The fusion of technology and the financial world is no longer limited to improving the banking experience. A new batch of fintech startups is using their technologies to create a brighter future in developing countries.

It is no longer improbable that a Maasai in Southern Kenya could become a micro-entrepreneur by offering a cell phone charging service, cutting hair with electric clippers or ironing clothes.

But it takes power. The electrical kind.

Globally access to electricity is still a luxury that 1,1 billion people do not have according to the World Bank. The Danish startup, M-Payg, wants to change that fact. The company has developed an IoT device accompanied by a leasing business model for solar cells and batteries that make the total package available for low-income households.

“Africa will probably be one of the largest economies in the world within the next decade. The accompanying need for electricity offers a chance for commercial success, but also a chance to make a difference,” says Asger Trier Bing, M-Payg founder and CEO.

Asger Trier Bing founded M-Payg two years ago and already went through testing different types of installations in countries such as Tanzania, Kenya and Uganda. And they just landed their first large order for 10.000 units of their Solar home systems.

Image tekst: A solar home system consists of a solar panel, a battery and an IoT-solution that ensures that the current is monitored and turned on and off. The package includes lamps and cellphone charging. Add-ons include radio, TV and fans.

But M-Payg is not the only company that aims to create a business with both a commercial and social impact. They are part of a new batch of fintech startups that are driven by a mission to accelerate growth in developing countries by employing new financial technologies.

Danish fintech hub partners with a humanitarian organisation

A new partnership between Copenhagen Fintech and humanitarian organisation Care Denmark, that works to promote social and economic development in developing countries, aims to employ innovative tech solutions to tackle some of the world’s most stubborn problems and help social impact startups to also create economic and social sustainable businesses.

“The new business models and solutions, that scale well, hold a possibility to get more countries and people on the development train. I assume that startups are agiler and less risk-averse and therefore can test projects faster than larger companies, who, traditionally, work together with NGOs. At the same time the NGO has a different skill set than the startup, so if you design the partnerships in the right way there is the possibility to make the technological solutions penetrate both horizontally as well as vertically,” she says.

Startups like Unumed, Penstable and HiveOonline are all determined to make a social impact based on different technologies. Marianne Haahr predicts that we will see an increased number of purpose-driven startups will come in further.

“Developing countries innovate at different speeds and therefore some markets will be more attractive than others. The companies do not enter the poorest countries in Africa since it is hard to create a viable business there. Partnerships between startups and NGOs can make those markets attractive because our different set of objectives and competencies are complementary,” says Marianne Haahr a long time social impact veteran and co-founder of Nordic Impact Investment Network.

More important to be pragmatic than use cutting-edge technologies

Some of today’s tiger economies are found in Africa and technological development is closely correlated to economic growth. The continent’s relatively low digitalisation – compared to the west – makes for a fertile tech ground. Configuring existing technologies to a new context could improve the living conditions for millions of people.

Data source: World Bank

A few years ago M-Payg’s leasing model would not have been possible. But now it is. In part because of a major drop in the prices of solar cells and batteries as well as M-Payg’s IoT device that ensures that the solar home systems only work as instalments are made.

The home system communicates with the large African network company’s mobile payment solutions such as M-Pesa in Tanzania and Kenya. Users can access the services through cheap feature phones that set themselves apart from smartphones by – only – offering the essentials.

“We have developed our solution pragmatically. We choose the technology that can deliver sustainable energy while keeping the price point at a manageable level for low-income households. Payment is a tool so in that perspective we are afforded to be agnostic. Rather we asked ourselves what would be the most convenient payment instrument for a Maasai in Kenya. To us it does not matter much whether it goes through Nets, M-Peas or WhatsApp,” says M-Payg’s Asger Trier Bing.

The point is not to use cutting-edge technologies. The point is to use solutions that work and configure them in a new and smart way to make them affordable for the African growth economies.

While blockchain technology brings grand promises on improving processes, prevent corruption and build new investment platforms, more pragmatic and tested solutions offer technological quantum leaps today.

“We should experiment as much as possible with blockchain because of the transformational potential that the technology holds. But right here, right now we need to use the solutions that work now, such as M-Pesa’s text payments – those solutions mostly scale the quickest,” says Marianne Haarh.

The Internet is the new foundation in the hierarchy of needs

M-Payg’s ability to establish a business in Africa builds upon the foundation of a stable digital infrastructure that has been established for both internet and mobile payments in Eastern Africa over the last decade.

“You might as well put internet at the bottom of Maslow’s hierarchy of needs. It has become a universal need. In the future, we need to focus on access to education, electricity and the erection of a financial system. But only thirty percent of Africa’s population has internet access – that problem demands solutions that affords all of the population internet access. When they have that we are going to see quantum leaps in a number of areas just like the leap we are witnessing in energy right now,” says Marianne Haahr.

In other words, the infant mobile payment system enabled M-Payg to turn sustainable energy into a business. The energy that allows Maasais to become micro-entrepreneurs. Marianne Haarh hopes to disseminate that kind of development to the rest of the continent through closer collaboration between fintechs and NGOs.

Startups can accelerate the growth in developing countries

Today, M-Payg already works with several NGOs in the poorest and most inaccessible parts of Africa. In collaboration with the DanChuchAid, they provide energy to Africa’s largest refugee camp in Uganda, and they want to reach 90 percent of Malawi’s population that does not have access to electricity along with the country’s largest NGO.

When M-Payg penetrates the African market they do so with the hopes of creating a fertile business. According to the founder, that approach is better when it comes to creating lasting change as opposed to a donation based organisation.

“We do not see a divide between commercial viability and running a social impact business. If we can deliver energy that is cheaper than lamp oil – and make turn a long-term profit – then that is better. We are competing on market terms and that creates an equal relationship with the customer,” Says M-Payg’s Asger Trier Bing.

Subsequently, they have decided to focus on East Africa’s markets as they have demand for electricity as well as meeting the prerequisites for creating a sustainable business.

“It is hard for our systems to operate in the poorest areas where there is no money. It is tough to sell solar panels to someone who does not have a house. We want to deliver a long-term service that our customers can trust. That is why a donation model that can fluctuate does not work – we need revenue,” says Asger Trier Bing.

In the vulnerable areas, technological development is dealing with the chicken-or-egg-problem according to Marianne Haahr. Infrastructure development creates a business incentive, but it is hard to make a profit by establishing infrastructure in the first place.

“In parts of West Africa – as we see in Chad and Mali – there is not much noticeable development. The lack of banks and payment solutions are one of the causes, and that does not look like it is being solved anytime soon. Those areas yearn for amazing mission-driven companies such as M-Pesa because the risk is high and the market’s complex,” she says.

But she hopes that new partnerships between fintechs and NGOs could bring that technology to the poorest countries and start a snowball effect.


Author: Sebastian Kjær