, CBA). Today, there are over 50 digital lending apps in Kenya that are churning out loans worth millions of shillings every day.

The lending apps exploit social information and apply various artificial intelligence tools to determine creditworthiness. This involves factors such as your mobile phone airtime usage, the amount of money you transact every month, your likes, location, Facebook friends and even how you save people in your phonebook. Algorithms are able to analyze the data and determine how much you are worth with some astounding levels of accuracy. This is possibly why there are less defaulters of mobile money loans than there are for shopkeepers, banks and loans from friends and family as shown in the figure below.

Impact of Digital Loans

There has been a lot of talk on financial inclusion afforded by these mobile apps. Many people who could never afford credit are now able to get cash to boost their businesses, pay school fees, or for whatever purpose. Banking on the high penetration of mobile money in Kenya, it is now faster and easier than ever to get a credit facility and have the money sent directly to your phone. The number of people who use these apps keeps growing.

But on the flipside, there is the dark side of the mobile-based loans. While most of these digital platforms do not charge interest, they have what is called set-up fee for every loan. While most of them are very short term in nature, the effective ‘interest’ charged by these apps comes to about 90% p.a for the conservative ones like M-Shwari and KCB-MPESA, and up to 180% p.a for Tala and Branch. These rates make the poor people who need these loans to use the most expensive form of credit that anyone can get. In comparison, SACCO loans charge an average of 12% per year while banks are limited to not more than 4% above Central Bank of Kenya lending rate, which would translate to 13% per year.

How SACCOs can intervene

For ages, SACCOs have occupied a prime spot when it comes to lending. However, they are not the preferred go-to shop when one urgently needs a loan of KES 500, 1000, or 15,000. This is the market that has been left to digital lending apps. Yet, it is the members of these SACCOs who go ahead to borrow from these apps. SACCOs would be better positioned to offer these micro loans, as they already have members’ savings as security, and their interest rates would be more affordable. This would make the credit more affordable, non-predatory and low risk.

Unfortunately, most SACCOs in Kenya are small in nature, and lack the financial muscle to deploy systems that can allow them to lend to their members using mobile apps. There already exists systems and mobile apps that can allow for SACCOs to do this, but the adoption of these systems is still low for the majority of the SACCOs. Many also have a high staff turnover rate, and depend on semi trained personnel to run the operations. This makes it even harder for these SACCO to intervene. Perhaps, the government and umbrella bodies should focus on how to get an effective system for the SACCOs which will help them face the Silicon Valley based lenders.

According to the Communications Authority of Kenya, Kenya has some of the highest internet and mobile phones penetration rates in Africa. This has been touted as one of the factors that have led to growth of the digital economy in Kenya, and widespread growth of tech startups all over the country. The statistics are something to celebrate about as this places Kenya on a favourable spot as vibrant economy. However, there is one key indicator that tells a different story. This is the adoption of Kenya’s country code Top Level Domain (ccTLD) .ke, which is the official domain name used in Kenya.

Domain Names

Domain names refer to names such as .com, .org, .net, .uk, and .de. These are domain names that denote an internet address, or even used in email addresses. The two letter domain names such as .uk, .rw and .ss are reserved for countries, with the mentioned one being for the United Kingdom, Rwanda and South Sudan respectively. These domains are useful since they help identify businesses in the countries where they operate. Using one also helps websites to rank highly in search engine (Google) results, increasing the chances of one finding clients or getting businesses online.

.KE is the domain name for Kenya, which is the online identity that shows some affiliation to Kenya. .KE domain names are offered by KeNIC through various domain registrars, and there are various variations of the same as shown below:

Nigeria and South Africa

In a recent stakeholders forum held in August 2019, KeNIC CEO Mr Joel Karubiu said that their target is to have one million .ke domain names by the year 2030. This number looks astounding, but it is a very small number when you consider that with almost a similar population to Kenya, South Africa already has 1.2 million registered .za domains (the Country code for South Africa). Nigeria follows with about 142,000 .ng domains that were registered by July 2019. As of today, Kenya has about 92,000 registered .ke domain names.

Why are there less than 100,000 .ke domain names yet we see more and more people doing business online? There are several factors that can explain that, but it is evident that Kenya is punching below its weight when it comes to the number of .ke domain names registered. One of the reason for this is that a number of people still prefer to use other domain names such as .com and .org, since it is claimed that they have an international appeal. Kenyan domain names therefore find themselves unfavorably competing with international domain names, resulting in lower adoption.

Cost

On the other hand, the cost of .ke domain names has been said to be prohibitive, especially when it comes to small businesses. At KES 1200 per year (on average), the cost of maintaining a .ke name ends up being higher than a .com domain (average 1000 per year), thus lacking a competitive advantage when it comes to price. This makes the .ke brand lose to other top domain names, and this is a trend that can be reversed by addressing the price.

The other thing that affects the uptake of .ke domain names is the fact that many people and businesses still do not have websites. For many small and micro enterprises, there lacks a value proposition for having websites or branded emails. This could be due to a feeling that a website may not benefit their business, lack of knowledge on how to effectively use a website, or the prohibitive costs associated with initial set up of a website. The fact that many also acquire domain names but do not renew them possible implies that they never find value in the websites they create. This shows that there is a need for creating awareness on how the digital economy works, and offering affordable services that will attract even the smallest of businesses to get online.

Conclusion

For Kenya to thrive as a regional ICT hub, we need to see more and more stakeholders come together to ensure that the barriers to uptake of .ke domains are dealt with. This will involve KeNIC pricing the domain names favorably and creating awareness on the need for the same. Other stakeholder should also ensure that the costs associated with having websites are broken, by offering websites at affordable prices.