Ovamba is making steady progress in its mission to open up access to credit for Central African SMEs.
A growing number of alternative finance providers are attempting to crack open the emerging markets. Think Lendahand, Eureeca and Emerging Crowd. Emerging Crowd recently compiled a breakdown of the most favourable frontier markets for sourcing quality investment opportunities, with Nigeria coming out on top. One notable absence from that particular leaderboard was Cameroon, within which the nascent peer-to-business lending platform Ovamba is beginning to build up considerable momentum.
Ovamba channels funding from Cameroonian high net worth individuals and global institutional investors into local small businesses. The platform has inserted itself into a substantial void within the financial ecosystem. Credit assessment in the CEMAC (Economic Community of Central African States) is a tricky beast, owing primarily to the total lack of traditional data sources. But these untapped SME markets are ripe for the picking, and represent a sizable opportunity for the company that manages to forge a sustainable lending model. Ovamba is attempting to do just that.
We caught up with Viola Llewellyn, Global COO of Ovamba, to dig deeper into the platform’s activities.
Which countries is Ovamba active in?
Ovamba has been active in Cameroon for 1 year now. There are continental plans for expansion in the very near future.
Could you give us a brief explanation of how your peer-to-peer model works in these countries?
Ovamba’s model takes an “enabling" approach to the market. Cameroon and the surrounding CEMAC region (Gabon, Tchad, Cameroon, Congo, Central African Republic and Equatorial Guinea) is quite nascent but full of potential. Lending in this region has had very little innovation or development in the last 15 - 20 years. We not only had to develop and execute our model, we had to create and develop the ecosystem for our model to exist and grow. We partner with MFIs to co-lend on loans to borrowers to share risk and access borrowers. This activity gives MFIs an expansion to their treasury and a marketing channel for Ovamba. Ovamba partners with traditional banks by servicing SME borrowers that they are not always able to access or service themselves. On a sole-funding basis, Ovamba has a number of "sale and repurchase” oriented products that allow us to fund imports, customs clearance and invoice/contract finance borrowers. Borrowers apply online at www.Ovamba.com for their loans. Ovamba’s investors are HNW individuals in Cameroon and global institutional investors. Investors can select loans from our platform or have the system create portfolios on their behalf.
How do Ovamba's credit models work - we understand you make extensive use of local knowledge, harnessing a kind of social credit score, is that right?
Yes - that is correct. There are no centralized or regional credit bureaus. There are no federated databases for consumer or SME borrowers. Banks usually make arbitrary decisions at the branch level based on a combination of their relationship with the borrower, the borrower’s deposits or the treasury restrictions in place that month. Our partner banks utilize Ovamba’s system which gives Ovamba a view into the behaviours of borrowers and potential borrowers. We have a team made up of experienced professionals who collect and analyze data from each transaction. This data is used to inform and improve upon the model with every transaction. The application process itself collects 200 - 300 more data points than the typical local financial institutional lender. All of Ovamba’s loans are fully securitized. Obviously, available collateral plays into the creditworthiness of borrowers. The social accountability of our model incorporates ethnic, geographic and religious aspects. The model also vets for traditional affiliation to local leaders.
There must also be considerable value in the weight of information that you're gathering about African SMEs?
There certainly is! Ovamba is fast becoming Africa’s Debt Solution. This information is what gives us the ability to serve African SMEs, especially in the francophone zone which is often left forgotten by most non-french speaking institutions. There have been many fractured attempts to create credit scoring systems, but I don't believe that these models have been developed in conjunction with actual live transactions at the scale that Ovamba is building and executing. The information is particularly important because Africans are leading the “gathering” and who knows Africa better than Africans?
What does the future hold for the Ovamba platform?
The future is very bright!! Our performance so far has shown that our platform and model can predict defaults and credit patterns in African SME transactions with the accuracy that institutional investors are looking for. We believe that we will be a destination for Investors looking for a trusted partner in Africa. Doing well by doing good is a cornerstone of impact investment. We deliver this with meaningful ROI. We believe that developing an investment model for Africa MUST be sustainable therefore it must be profitable. For the borrowers - we expect to develop more products to help them utilize credit for true business and economic growth. We are excited to usher in a new asset class for the African continent and hope to be the fore runners of new evolved products for borrowers and investor tools.