Loans through phones drives Kenyan start up to global market

By MUTHOKI MUMO for Daily Nation | Thursday, April 4  2013 

Mr Julian Kyula. His company Mobile Decisioning gives loans of between $0.06 and $22 to mobile phone users in the form of airtime. PHOEBE OKALL | NATION MEDIA GROUP 

Julian Kyula moonlights as a pastor. His nine-to-five job involves running a technology company that has in three years started operations in 16 countries globally.

His company, Mobile Decisioning (MoDe), has carved a promising niche in the mobile money market and is making the most of the opportunities at its disposal.

“We deal in nano-finance. At any time of the day, someone in the world is in desperate need of a very small amount of money. This is where we step in,” says Mr Kyula.

Nano-finance, he explains, is one step below what microfinance institutions do. His company extends small loans worth between Sh5 and Sh1,800 to mobile phone users.

In Africa, the borrowing is administered under the guise of lending airtime to subscribers — at a fee.

MoDe is the firm behind Airtel’s Kopa Credo service as well as similar offerings on the MTN network across Africa. The company has now extended its operations to Mexico, South East Asia, and Russia.

“We provide the platform to telecom companies and guarantee the risk of customers borrowing the airtime,” says Mr Kyula.

Last year, MoDe processed 225 million transactions and loaned over $150 million in airtime. In Africa alone, the company has a customer base of about 105 million people.

Looking at the MoDe’s performance statistics, you would be forgiven for forgetting that the company is still in its infancy. The fact that the company’s founder, Mr Kyula, is a university drop-out seems even more unbelievable.

In 2001, Mr Kyula left his business degree studies in the United States following what he terms “philosophical” differences with his instructors. He already had a taste for the business world, to which he was addicted at first bite.

“I simply walked out of school. I did not agree with what they were teaching and from my interactions with the real business world, I didn’t think that their lessons would remain relevant for long,” he said.

Over the next four years, he would work with an American corporate, crunching data on potential borrowers and purchasers of insurance policies.

In 2005, he packed up and, armed with his new-found love for numbers, headed back home — Kenya.

He was determined to change the local business scene by setting up the country’s first data company — Quest Holdings.

He envisioned an organisation that would help banks, credit rating bureaus, and other financial institutions to extend financial assistance across the country.

To his disappointment, the business flopped. Mr Kyula, in his words, “lost millions”.

He eventually picked himself up from the dust and in May 2010, launched MoDe with his partner, Mr Josphat Kinyua. Ironically, his past failures were instrumental in drawing investments to his new business.

“Some investors told me that the only reason they were putting their money in MoDe was because I had failed. They could not trust anyone who did not understand failure and could not learn from it,” he says.

Three years later, Mr Kyula has built a company that is, in a word, unorthodox. There are no working hours at MoDe. Employees report to work whenever it is convenient provided they complete projects within deadline. Mr Kyula is insistent on “work-life balance”, allowing his workers as much time as possible with their families.

He has also adopted a rather strange recruitment process. He does not look at CVs. He does not conduct interviews. He chats with potential employees and brags that in three minutes, he can determine whether someone is the right fit for a job at MoDe.

He attributes his recruitment methods to lessons learned from his past failures. At Quest Holdings, he says, the CV had been near sacrosanct.

Candidates with formidable papers from good universities were a shoo-in. Despite this, Quest failed.

“It is about attitude and chemistry. I do not want to work with a qualified snob. I don’t care if you have 20 degrees from Harvard, If you come here and put a dent in our culture, then we don’t need you,” he says.

Unorthodox though they may be, Mr Kyula explains that his flexible working conditions are pragmatic, given the different markets in which MoDe operates.

Teleconference meetings can be held at any time in order to accommodate different cultures and time zones.

Culture shock

MoDe has also had to be flexible in other areas. Operating in 16 different countries, each with their own taxation and regulatory regimes, the company has had to adapt repeatedly.

In order to do this successfully, Mr Kyula says, MoDe has had to enlist a number of tax and legal advisers with knowledge of the global markets.

He has also experienced his fair share of culture shock and navigating different ways of doing business in varied markets has been no mean feat for this pastor determined to maintain his ideals and values.

“We have gone to meetings where clients simply drunk vodka and chatted for 20 hours before finally getting down to business. This is why you need partners who understand local culture and can help you navigate it,” he says.

Earlier this year, MoDe was declared the IBM, Global Entrepreneur of the Year beating hundreds of other contestants from around the world.

At a ceremony in New York, the company pitched its ideas to the cream of global venture capitalists.

According to Mr Kyula, the competition has provided MoDe with a level of publicity and exposure that would otherwise have been near-impossible.

The company has already started receiving inquiries from interested investors and plans to expand into 10 more countries this year, reaching at least half-a-billion people.

However, he recognises that the market for nano-lending services is growing ever more competitive.

While MoDe has stuck to airtime in Kenya, companies like Safaricom are diversifying their products and lending hard cash to Kenyans.

The key to surviving in the tough environment, he says, will be constant innovation.

Risk is spread

“I am in a constant state of paranoia that someone will kill our business, not with a bomb, but with an idea. So I would rather kill my own business with a new idea and, in the process, create another one than let an outsider do that,” he says.

Further, the company’s global vision means that its risk is spread. Although mobile money and mobile lending might become a cutthroat segment in Kenya, there are still numerous countries across the world that do not have the technology and nothing short of an economic Armageddon could take down all these countries at the same time.

“Local companies need to create products for the seven billion people living in the world right now, not just for the 40million Kenyans,” says Mr Kyula