#360Mentor is a continuation of the #40DayMentor series. In this episode, Robert Kabushenga (RK) speaks to Lucy Mbabazi (LM) on a Cashless Africa.
RK: Hello Lucy, good to have you on #360Mentor.
LM: Thank you, Robert.
RK: Normally, we begin by exploring people’s backgrounds; today, we shall not. Tell us about the work you were doing with Leo Africa Institute.
LM: My work with Leo Africa is one of the most exciting initiatives to be a part of. I have known Awel, the founder, for a long time. I feel like I’ve known him since primary or secondary school. He shared about Leo Africa and what he was trying to achieve. At that time, I had just moved back to Rwanda from the US and I was really passionate about leadership and public policy… and the idea of building young leaders is everything. Your leadership makes or breaks everything. And to invest in young people who can take on leadership roles now and can even take on bigger roles in the future is something I couldn’t miss out on. The founding board appointed me to be the chair. I couldn’t say no. It was really such a joy being part of that work and it continues to be.
RK: How do you end up in this digital tech world?
LM: I was born when Amin was taking over in Mulago Hospital. I studied IT and Management at university. I did my primary school in Uganda at Gayaza Junior School and Nabisunsa Girls School. After S4, I had an opportunity to go to the US and got a chance to skip a level and I just continued to go to college.
RK: That means you are a genius.
LM: Not really. I was supposed to go to Budo actually.
RK: You survived.
LM: I know. I came to the US and I didn’t have a phone, a bank account, I didn’t have anything. There were no teenagers in Uganda with such things in 1998. I studied IT and management. I went into software programming and I quickly realised I didn’t want to be behind the desk. I want to go and see people and get my hands dirty and see people’s faces.
I went on a journey of self-discovery to find out what I really wanted to do.
RK: Wait a moment. This journey of self-discovery, what did you engage in and how did you discover yourself?
LM: It was painful but worth it. North America is not easy yet compared to the stories I have heard here on 360, I have had it so easy. But there are employment agencies that will provide you with opportunities for you to choose and go work. Through working with an agency, I went to work for a company that was founded by the BET founder Bob Johnson. It was interesting being there. I applied to be an assistant to the CFO. After spending so much time with here, she told me “ I really like what you’re aspiring for even though you can’t put a finger to it. I can’t give you this job you are aspiring for. You need to go back to school and study public policy.
RK: Have you finished your first degree?
LM: Yes, I had and I had done all kinds of jobs to survive but I was not enjoying any of it. She told me to go back to school and figure things out. The thought of going back to school was not adding up. With kyeyo money, it can never be enough. I had gotten permanent residence and she told me there was nothing to worry about. I could get a student loan. She told me not to look at it as a loan but as an investment into the future. The hardest thing was to get into school but the money would come. I applied and ended up going to the Kennedy School of Government where I met the late Prof Calestous Juma.
RK: As we say here, Juma was a man and a half.
LM: All the office hours I had were with Prof Juma and going to his talks, attending the conferences he recommended and immersing myself in learning how technology and development could intersect and really that enriched my vision. I got a chance to write my thesis on how technology can drive Rwanda’s development for Rwanda Development Board which became my first job.
While there, we were tasked with figuring out how we should digitise payments for tourists. Tourism was a big part of the agenda as a driver for service development. But everyone who was coming was carrying cash.
RK: So the idea was to relieve them of this risk?
LM: Yes. and in figuring out how to make this work I was where it occurred to me that we cannot develop as fast as we want to until we digitise the moment we exchange every day. Of course, tourists were a good starting point but we had to think of the rest of the people who were transacting every day. and this is where it all began.
RK: I am keen to know, how did the conversation at RDB come about?
LM: The beauty of this is that I had a blank page. I had a converse to figure everything out. I had such an incredible boss who was leading the IT department as well as the ministry of ICT just reading up on what this entails… Visa Inc. was on the continent trying to figure out where they were going to pilot a mobile solution which was the first time they were going to pilot anything outside the US. They were looking at various countries and Rwanda was one of them. I spent a lot of time trying to figure out how we could have Rwanda as one of the countries selected. And it was such a steep and learning curve for me but I had such great support and the need was there. My thesis was around ICT driving development which then led me to lead Rwanda’s technology plan between 2010 and 2015 which was a continuation of the two plans which were there before. It was also the first time that a young Rwandan was going to lead this process.
RK. We are now breaking ground here.
LM: Yes, but the trust that was put into me at 32 years old moved me quite a lot learning what Singapore did, South Korea, Estonia opened my mind to the possibilities which were there and I figured that I was anchoring myself here. And Calestous Juma was there with me through the fire and helping me with resources on how to figure things out.
Ultimately, visa Rwanda and I got the chance to learn more as I implemented what we envisioned on paper in making it a reality.
RK: What did you see when you did all this research? What was this realisation?
LM: part of the pilot was with a refugee camp in northern Rwanda and we were figuring out how we were going to digitise the food aid that was coming into Rwanda to turn it into money. and so in implementing this digitisation of the 3000 families, that’s about 50,000 refugees. We set up places where they could get money when they needed it and we had to set up places where they could buy whatever they needed.
Prior to that, the only food they had was kawunga, beans, cooking oil and salt. And if they needed to buy onions or tomatoes or anything, they had to sell part of their food in order to get what they could use to cook. Also, there were refugees from Congo who did not like kawunga, they preferred cassava flour.
RK: What is kawunga for those who don’t know?
LM: posho. Maize meal. Maize flour. So when I realised that when they get these $9 per person, they count calories per individual and they give per family the equivalent in money. And that was $9 per person in this household.
The first money that we sent out was withdrawn in cash. About 99% of it. It was a party around the camp.
For the first time, they had money. they had cash. And so we watched the transition when within the first three months, over 80% of these cash withdrawals had converted into merchant payments because they realised that in getting cash, they were losing out.
RK: So when they withdrew the money,there was a fee?
Lm: Yes. The agent banking fee to withdraw. Within 6 months, it was 100% online payments. And the economic activity around this camp was amazing to see.
RK: So low because you have this group of people, they have got financial ability delivered to them directly, trade started to grow around the area.
LM: Not only that, before, food was coming in, it meant that people were just eating it. Now that money was coming in, it meant that people were buying directly from farmers. The food that was grown directly from there is what was rising. Not the imported food which was coming in as a food donation. Now, that salt and beans and flour were being brought from the market within. you can imagine the economic possibilities that came out of that. The impact of $190,000 every month coming into your economy what that meant.
RK: In that location
LM: Yes, in that one location. And the ripple effect across.
RK: Yeah, these ones also went out into other locations.
LM: Exactly. The difference between food aid coming in versus money coming in is one thing. And then you start to think of it. all the small transactions that people are making every day buying a matchbox, salt name it. If all those transactions were digitised, what would be the impact for us? Interest rates are 17% in a good place, some parts to 23% but if you go to Cape Verde where they are mainly a cash economy, liquidity is not a problem for the banks, interest rates are 7%.
So if you get all these small monies transacted digitally, that means we don’t have to have 23%, we can get to 7%. And that applies to individuals, businesses and government.
RK: I have a question, how did you overcome the prejudice? you were taking away transactional powers of organisations which were buying food? How did the mental frame change from cash to cashless?
LM: One, it was WFP trying to figure this out and sometimes when there are food shortages, or anything that stops food from coming, it is a challenge. But they were also trying to give the refugees a choice in what they eat. In their move to take away their paper system that was so involved in trying to manage every day to simplify and bring efficiency to this work.
For them, they wanted operational efficiency and in the process of trying to figure this out, it was the digitisation of this food voucher that made the most sense. And to do that obviously, the main stakeholder is the beneficiary.
The starting point was financial literacy and we did it in a fun way. By that time I had left the government to join Visa to try and implement the project.
RK: I see…
LM: An opportunity came and Visa wanted a local to join their team and it so happened that I was able to join them.
RK: That was a young man here called Hussein who called it proactive serendipity.
LM: Financial literacy to them was the very first time. building better money management tools was the first priority. secondly, building tools with which to transact. Airtel gave feature phones. To make a payment you don’t need a smartphone, any phone can work. Every head of household got a phone and told them of what that means securing their information, their PIN, and everything pertaining to education. Education to help them understand what this means and how to go through step by step of every single transaction. This education went on for about three months. It preceded the first payment.
You can kind of let nature take its course. We encouraged them to do merchant payments but there were way more agents than merchants because those who were implementing thought cash is what people were going to want. Naturally, we have 33 agents but about 16 merchants. And so that natural transition is where we see to do the necessary change. That taught me that when you put digital payments at the place where people are paying every day it is going to be a natural progression. But also the businesses have to find value in that digital platform to be better than cash.
For the businesses, they loved that they didn’t have to count cash, they didn’t have to count change. Also, all of a sudden micro opportunities came up for them. They realised that they had a cash flow from these sales they were making. Even the refugees would get food on loan and pay back when they got the money.
There’s lending, cash flow opportunities and the bank that is benefiting from all this.
RK: This is so fascinating yet so simple. You’re saying that moving away from cash creates more opportunities that would not have happened with cash?
LM: Absolutely. And this is why I wake every day to do what I do.
RK: Why don’t we get it? That’s what I don’t understand.
LM: I think the folks don’t know. We need to put these facts in front of them. a lot of the focus is put on digitising government payments. But government payments are so small compared to the economic activity you and I are involved in.
RK: But you see, Lucy, the government is lost in governance issues.
LM: I think a lot of the spotlight is put on the government transactions rather than the private sector which as you know, the private sector drives the economy. Businesses need to get digitized. Traditional brick and mortar has been hard. You have to build a branch and ATM, these things are expensive. enter mobile. Every person who has a mobile phone has a payment tool in their hands.
RK: First pack that issue. Educate me who is from the analogue world, what do you mean by cashless and digital economy?
LM: This is exactly what I have described above. Essentially, every time you go out to pay for a good or service (cash is the only option for the majority of us) instead of paying with cash, we need to avail digital payment options. As much of this cash we have in this economy is transacted digitally and the simplest way is through the phone. There are other tools as well. but it means that all this cash in circulation sits in the national treasury. It sits in the financial system. It means that the banks have more resources to work with to be able to give us money at lower lending rates.
RK: The cost of money drops.
LM: The government doesn’t have to go outside the country to borrow money to do development projects. It is the digital money that is going to drive development. Whether you are an individual, business or government, all of us can benefit from this liquidity that is sitting within these financial systems.
When it is outside then things become very expensive. If we make even 50% of every Ugandan’s transaction become digital, the ripple effect of the businesses will multiply. In 2020, once there was a lockdown, motorcycles and bicycles were the only ones delivering goods. The women at the market would call you, send the groceries through a delivery guy and then you pay through mobile money.
The fact that we could continue to transact despite the difficulty of moving shows why we must digitise quickly.
RK: Let me tell you something I did. All the people who come to buy anything on the farm in cash.
LM: What have been the benefits for you?
RK: Two. Cash used to come in and it would stay at the farm and go out as expenses. That was a problem. We were not tracking our expenses. And we were not banking anything as well. Now, all our merchant accounts are connected to the bank. Now we know and can track the payments.
Secondly, I had a young man who was a cashier. If someone came and bought a lot of matooke, he would have wads of cash and his fellow workers would know that he had cash. So there was a threat that one day they would go in and beat him to take the cash.
The day I took that away, everybody stopped thinking that guy is very powerful. Now the only thing we need to resolve is payments. We still have payments still done in cash. I am thinking that the next thing is to pay everyone through mobile payments.
LM: You see that efficiency and security of that guy is essentially what we need to do for every business whether I am selling sumbusas in a bucket, I need to have that security and peace of mind that if I make my sales no one is going to take it away from me.
The other thing we saw is that the domestic violence that came from the presence of cash was reduced. Ladies tell us, they come from the market and the husband doesn’t beat them because if he is going to get the money she is the one to give it to him. so now she needs a pin to access it. This brought peace of mind and the dignity of the children that they didn’t have to suffer the verbal and physical abuse that came with carrying physical cash.
RK: What an amazing story! That’s what you call unintended consequences.
LM: They are the endless possibilities that come with digital monetization. For you efficiency is what every business person is grappling with. you are now directly interfacing with the bank. You can even do salary payments. Even the bank has platforms you can use to pay people whether they are choosing to be paid in a bank or mobile money. With one click of a button, you push all the payments to all at once. That you can do today.
RK: In fact, with effect from tomorrow everybody is going to be paid by mobile money.
LM: Sure. Imagine what that means for them. already having a steady income that is recorded means that I can access insurance or a small loan.
RK: But even my accountability with the taxman
LM: Yes. If governments could do everything possible to ensure that every business is digitised or gives customers the opportunity to choose how to pay, it would be incredible but they must have digital payments. The ripple effects of that are amazing.
You know I have been doing pan-African peer exchanges and we had speakers from Senegal and Burkina Faso who have digitised their systems. The speaker from Senegal said that during covid, in the first six months of the year, they had collected way more than they would have in one year. As a result, they were going to achieve their budget goals within the first eight months of the year.
RK: And that is real money?
LM: Yes. That is why I am telling you this. That gentleman is a member of parliament. He said he was going to tell all the mayors to digitise their local payments because the dependence on the central government for money has gone away. Central government is grappling with so many things, by digitising these payments in my jurisdiction, I can stand on my feet. Governments stand to benefit when life is simplified for businesses.
RK: Let me take you to omuntu wa wansi, the layman. I like the example of mpesa. Where is the opportunity for the individual?
LM: I can answer that with an example. I got a chance to go to Ghana to lead the digitisation of merchant banking for Eco Bank. And my favorite food was kofi brokeman which is plantain and peanut. But every time you would go, it would be cash only. But every time you would go, the bank had only these express accounts that you could open on your phone. We put on suits and put on our shirts and khakis. We went to Lagos Avenue which is near the University of Ghana. We went to these women who sell the kofi brokeman and told them about Eco bank pay and we would buy from them their kofi brokeman digitally.
So we went through with the lady right on her phone and walked her through the process. As soon as we were done, I had the first transaction to confirm. I went back a month later when she had got her QR code when she was transacting. She said you have saved me. I no longer have to touch cash and I have been able to qualify for a small loan.
RK: Just because of the bank’s visibility of her volumes?
LM: Yes. regardless of how much you make, the bank will be able to seize the opportunity for you. You could be saving maybe 20 sidis. With that visibility, she was able to have financial viability that she would never have got while transacting in cash. Because now, it is the ban calling her. The bank too was being forced to find new ways of working with them. Assessing their risk had become much easier because it was easier to assess their cash flow. Now because of visibility to cash flows, each business was able to qualify for a small loan.
Yourself Robert, your visibility as Rugyeyo Farm has improved because of the transactions you do. If your staff need a loan, it is easier now. You can work it out with the bank and help them.
RK: Just know tomorrow that is going to be done. We do our coffee sales online. Everything is done digitally. I don’t have any cash anywhere.
LM: Imagine if every business you know had that.
RK: I was told of a story in Kenya of someone who grows macadamia. Farmers used to sell their macadamia and wait for payments later on. This young man secured a long and bought Wi-Fi-enabled weighing scales. He then went with scales to buy macadamia. A farmer would come, weigh his macadamia and the price agreed. The weighing scale would convert the weight into money and send the message to the bank. And the bank would send Mpesa to the farmer instantly.
LM: Imagine that!
Rk: Mpesa provides the best example of a digital economy.
Lm: The ripple effects of digital payments have been so huge that you look stupid when you try to pay by cash. All they say is “Mpesa me”. looking at the growth of Safaricom, it changed its books in terms of calls and data. And I think mobile money was one of the accidental innovations.
The first thing mobile money does is to deploy an agent network. There is no digitising anything until there is a ubiquitous network of doing things. a place where people can digitise their money. That is the first step.
Now, there are more money merchants than there are agents because withdrawing money is a loss for you.
Rk: Wait, agents, are the ones that pay out cash?
Llm; they are the starting point. They are paid a commission every time they service a customer. They are more on cashout. They are a starting point. But the merchant network is where the greatest opportunity is. The biggest opportunity is in digitising. Payments is one aspect of digitisation. There are the operations of stock management and all the other things which come with running the business successfully.
Look at how many delivery businesses started during the lockdown because it is on the phone. Businesses which were not on Jumia were rushing to join because access was in the palms of people’s hands. the market opportunity when the market digitises grows from their small locale from the shop where they are sitting to all the people outside to where they are sitting. All these opportunities await those who are ready and willing to make this investment. Digital payments are just a small aspect of it.
For a cashless economy, it is not that I am trying to get rid of cash, many critics attack me that I am trying to take away people’s choice of having cash. Many of those critics are in economies where they have the option to go digital whereas for us, we don’t have that option and we are paying the heaviest price for it. Africa is not poor. Three trillion is not small money in terms of GDP. If we can even digitise 10 or 20 % of that, the consequences of that would be super. Think about Safaricom and Kenya, the benefits of digitising have been so immense. Now mobile money is becoming a company of its own.
RK: Even internet banking. I no longer have to suffer with that. The number of small businesses trading on social media using digital are incredible, do you want to talk about that?
LM: The availability of affordable internet that you can have an instagram shop or Facebook or any, all that is made possible because I don’t need to chase you for the cheque or cash. You give me my money and I send you the goods. It is instant gratification for everybody. When you think about just the access, then that is the starting point. Innovation comes as a result of access. The government doesn’t really have to get involved. It only needs to make sure the internet is available and there are systems in place. We have provided a framework that helps governments to figure it out. At the heart of that, I’m putting people at the centre of what we are doing. As you meet the needs of people, they will trust you more and they will do more. and this is a self-sustaining business model.
Comrade Otoa: how do we blockchain and these other digital platforms to Uganda?
LM: You don’t need a smartphone to digitise. You remind me of the time of working with refugees. All we did was to train them. we gave them the real time experience to see the benefit of this. We recently did a study called Better Than Cash in the cocoa sector in Ghana where they estimated that $25 million was lost annually because of cash. And so what the cocoa board started doing was to digitise the entire value chain of cocoa. For Uganda, we need to find the movement of money and everything around it. speaking to the farmers themselves and understanding their perspectives. It is what I call designing for user needs. Once you listen to their pains and you are able to deliver solutions that answer those pain points, I have no doubt you will succeed in getting them very quickly. I have seen this in Senegal, Burkina Faso, Rwanda and Kenya. You need to show them that life will be easier by using your product. The more people know, the more they are going to be more receptive to whatever you are designing for them.
Henry the 8th: Lucy, from our experience how do you think we can adopt the e-naira?
LM: I have spent almost a year in and out of Nigeria trying to find an answer to this question. but first and foremost the e-naira has to make sense for the ordinary citizen. They need to take away all the big words and bring the words that every person will understand. I can’t wait to have a continental currency. The cost of printing cash is quite high. The more we digitise money, the better but the government should figure out how this will be of help to the local Nigerian citizen.
RK: Lucy, what does the future look like from where you sit?
LM: When governments can be able to put the principles of digital payments to good use in holding every single individual service provider accountable and when the financial service providers get ahead of government and on board these principles, when payments are done responsibly there will be no one losing out. The principles we have developed really bring to light what needs to be done and how it can be done and especially make Africa’s payments interoperable, we will be able to take on businesses and the innovation out of that will be amazing. The lack of interoperability really holds us back. I believe if I succeed in this gospel that I preach around responsible digitisation, every single wage will be digitised, regardless of wherever you are, you are able to transact in any way you can, our possibility as a continent to fund our development is the future I am working for. And I will not rest until that future happens. The money we have has to work for us.
RK: Lucy, I am going to tell the African union that the first governor for the digital bank of Africa is you. Thank you very much for the evening.
LM: Thank you too, Robert.