New Africa Daily spoke to Viola Llewellyn, president and co-founder of Ovamba Solutions, about her company’s approach to some of Africa’s challenges. Ovamba creates technologies for banks so they can serve small and medium-sized enterprises with sharia-compliant trade finance products.
New Africa Daily: Ovamba started in Cameroon. Could you tell us a little about your model and how Ovamba has transitioned from a classic fintech company to a tradetech company?
Viola Llewellyn: We started in 2013 as a platform for the African diaspora to take what would ordinarily be remittances and use that capital for investment in home communities. This was not a viable model back then and it failed before it even started. Our pivots since then took us through the journey of our actual customers. By going through bank account opening, loan application, trying to get services, importing, and looking at how risk works and who would be a reliable customer, we were able to shift effectively to our current model, namely a tradetech solution with additional services. It is comprised of a suite of services available on a mobile app and connected to a risk-measuring and transaction-authorization back office, from e-commerce to logistics services.
NAD: Do you think lending is a healthy option for development of prosperity in Africa?
VL: Lending requires a steep list of criteria to qualify, which inevitably excludes businesses and people who are a good risk but their best aspects cannot be measured by traditional credit processes. Credit that can be secured or not secured has a punitive consequence in the face of non-performance and can create a cycle of poverty, especially amongst sub-prime candidates. Africa requires capital and services together. It has been shown that focusing on inventory and business performance not only produces better transaction and capital deployment outcomes, but also trains businesses for better performance.
NAD: What has Ovamba learned regarding the formulation of risk models?
VL: We have learned that risk models that are formulated correctly open a wider catchment of customers. We formulate our risk models to look for ways to mitigate, not prevent, exposure to risk. We have noticed that in the African market, banks approach risk from the standpoint of total prevention of any exposure to risk, which shuts out customers who may just need an adjustment to the conditions of a transaction.
Case in point: It is common practice that if you want a loan of US$10,000, your bank will require that you have $10,000 “blocked” in your bank account. So lending is secured by your own capital, and you may be required to bring collateral to the table on top of that. This is not how risk management should be done.
NAD: What can sharia finance offer in terms of providing financial services to the informal economy?
VL: Sharia finance offers an ethical fee-based “risk-sharing” approach to finance. It puts inventory at the heart of the transaction, and not the client’s past or future financial performance. It removes the need to have a perfect track record from the main criteria for approval. After all, you can have perfect credit but absolutely poor choice in suppliers or business timing. That makes the transaction a failure. Or you could have great business acumen and mediocre cash flow or reserves, but if the financier has legal and physical control of the asset, there is a balance in the sharing of business outcomes. It works remarkably well for Africa, where wholesale and retail trade drive whole economies.
NAD: What does Ovamba’s description as a tradetech company mean to you?
VL: It means designing innovations to support and drive trade, while simultaneously impacting the business ecosystem through performance and capital. It involves customer selection and onboarding, and having deep knowledge of assets, inventory, logistics, market sector dynamics, value chain, and supply chains, all rolled into easily accessible innovations, apps, and processing algorithms. It is a suite of digital solutions for traditional problems.
NAD: What has Ovamba learned from working with African central banks? How can they be more efficient?
VL: We have learnt that central banks are not technology innovators. We also understand that policy development and response times cannot keep up with innovation. Central banks fully understand what is at stake. The general wariness of fintech and tradetech solutions is slowly giving way to collaboration in the form of sandboxes. Central banks are concerned about financial inclusion and the poor track record of banks who cannot control non-performing loans. We have had the opportunity to speak to quite a few central banks, which all agree that tradetech is a bona fide solution to financial inclusion and better portfolio performance from lending to the informal sector, but that it has to be at scale. Having a digital platform that has the security and bandwidth is the perfect tool to achieve this while also being mindful of data protection.
Viola Llewellyn is a member of the Africa Professional Services Group, the European Women’s Payment Network, and the African Women in Fintech & Payments. In October 2019, she was appointed to the board of advisors of Lobbying Africa. She was born in the United Kingdom to a Cameroonian family and currently lives in the United States.