How Vancouver Angel Investor, Ed Levinson, is Creating Social Impact in Uganda
Open Angel’s Program Manager, Shawna Quinton, interviewed Ed before his most recent trip to Uganda.
Shawna: Ed Levinson is the Executive Director of Open Angel and an active angel investor in Vancouver, BC. I sat down with Ed before his most recent trip to Uganda to find out how he became involved in raising a round for a Ugandan fintech from Canadian investors. A couple things I already knew were that Ed likes fintech investments and he loves baseball — but I had no idea that these intersected.
What was your initial connection to Uganda?
In 2011 a Little League baseball team from Kampala won Little League’s Middle East-Africa tournament. This earned them a spot in the Little League World Series in Williamsport, Pennsylvania. And their first game was against Canada. The tournament is a big deal for Little League, and a huger deal for kids from a poor area of Kampala. But a bureaucratic issue left the Ugandan team without visas to enter the US to play. Ruth Hoffman, a Vancouver accountant and serious baseball mom, decided to right this wrong and started working her Ugandan connections to get the Canadian Little League champion team from Langley BC plus their parents and coaches to Uganda to play the game they were denied. I called Ruth and asked if she needed umpires. She did. I connected with the team on the ground there and umpired at this game and I’ve been running an umpire training camp in Uganda every January since then.
I looked this up and found that Ruth started what is known as the “Pearl of Africa” series and has attracted funding attention from other countries and organizations to support Ugandan Little League baseball. Here’s an article from the UBC Faculty of Medicine in 2013 that talks about Ruth and the series »
How was the big game?
Fun. The trip ended up including major league baseball players and major media outlets like the New York Times, Al-Jazeera, CNN, ESPN and TSN. Part of my umpiring job was managing the on-field photographers.
Are you an umpire celebrity?
Most definitely not. I umpire Little League and high school age leagues in Canada, and I hope to be promoted to train umpires in Canada.
How many trips have you made to Uganda since then?
Five. It started with the January trips but I’ve been going more often with my involvement in Ensibuuko.
Good segue, Ed. How did you get involved with a Ugandan fintech startup?
Keith Ippel, who runs an impact accelerator in Vancouver (Spring), introduced me to Luni Libes, who runs a similar accelerator (Fledge) in Seattle. Fledge brings in companies from all over the world and they had a handful from Uganda. Luni introduced me to Ensibuuko in the fall of 2015 and in January 2016 I arranged to meet with them during my annual umpire training trip to Uganda. A Ugandan friend and I spent a few days with them.
What does Ensibuuko do and why have they received so much of your attention?
In short: they are a service provider to a financial services entities unique to sub-Saharan Africa. First I have to tell you about the current banking situation in Uganda (and other African countries).
Okay.
Banks are concentrated in Kampala and a couple smaller cities in Uganda. They charge for everything, including checking your bank balance. Services are expensive and loans have interest rates of more than 20%.
That’s usuary!
Not there. It’s part of the general problem of poor and expensive financial services infrastructure in East Africa. Instead of working with banks, most Ugandans have an account with a village-based micro-finance institution similar to a credit union, called a Savings and Credit Co-Operative, known there as SACCOs. These SACCOs provide banking services for more than half the population — 18M out of 35M. And there are an estimated 5M in that 35M who are completely “unbanked”, with the remainder of the 35M children and a small minority who use banks.
How do the SACCOs work?
SACCOs take deposits from members and then make loans at more reasonable rates, which is good, but their infrastructure is not very good. Cash is stored in a lockbox, transactions are recorded on paper ledgers; they are often run by village elders who may be illiterate and in some cases innumerate. Money gets lost, transactions don’t get recorded, ledgers disappear and money gets stolen. Last January when I was in Uganda, there was a story in a newspaper about a small SACCO that had the equivalent of $100K CDN stolen by its manager. Most of the SACCOs members were single mothers who were saving to pay for school for their kids. In the article they seemed so resigned and accepting of lousy, unreliable financial services with something like a sigh of disappointment that their kids wouldn’t go to school that year. Disappointment and resignation — not outrage!
Now can you tell me about Ensibuuko?
Yes. Ensibuuko is providing SACCOs with modern electronic banking infrastructure. Ensibuuko’s software is hosted in the cloud and they have created a solution over the mobile phone network that allows for web services even in rural areas with poor telecom infrastructure. This resolves the problem of the single paper ledger. At the back-end, Ensibuuko’s software is connected to the banks so the SACCO has a single account at the bank and Ensibuuko keeps track of the individual transactions within the account. This resolves the problem of the cash lockbox. The software is also connected to the mobile phone network. This allows users to access their account via mobile phone — they can check the balance, repay loans, make deposits and withdrawals. This creates access and transparency.
Wait, how can you deposit cash with your phone?
Mobile phone kiosks. They are everywhere in Uganda. You hand over cash, have money electronically added to your mobile phone account, withdraw money and have it subtracted from your account. Ensibuuko makes it possible (and easy) to move money from a mobile phone account to a SACCO account.
The question we often ask at Open Angel: what is the revenue model?
Ensibuuko charges the SACCO a flat fee per member. The SACCO can charge members per transaction, per year, however they want to operate. This gives the SACCO a revenue stream with which to professionalize services like reliable operating hours. This is a familiar story — a farmer takes a day and pays for transport to visit his SACCO to make a cash deposit but the SACCO is not open that day because the one person who runs it has somewhere else to be that day. It’s very inefficient. I did some development work in Indonesia years ago and I’ve found that it’s about infrastructure — but more than clean water, sewers, reliable electricity. Financial infrastructure is a big component.
How is Ensibuuko doing?
They currently have $10K in monthly recurring revenue and $15K in monthly expenses and lots of room to grow. They’ve had some significant customer wins with the government employee credit union, and government regulators have recently required a SACCO with a fraud issue to use the Ensibuuko system in order to keep their licence to operate. Ensibuuko will be attending a SACCO conference in Rwanda in October. They’ve had serious interest in licensing deals from Senegal, Rwanda and Tanzania, and interest in what from Kenya, Nigeria, South Africa and Burundi. In my estimate, over 200M potential clients.
What do you like about this as an investment?
Their potential. It’s a win for individual Ugandans, SACCOs, even regulators. Don’t get me wrong — it’s a for-profit business, but it does have real social impact: cleaning up SACCOs, lowering costs, equalizing access to financial services. These are important social goods.
And my final question, why Uganda?
Angel investing is essentially local and after making 6 trips there for umpire training, it’s local to me now. I know people, how to get around, where to stay, where to eat. And I’m beginning to understand how things work there on the ground. Many investors I’ve spoken to over the past few months are concerned about the company being successful and the government taking a significant cut of the proceeds that should go back to investors, but I think the risk of that is low, based on what I’ve learned. Uganda is fairly stable, albeit repressive, and has a solid legal system based on British common law.
How will investors repatriate their money? (I know I said last question but this seems important)
Canada does not have a tax treaty with Uganda so I’m setting up an intermediary in the UK. The UK has tax treaties with Canada and Uganda. The investment is actually in the form of a syndicate, where a number of local Vancouver investors are participating.
Ed and Boris Mann just returned from Uganda. Boris wrote about an evening event at the Kampala-based co-working / accelerator space Hive Colab that contains more info on the startup scene there in Uganda. If you’re interested in finding out more about investment in Uganda, contact us on the Open Angel site »
