All language subtitles for ep 33

In these informal and unregulated
markets, people have been bitten so

many times by whether it's unfair
charges or whether it's refunds that

don't get paid arts or just hidden
fees and these sorts of things.

So it's, it takes a while for the clients
to come and understand our product.

But once I do people really have a
loyalty to us because of us favoring

them in our decisioning and designing the
process to favor the client and it works.

I have previously talked about how
the first wave of African FinTech was

largely about finding innovative ways
to leverage feature of our networks

to provide very basic banking service.

The services were locally impactful,
but they largely solve problems

inherent to developing markets
problems of infrastructure.

Now this more recent wave of African
FinTech is in many ways more exciting

because it leverages smartphones.

It can provide richer services
and those services are more

exportable to the rest of the world.

There is a risk that we can create
a digital divide of sorts, where

all the innovation moves to channels
that leave less sophisticated, less

connected consumers behind, which
is why I love the branch to digital

strategy pursued by unified credit
whose CEO Makilah Ru is with me today.

Plus they actually target
profitability, which can feel

almost subversive these days.

Welcome to how to lend money
to strangers with Brendan.

Okay, welcome to the show.

It's a pleasure to be chatting to
you again, after all these years.

I think the first time we met, I
was sitting with your brother in a

land cruiser, floorboard deep in the
river, watching you as the younger

brother, kid volunteered to swim under
what we could only guess I think was

the lowest strand of an electric.

So you could run back to camp and
fetch the car with the working battery.

Since those cave free days,
we've all grown up a bit.

You, you went on to study, spend some
years in private equity, and now all

sitting as group CEO of unified credit.

Before we talk about unified credits and
what you're doing to make smarter, easier,

and foster loans in Sub-Saharan Africa.

Spend a bit of time
expanding on that background.

And in particular, what you saw
that inspired the unified business.

Thank you.

So it was, uh, did turn out to be the
bottom rung of the electric fence.

And so I had a bit more
time to work on my career.

After that the thought of
unify was really opportunistic.

I would love to say it was
a vision, but it was more of

an opportunity that came up.

I was working for a joint venture
between a south African investment

firm and a east Africa based consumer
goods and soft commodities trader

trying to bald up a consumer facing
private equity fund, which started okay.

But then turned out quite
badly for several reasons.

And it never really got going one or
two investments became problematic

and then the investment appetite
and the money just dried up.

And I was in a space in
my career where I had.

Tried very hard to be an entrepreneur.

I'd had a few false starts.

I was living in Joburg, loving,
Joburg, but also quite keen to explore.

And I was very much on the lookout
when a email came across my desk

from an entrepreneur in Zambia
called Charles Bernard and XL Africa.

And he just told me that his
business was up for sale.

It was called unity finance, which
is the root for the name unified.

And there's a lot of things that just
got me excited about the business.

So I did eventually go to visit him,
had a look around and eventually I

took the opportunity to my employer.

They weren't interested.

So I got some friends, fools, family
money together, and bought the company

myself, moved up to Zambia and.

Ran unity finance from late 2014.

What was interesting to me?

Uh it's for several reasons, I guess,
uh, having been in the consumer

goods, food ever processing industry
prior to that, none of the assets

that I had looked at were quite
black, old, highly sweated assets.

It'll be like a, a Swabian
blonde or amaze mole or.

Ship packing factory acids, decades, all
that, uh, going through a generational

change and the guys are trying to sell.

Whereas unity finance was
fresh, young, new the staff.

They really believe in the brand and
in the business and the clients really

believed in the brand and the business.

So it got me very excited.

I like the traditional branch based
lending that unity finance had at the time

and that we still have, and it was just
a really cool and exciting management.

And crucially profitable
at the time high margins.

And you could see a lot of possible
improvements in the business.

It was being run well operationally,
but from a knowledge economy side,

not a particularly sophisticated.

So I was excited.

We do a quite a long and
stressful due diligence.

And eventually in April, 2015
made the transaction to invest in

unity finance, which later became.

So just to answer your question, I had
an interest in Sub-Saharan Africa and

interest on entrepreneurship, but the
business model itself was more of an

accident than a, I guess then the business
routes could be say to the, in Zambia,

your roots, obviously in South Africa,
but you're also in Uganda and Tanzania.

So already a continent wide business,
but in markets and obviously diverse

and have their own challenges
and, you know, markets with.

Traditionally people would be a bit
wary of entering they're relatively poor

economies, relatively underdeveloped,
quite often disperse populations.

And you'd, you could see that opportunity
in there despite those challenges.

But before we talk about how you've
done that, if you think about those

full countries and how you see
them now that you've, you know,

you've got experience in them.

So South Africa is definitely
an outlier amongst that.

It's a lot more sophisticated in
terms of financial infrastructure.

There's much sharper competition
and lot more difficult to break

into, but it's a lot bigger as well.

So I'll say South Africa side
for now focus on the other three

and then also focus on Kenya,
which we are due to open in 2022.

There are many similarities.

They're all English speaking.

Tanzania is a bit hybrid with Swahili,
but they're all based on English law.

The environments are data poor and
it's something that we battled with.

There's very little information on
people's credit record, usually almost

nothing, but there's also poor information
on things like identity, verification,

biometrics, et cetera, employment
information, employee your information.

So your data richness and
your data validity is a real.

And something which we've had to
invest in quite heavily to solve this.

The second similarity is that all of
them are to a large extent shielded

from international competition by very
tough, low cooperating environments,

not many international lenders and not
many fintechs have appetite to figure

out and invest in local operations.

To the extent that is necessary to
make a success in these countries.

I wouldn't say
uncompetitive, but certainly.

Competitive than South Africa or maybe
other markets that you often talk about.

And that just means that when
you get it right, the margins

can be quite high margins.

And then another similarity is that
of the former employment governments

by far the largest employer.

So governments very big in our
lives, not as a direct counter party,

but as an employer of our clients.

Yes.

I remember when I was landing in Kenya,
the teachers' unions, the military.

You know, those employer groups
of the government, sustainable

employer, they get paid on time.

Big difference in risk between that.

And somebody followed
is formerly employed.

Now, if I look at your, your
tagline, you talk about taking

smarter, easier, and faster unsecured
lending solutions to underserved

markets across Sub-Saharan Africa.

You've obviously already mentioned
some of the challenges in terms of

sort of hard infrastructure and data.

But if I look at that tag line,
I assume that you're leaning

pretty heavily on the smarter.

That you're using tech container.

You've already spoken a little bit
about investing in that, but I assume

that that's where you lean so that
you're able to do it fast and easy.

How have you made it possible
to enter these markets?

Whereas you're saying it's
a little bit challenging.

Yeah.

I don't think there's any magic in it to
be very honest for our model where it's

a combination of branches and online
channels, you need to have the patient.

Of writing out a branch network and
navigating the operational issues that

come with high employment and with cash
in transit and landlords vehicles, just

the physical infrastructure on the ground.

That's not really anything.

Too smart, but it's not easy.

It's hard work just to keep things
together and build good teams.

Certainly given that we've
largely achieved that the next

step for us is really to make
the lending smarter, as you say.

And that is the current
chapter that we're in.

Again, I'm quite a traditionalist.

Our data analytics are based
on machine learning or AI.

We just make sure that our
basics are done correctly.

So in a data poor environment,
we make sure that our own data

are very well verified, stored in
structures that are easy to access

and very accessible to the users.

So even though we don't get many
external sources of data, we use

our internal sources of data three.

Well out of that, we've been able
to bold scorecards that I believe.

Better than most of our competitors,
usually only behavior score cards.

So in all the new countries where
we operate are first time, clients

are treated very similarly.

It's very difficult to get first
time information on clients to make

a credit decision, but then we follow
sort of a loan growth strategy where

we start with a short short-term.

Low value loan.

And they very early on use information.

We get back from the person's repayment
behavior to increase limits and push term.

And I think I'll be able to score cards,
even though they are not based on any

sort of new science and new magic are
quite revolutionary in the markets where.

Apply them.

And we've got enough confidence to make
pretty strong credit decisions on them.

So the difference in limits between
the opposite ends of our score card

and the difference in pricing are vast,
which is a big part of our strategy.

Yeah.

And it's as important part of it.

And it's really actually great to
hear because often maybe they've got

a consultant in and they've built
themselves a scorecard and that

scorecard can create 50 customers.

But then they still give everybody
the same limit in the same price.

I just haven't thought through
what to do with their data.

And that's really the most important
part where you might get caught

up in the slight difference in
the genie or something and saying,

well, you're not using any of the
predictiveness that you're chasing.

And also, I see you talked
about right upfront, the

business was already profitable.

And I think that can get lost in a lot of
the FinTech we talk about today that chase

has growth, Chase's technical innovation
and hopes one day that they will,

uh, make some profit in the long run.

You're showing that a thorough
thinking through of the

business is often better than.

Implementing the latest
technical tools for sure.

So we've always trashed profitability
throughout, and we've only missed

one quarter in 2015 when things were
really bad in Zambia, but I believe

in balancing the books and, and, and
using your, your income statement as a

guide to where you should go, just to
quit, maybe add onto the innovations.

So I spoke about data and it's
big for us, but the system and the

technology side is equally as big.

If not better.

We've insourced our loans management
system, which is a big challenge,

but a very good decision for us.

We centralize the costs between the
different operating entities, which

certainly takes away some of the pain.

And we've made a lot of effort to
integrate starkly into the large

mobile network operators that are
across Africa, AMT and air towns.

To be able to do real-time integrated
mobile money collections and payments that

gives our clients massive convenience.

So even though we have a new cloud
requirements to present yourself to a

branch and to enroll your fingerprints
and take your photo, once new clients are

enrolled, the majority of people actually
transect subsequently through a USD

interaction that's fully integrated with.

Cashless paperless contactless.

So you could sort of see the theme here.

It's a sort of traditional starts and then
very quickly move people into a online

and tech interface and a channel with kind
of limits growing and prices coming down.

Yeah.

So I guess you're saying we're not going
to just build the modern environment and

hope some people filter through we're
going to provide a routine so people

can come in and we will validate them.

It'll be secure.

There'll be a bronch.

If any.

But once everything's digitized, we've
put the data to offer a fully mobile

solution, a fully online solution.

And we can do that as well.

And I think that's quite an
important step in a developing

market with, as pops need to create.

Otherwise people get stuck in a Bronx
neighborhood cause they need a bronch,

but the bronch thing is the only option
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to strangers with Brendan Legree.

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Let's get back to the.

You also talked about the identity
earlier and there as well.

You know, one of the big challenges
that comes up often when you talk about

lending in developed markets, is this
lack of approvable it entity where traces

don't always exist in any meaningful way.

Even government records
can be questionable.

It sounds like you've also invested
quite a lot in getting those

biometrics on board and being able
to do a solid, genuine checkoff.

Versus the old school and name and
surname and date are very, very important.

When you think about the customers
you're serving and what they're

getting from their relationship with
unify, what would it have looked like

if we talk about say 10 years ago?

Well, those sort of
customers were looking for.

What would their
experience have been like?

So I think there's quite a difference
between government and private

sector clients, private sector,
typically collateralized lending.

So either with a bank or a non-bank
lender, a loan that's backed by

tangible security, maybe landed
property, maybe a vehicle through book

finance, maybe if you're lucky, some
sort of business stock or inventory

or something along those lines.

Government workers are
slightly better served.

10, 15 years ago saw the
emergence of payroll deduction

lending in south Southern Africa.

I'm sure that's a story
that you're familiar with.

The way I see it is that there is a shift
away from payroll deduction lending.

There's a customer fatigue as well as a
kind of a political shift away from it.

So I see these markets moving to our
secure lending over the next gen.

On payroll.

I think the differences, perhaps
also the valuing of privacy.

So I used to work for a bank
and we did payroll deduction

lending for government employees.

As I say, we would make a deal with
something like the teacher's union,

where you've got all the government
teachers in the country and they would

get a big discount on the interest.

But anybody who went into arrears
became a disciplinary issue at work.

This course it's about
an even worse history.

In some places we're both sort of
familiar with some of the bad history of

South Africa and the mines where people
would end up with negative salaries.

But even when it was well controlled
with affordability checks, there's

still a bit of a uneasy relationship
between your, you know, your age.

Yeah, phoning you up and
talking to you about your day.

So as soon as you've got another way
to check that credit risk, another

way to build those relationships, then
I can see that people would start to

say, yeah, I'm not so comfortable that
my boss will also be looking over my

shoulder at my finances and, you know,
Typically don't have a great reputation,

but some of them are really good.

Some of them aren't, but money
lending office is one of the

oldest occupations in the world.

So everywhere you go, there are informal
channels through which people can borrow.

So people do have options, definitely.

But the second part of your
question was about the experience.

So I do think we've
changed the experience.

We've got a very big focus on instance so
that the credit decision is made at the.

Of contact with the clients.

So there is a decentralized grid committee
or a centralized decision-making body

that need to review line applications.

We do have some centralized checks
that get done, but they get done

while the person's in the brush,
but that really transforms it for

clients who enjoy the fast experience.

I think banks particularly have a really
bad reputation and even payroll lenders.

Oh actually originated not by the
company themselves, but by loan

agents, sort of suitcase bankers.

And those guys can often sit on
a physical piece of paper that's

been written on as an application.

They can sit around for a couple
of days or even a week before

it's eventually handed over to the
lender for the application to start.

So, you know, clients
don't like that at all.

And then I think throughout the client
journey, we really invested a lot in

making it slick and smooth and just ruling
in the client's favorite every time.

In these informal and unregulated markets,
people have been bitten so many times by

whether it's unfair charges or whether
it's refunds that don't get paid ads or

just hidden fees and these sort of things.

So it takes a while for the clients
to come and understand our product.

But once I do people
really have a loyalty to.

Because of us favoring them in our
decisioning and designing the process

to favor the client and it works.

Yeah.

And as you said, there is a sort of
a tricky history in micro-lending or

we've heard of really good stories like
Grameen bank in Bangladesh as well.

Predominantly the headlines will be
some of the more questionable practices.

I was going to ask you about this,
but you've already brought it up.

Clearly.

You've built, sent a business
around loyalty around the customer,

and it's good to hear that, you
know, first and foremost, this

is customer first, but also.

In a way that is just as a sustainable
business, it needs customers coming back.

You need to have that same self
communication and loyalty with them.

Yeah.

It's a tricky situation that we
have with our clients, right?

Because that's, our clients are
extremely grateful for business.

Um, and then there is a proportion
of our clients for whom it doesn't

work out and, you know, maybe feel
very overburdened by our products.

You know, it's pretty simple.

If that proportion is too
large, then we got a business.

Cause we don't make.

If our collections are I bad dates?

There's a couple of basics that you
could do, that there are unethical

collection practices out there.

I always feel that your collection
intervention needs to be proportional to

the person's debt and what they owe you.

So it's pretty easy to avoid those
things by the way, our entire

collections team, all females.

So there's very little masculine going on.

There's a lot of verbal persuasion
going on, but to keep the.

And the collections interaction
is also quite important to me.

And we put these core values of ours
and our core centers, and we actually

do quality audio quality checks and
our call centers to make sure that

people are persuasive, but they're
not disrespectful towards clients.

And then people will get disciplined for
crossing the line towards clients, even in

the, in the late stage collection space,
which is where you could most easily lose

your kind of respect for your clients.

Right?

Because that relationship
has already broken.

And then the land value and the
interest rate is difficult, right?

I mean, we are very expensive.

We are very small values.

We put a lot of thinking into the
amount that we land clients over

committing the client is a very big
danger from a business perspective,

but also from the client's perspective.

So we put thinking into our scorecard.

We AB test these sort of things.

We serve our clients who do focus
groups to try and figure out what's

the best format to limit our plants to.

And it's interesting.

The results of it's where particularly
in Zambia, we've both the most

impressive business, the most settled
business, our best clients are at

interest rates that are well below.

The regulated caps in
South Africa in Zambia.

It's unregulated.

Not because anyone told us we had to,
but because it makes good business

sense, I'm a believer of the markets
and that the best guy will win.

But I know that the industry
gets some bad headlines.

No doubt.

Yeah.

Well, and I've always thought that the
only time that that's the problem is.

When you're making the customer
pay for your unwillingness or

inability to properly measure risk
where you're just saying, okay,

everybody's going to pay 70%.

The market will parents.

I'm just going to do it.

But Katie, with a model that is built
on like that low in grower approach,

where you're using all your internal
data with scorecards on behaviors.

So it's a true reflection of their risk.

And sometimes their risk is really,
really high and they're going

to be challenged with very high.

But it's not ranking proportional to
what they're doing rather than, okay.

This is just the average
we charge everyone.

And I think that's local Fe.

Even if that number is really high,
it is self-correcting naturally,

it is what good data frees up.

But again, as we sort of say it a lot
at the stop, if all you've done is

built a business with . And you haven't
built a strategy around it to do a

B testing, to do risk based pricing,
to do risk based limits all the days.

And the world's not going to help you.

The business had dropped bottom
in October, 2015, shortly after

invasive, we invested in the best.

And there was a big downturn in Zambia
and a lot of our clients lost their job.

About 20% of our clients lost
their job over a span of two weeks.

And at the same time, there was a
walkout of some of the legacy management

members who started up against us.

It was very traumatic, very
difficult, and in, uh, operating

in a country, that's not my native.

And at the time, our business model
was very simple and our competitive

advantage is really sitting in the
strong operations at the branches, you

know, good customer service and good
anti-fraud and these sort of things.

And these competitors that started up
against us from the inside, they were

able to replicate what we did pretty
easily and able to take away a big chunk.

And that's sort of, when I resolved to
go down a journey of building a smarter

business, cause it just became very
clear to me that you can run a business

tightly, but you can never scale it up
if operations and customer services,

your only competitive advantage what
we've bought today, or let me say

what we're in a process of boarding
and this journey we taking becomes

harder and harder to, to copy with.

Firstly a long legacy of customer
information, but secondly, the

ability to digest and sensibly
process that information and make

strong business decisions on us.

And I see that our pricing and
credit limit decisions becoming

more radical as time goes on.

Whereas most businesses go the
other way around, you know, as the

balance sheet grows, people become
more careful with the decisions I'll

journey has allowed us to become more
and more radical with what we do.

And it's just transformational
for the success of the busy.

Yeah.

And I think it speaks to that ability to,
to learn from the data that absolutely.

And then speaking of growing, you're
going live in Kenya this year.

Do you want to talk about that?

And any other plans that you might have?

I saw when I was Googling it earlier,
that you've, you've secured some

financing that Westbrook, which is
actually where my brother works.

So shout out to them, but what are
your blends as very much part of the.

We want to replicate the existing business
model with a little bit local flavor

in terms of the implementation and the
customer facing side of things in Kenya.

It's a very big market, small
produce, incredible depths.

It's a fibered market and
competitive there's international.

Authentics in there as well.

There's very strong local banks.

So it's going to challenge our
model and our ability to execute.

So, I mean, that is very
much our plan for 2020.

There's a lot of internal plans as well
of improving the existing businesses

in Uganda, South Africa and Zambia.

We are divesting from Tanzania because of
a shelter dispute there, but the kind of

longer term plan is to remain in lending.

I see a dramatic shift in the whole
Sub-Saharan region from secured lending,

whether that's federal secured or
collateralized lending into the unsecured.

In the next few years as these countries,
industrialized and the financial

infrastructure becomes more sophisticated
and positioning unified to be in the

forefront of that, of that movement.

And, um, I just see incredible
growth in our markets and in our

products and lending is a complicated
business and it to details business.

So even just doing the same thing over
again, but doing a bigger, it takes

careful planning and careful execution.

So we're setting ourselves
up to execute well.

And I know you said you were hiring.

If anybody wants to.

Learn more to come work for you
or to borrow from you, or to

just learn more about what you're
doing and maybe chat to you.

Where's the best way for them to
go find more information websites,

unify dot credits, or if it's
work, uh, you know, career related.

It's, you know, Fido created Ford slash
careers and for any prospective clients

out there, it's, uh, it's your nearest
branch or the website to know how

many dollars you get from east Africa?

Yeah.

We're so we get a few, we get,
uh, not, it's not a Heartland yet.

It is one of the big
testing grounds for FinTech.

Isn't it in Africa?

I love the place I've been up there quite
a few times who people hustlers really,

really assertive, uh, busy thinkers,
uh, the Kenyans, uh, if I can generalize

maybe to add on then kind of the plan for
2020 twos, we've been on this journey of.

You know, there's touch and text strategy
of ours with attached being the branches

and the tech being the USSD mobile money
straight to bank websites type of lending.

There's been a transition, obviously
in 2015, it was fully Dutch today.

We're majority tech, but there's a
transition taking the physical client

or the client that visits us physical.

Turning them into a digital client.

And I think Kenya is only going
to accelerate that further because

Kenyans are extremely digitally
savvy, very big on their phones.

They're very big on mobile money.

So we working hard to further
accelerate that transformation or

business into the digital space.

Cool.

Well, thank you very much and
thank you all for listening.

Don't forget to like, and subscribe on
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Feel free to drop me a connection
request, how to lend money to strangers

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