Safaricom, Kenya’s leading mobile operator, revolutionized the way Kenyans manage money by introducing M-Pesa. The innovation initiated Africa’s fintech revolution and created a generation of people who manage their finances digitally. Despite having an early lead into fintech, Kenya still lags in certain sectors of the industry.
Last year, Kenyans saved $13 billion, and more than 70% of them used informal saving groups and SACCOs. Low-interest rates and high minimum-balance requirements have pushed many Kenyans towards informal channels as they offer better returns and greater access to credit.
Today, there are more than 10 million SACCO members, and they collectively control savings of KSh 501 billion (US$ 4.7 billion) and an asset base of KSh 694 billion (US$ 6.54 billion).
While SACCO’s offer the benefit of high returns and access to capital, what deters many young, digitally-savvy Kenyans is the largely manual process. Many want an easier way to protect and grow their money. Answering the call, Koa, a Kenyan fintech, makes saving simple, seamless, flexible, and hassle-free for customers with its goal-based saving platform.
Koa takes out the guesswork in savings, putting saverson a clear and visible path toward financial freedom. I spoke with Delila Kidanu, co-founder and COO of Koa, about what led her to create Koa, the importance of financial literacy, and what Built In Africa means to her.
Journey into tech
My name is Delila Kidanu, and I’m one of the co-founders of Koa. I’m originally from Ethiopia but grew up in Kenya for most of my life. I started my career in policy, working in Brussels with the European Union, where I dug into bankruptcy legislation for entrepreneurs across the EU.
I quickly realized that policy wasn’t the space for me and that I wanted to be back on the continent, working with companies and building things. I started my consulting business and began working with international companies looking to expand into the Kenyan market. I helped them perform market assessments, conduct product research, and develop market entry strategy.
Then, I got the opportunity to join an early-stage tech company called Yusudi. It was a great experience that taught me how to take an offline industry and bring it online. After leaving Yusudi, I joined MEST Africa, and that’s where I met my co-founder, Alexis Roman.
At MEST, I led the deal sourcing side, identifying early-stage startups to invest in through the Mest Africa Challenge and Mest Africa Summit. At the same time, Alexis worked on the investment side, where he worked directly with the MEST companies to help them grow. We both learned a lot from our time at MEST. The work we did and the environment prepared us to build Koa.
Transitioning to KOA
Alexis and I both had an interest in fintech and financial services. I come from a more traditional background. My family ran chamas — an informal investment group that is used to save money. In contrast, Alexis comes from an institutional background.
When we dug into the market, comparing West African markets like Nigeria and Ghana to East African markets like Kenya, we saw a clear gap to fill. Retail customers needed access to financial services. And so we dove into the problem, researching, asking questions, and speaking to potential customers.
When the pandemic hit, we decided it was time because people’s perspectives tend to shift when there is a substantial external shock. Also, from a market perspective, there was a clear need for a savings and financial wellness tool to support retail customers in building wealth.
What is Koa?
Koa is a goal-based savings platform that allows individuals to access financial services easier and faster than the general market. For example, if I wanted to give my money to an asset manager, it would take 14+ days, and the process is manual and tedious. With Koa, we’ve cut it down to two minutes. The process is fully digital and can be done on your phone.
In addition to expediting the process, we are increasing access to financial services. Investment funds also have a high barrier to entry. The minimum deposits are high and often price out a whole section of the population. We’re focused on retail customers and making access as straightforward as possible by allowing customers to deposit as little as Ksh. 100 ($ 1) and creating a frictionless user experience. This gives an opportunity to young savers to not only start to build a savings culture, but also earn an interest on their savings from day one.
Today, we have a range of customers. One customer, I’ll call her Betty, was saving in a traditional fund when she started using Koa. She set up two goals, and three weeks in, she decided to move her life savings from the traditional fund to Koa. We’ve also seen university students who are starting to save and want to build the habit of saving join the platform.
Describe the tech solution
The core of what we were building is a platform that allows users to create their unique savings journey. They set up the parameters of the financial goal they would like to achieve and determine how much they want to deposit. We’re here to walk alongside them on their journey.
We leaned on tech to make the process as clean and straightforward as possible. By digitizing the process, we’ve cut down the amount of time it takes to go through each step. One of the key solutions that enabled us to digitize was integrating with the mobile money providers. It made the deposit and withdrawal process seamless.
We built Koa based on behavioral economics. We interviewed and studied users to learn how they think about money, how they save, and what motivates them to save. We used that insight to build some of our key features.
Accountability reminder: We send reminders to customers to keep them accountable for their savings goals. We’ll send a reminder based on the cadence they picked, whether to make a deposit daily, weekly, or monthly.
Progress rings: The progress rings are a visual representation of your progression towards your goal. Seeing progress is something else that motivates our customers to keep saving.
Daily interest payment: The biggest trigger for customers is receiving an interest payment every day. It’s psychologically rewarding and motivates them to keep saving on the app.
Something we found very interesting was that customers put their money in different places to mitigate risk. When designing the user experience, we focused on building trust. Starting with onboarding and continuing throughout the customer’s journey, we were intentional.
We let our customers know where their money goes and how we get returns for them. They also have complete visibility on all of their transactions. When they withdraw or deposit money, their account updates in real-time, and they receive an email confirmation. When we speak to our customers, some of the feedback we receive is that this transparency gives them comfort and instills trust in us.
Teaching financial literacy
The sentiment from many of our savers is, I wish I were better with money, and I wish I knew what to do with my money. They are also keen on learning the various financial concepts and how our business model works. They’ve asked us questions like, what are the benefits of saving in a bank when I can hold onto my money? How does compound interest work? And more Koa-specific questions like, how do you generate interest? Where are you putting the money, and what are you doing with it? Are you loaning it out safely?
All of these questions are valid, and as a financial services industry, we have a responsibility to ensure that the retail customer is well educated because only then can we offer more sophisticated products. That’s why we decided to make learning a core function of the application.
We built a learning center to teach financial literacy. We have articles that cover a range of topics, we created a community channel on Telegram to have savings and investment conversations, and we host webinars to engage the community. We’ve also partnered with a few universities and external foundations to teach students and young adults about financial literacy.
Partnering with Flutterwave and Smile Identity
We’ve always had the philosophy that collaboration and partnerships will take you further. Our partnership with Flutterwave has been great. It’s enabled us to provide better access and better transaction services for our savers. Also, they’ve been around much longer than we have, so they understand the market better. We’ve learned a lot from their local team and the team in Nigeria.
Smile ID, like us, is a portfolio company of Catalyst Fund, and we are working with them closely to understand what the verification landscape looks like, the pitfalls of other startups, and what we should look out for.
As a startup, partnering can help you get to where you want to be faster. People are building incredible things, and the information and insight you gain by partnering take both organizations much further than if they were to do it alone. I believe that as a tech community, we can achieve a lot more through partnership.
Koa in the next 3-5 years
We have ambitious goals that we are working towards. First, we want to cement our position here in Kenya, and then we’d love to expand to more markets. Our North Star is individual customers. We’re focused on how we can add value to them as they’re going through their financial wellness journey.
Whether their goal is to buy a house, car or set themselves up financially, we want to do it together and see them succeed. We also want to pave the way for other startups that are in the fintech space. As we go forward and learn, we want to share our experiences and knowledge.
Built In Africa. What does that mean to you?
The phrase Built in Africa symbolizes businesses that are building to solve problems that are unique to our continent and unique to how we live our lives. There are many issues and problems that we need to solve as a continent, and having those solutions being built in Africa with an African mindset is important.
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