Navigating the murky waters of financial planning in your 20s is no easy task. With the economy perennially in a state of flux and debt on the rise, maintaining a healthy financial life has proven to be even more challenging. We spoke to some finance gurus and experts to glean from them the following that could throw ideas and provide some relief:



<ol type="1"><li>Save. This money is not for immediate use, it isn’t even for foreseeable use. This money is for the long-term, and can be diversified through a number of different investments and unit trusts. These banking faculties ensure that the money you’re putting away is reaching its maximum potential and will serve you well, when the need for it arises. The amount being saved will depend on monthly income and expenses. Increasing this as you progress to each stage of life is recommended and will serve you well when the time comes to reap these rewards.</li><li>Budget. Keep track of your monthly expenses and reduce frivolous spending. A detailed review of your expenses in a month can help determine the money you need to cover it. After all essential expenses such as rent or loan repayments, the cost for essential items such as food and toiletries should be calculated next. The last to follow is optional expenses such as eating out or luxury spend. In doing this, it ensures all the important factors are covered while leaving room for the occasional splurge.</li><li>Emergency funds. Life can be unpredictable. With this come unforeseen costs. To prepare for this, experts recommend creating an emergency fund. This fund is an accumulation of money that is put away to access should the need arise. It can be used on an unexpected medical emergency or sudden job loss. The creation of this ensures that debt is not incurred and long-term savings are spared. It should be placed in a bank account that is quick and easy to access so the funds are available immediately should you need it.</li><li>Assets. Acquiring assets such as vehicles or property is an important investment into the future. Using the finance options available also has its benefits. Creating a positive credit score is important for anyone especially later on in life when business loans may be needed or when opening accounts. While vehicles depreciate quicker, these are assets that can be kept for years at a time and can be used as collateral for a better model when the opportunity arises. Property is also an investment and does not depreciate.</li><li>Retirement funds. Time waits for no man and age catches up with us all. This is why saving for retirement is something that should be started as early as possible. Everyone wants to age comfortably. To do this, it means taking the initiative while you’re young. Over and above the pension or preservation fund being accumulated through your job, setting up a retirement annuity is also highly recommended. This ensures that either a lump sum or monthly stipend is received ensuring that you age in style.</li></ol>



Being in your 20s can be exhilarating and terrifying all at once. The events of your 20s are a significant factor in how you approach the rest of your life. The one thing you want to make sure is that your finances are in order. Debt globally is the highest that it has ever been, and the economy is in recession. Preparing now makes sure that you weather the storm. With calmer seas, you’ll reap the rewards instead of being stranded with no lifeline. Let your finances be one of the things you do well in your 20s.

Millennials & New Ways of Investing

5 Ways To Plan Your Finances In Your 20s

Stay-at-home consumers and stimulus checks have been a boon for online installment financing, digital banks and day trading.



In 2015, Nick Molnar was living with his parents in Sydney, Australia, and selling jewelry from a desktop computer in his childhood bedroom. Hocking everything from $250 Seiko watches to $10,000 engagement rings, the 25-year-old had gotten so good at online marketing that he had become Australia’s top seller of jewelry on eBay, shipping thousands of packages a day.



That same year, he teamed up with Anthony Eisen, a former investment banker who was 19 years his senior and lived across the street. They cofounded Afterpay, an online service that allows shoppers from the U.S., U.K., Australia, New Zealand and Canada to pay for small-ticket items like shoes and shirts in four interest-free payments over six weeks. “I was a Millennial who grew up in the 2008 crisis, and I saw this big shift away from credit to debit,” the now 30-year-old Molnar says today. Either lacking credit cards or fearful of racking up high-interest-rate debt on their credit cards, Molnar’s generation was quick to embrace this new way to buy and get merchandise now, while paying a little later.



Five years later, Molnar and Eisen, who each own roughly 7% of the company, have become billionaires—during a pandemic. After initially tanking at the start of lockdowns, shares of Afterpay—which went public in 2016—are up nearly tenfold, thanks to a surge in business tied to ecommerce sales. In the second quarter, it handled $3.8 billion of transactions, an increase of 127% versus the same period a year earlier.



<hr class="wp-block-separator"/>



<h3 class="has-text-align-center has-vivid-red-color has-text-color">Buy Now, Pay Later</h3>



<blockquote class="wp-block-quote">After a steep drop in Afterpay’s stock in March, the eCommerce boom and credit card-weary Millennials have propelled the installment payment company’s stock to record highs, nearly doubling its value in six months.</blockquote>



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They are not the only ones whose fortunes have taken off in the last few months. According to Forbes’ analysis, at least five fintech entrepreneurs including the two Aussies have been vaulted into the billionaire rankings by the pandemic. Others include Chris Britt, founder of digital bank Chime, and Vlad Tenev and Baiju Bhatt, the co-CEOs of “free” stock trading app Robinhood. Several other founders from such companies as Klarna and Marqeta have also gotten boosts and are suddenly approaching billionaire status.&nbsp;



As in other sectors, the Covid recession has created both fintech winners and losers. For example, LendingClub, which offers personal loans to higher-risk consumers, laid off&nbsp;<a href="https://www.forbes.com/sites/jeffkauflin/2020/04/21/lending-club-is-laying-off-460-employees-or-30-of-staff/#4ddcb1bc3c7e">30% of staff</a>; small business lender On Deck was sold in a&nbsp;<a href="https://www.forbes.com/sites/jeffkauflin/2020/05/11/fintechs-for-sale-post-covid-its-partner-or-perish-for-many-startups-heres-a-buy-list/#2747c79f6b3b">fire sale</a>.



But for a sizable crop of consumer-facing and payments-related fintechs, the virus has delivered a gust of growth, just as it has for e-commerce behemoth Amazon and&nbsp;<a href="https://www.forbes.com/sites/greatspeculations/2020/09/14/zoom-docusign-okta-work-from-home-stocks-poised-for-further-gains/#76e7336611b2">work-from-home players</a>&nbsp;Zoom, Slack and DocuSign.&nbsp;



“Consumer fintech adoption was already strong pre-pandemic, especially among the 20s to early 40s age group,” says Victoria Treyger, a general partner who leads fintech investing at Felicis Ventures. “The pandemic has become a growth rocket, fueling the rapid acceleration of adoption across all age groups, including 40- to 60-year-olds.”



Several Covid-driven developments are helping specific types of fintech players. For example, consumers’ shift to more online spending and delivery services is a boon to certain companies powering payments. Marqeta, a specialized payments processor whose clients include Instacart, DoorDash and Postmates, has been in talks to go public at an&nbsp;<a href="https://www.forbes.com/sites/jeffkauflin/2020/07/17/pandemic-power-payments-company-marqeta-could-fetch-8-billion-in-ipo-doubling-value/#3a7e25491c9e">$8 billion valuation</a>, four times&nbsp;<a href="https://www.forbes.com/sites/jeffkauflin/2019/03/26/it-took-three-tries-but-this-entrepreneur-transformed-his-struggling-startup-into-a-2b-unicorn/#4cdfdd23706d">what it was valued at in March of 2019</a>. That would give CEO Jason Gardner, who owns an estimated 10% of Marqeta, a stake worth $800 million.



Meanwhile, the $2 trillion-plus CARES Act Congress passed in March, with its $1,200 per adult stimulus checks, student loan payment holiday and (now expired) $600 a week unemployment supplements, helped many Americans keep financially above water—and some digital banks like Chime to prosper. 



<hr class="wp-block-separator"/>



<h3 class="has-text-align-center has-vivid-red-color has-text-color">Debit It!</h3>



<h4 class="has-text-align-center has-white-color has-black-background-color has-text-color has-background">Spending on the travel and luxury items U.S. consumers typically put on credit cards has fallen with the pandemic, while spending on debit card necessities is up.</h4>



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In the second quarter of 2020, amid Covid lockdowns and fears, consumers slashed spending on travel, restaurants and luxury items they usually put on their credit cards, but continued to spend on necessities and smaller items—the sort of things they’re more likely to pay for with debit cards. During that quarter, Visa credit card transaction volumes were down 24% from the year before, while debit card transactions were up 10%, according to research firm MoffettNathanson. And debit cards (rather than checks or credit cards) are the spending vehicle most frequently offered by fintech neobanks like SoFi, Dave and MoneyLion.



San Francisco-based digital bank Chime, in particular, has used the stimulus payments to its advantage. In mid-April, about a week before the $1,200 government-stimulus checks started hitting Americans’ accounts, the company&nbsp;<a href="https://www.forbes.com/sites/jeffkauflin/2020/04/09/digital-bank-chime-now-offering-stimulus-check-advance-to-100000-users/#40758dfb1c10">advanced customers that money</a>, eventually extending over $1.5 billion. “Following the stimulus advance, we had the largest day for new enrollments in the history of the company,” CEO Britt reports.



The pandemic has depressed total consumer spending, and the unemployment rate remains at a high 8.4%—two factors that affect Chime’s middle-income customer base. Yet on a per-user basis, “average spend per customer is up over last year,” Britt says. “Part of the reason for that is the government programs around stimulus payments and unemployment.”&nbsp;



Today, Chime’s annualized revenue is running at a $600 million rate, according to a person familiar with the private company’s numbers. At its eye-popping new valuation of $14.5 billion announced along with a $485 million fundraise in mid-September, venture capitalists are valuing the company at 24 times its revenue. Some investors are asking if Chime should get such a lofty value when Green Dot, a publicly traded fintech that offers checking accounts and prepaid debit cards for low-income customers, trades at two times revenue. “We really look more like a payments-processing business,” answers Britt. That’s because virtually all of Chime’s revenue comes from interchange—the fees merchants pay when Chime’s users swipe their debit cards. The company doesn’t make money on interest through its new secured credit card (that’s a starter card where the holder puts up money to cover his or her credit limit), although Britt says he doesn’t rule out lending in the future.&nbsp;



Now Britt himself has sailed into the “three comma club.” Forbes estimates his Chime stake is at least 10%, meaning his holdings are worth $1.3 billion-plus (Forbes applies a 10% discount to all private company holdings). And he’s planning an IPO. “Over the next 12 months, we have a number of initiatives to get done to make us even more IPO-ready,” he says.&nbsp;



<div class="wp-block-image is-style-default"><figure class="alignleft size-large is-resized"><img decoding="async" loading="lazy" src="https://www.forbesafrica.com/wp-content/uploads/2020/09/GettyImages-1027918206-812x1024.jpg" alt="" class="wp-image-47930" width="286" height="360" srcset="https://cms.forbesafrica.com/wp-content/uploads/2020/09/GettyImages-1027918206-812x1024.jpg 812w, https://cms.forbesafrica.com/wp-content/uploads/2020/09/GettyImages-1027918206-scaled-300x379.jpg 300w, https://cms.forbesafrica.com/wp-content/uploads/2020/09/GettyImages-1027918206-scaled-600x757.jpg 600w, https://cms.forbesafrica.com/wp-content/uploads/2020/09/GettyImages-1027918206-238x300.jpg 238w, https://cms.forbesafrica.com/wp-content/uploads/2020/09/GettyImages-1027918206-768x969.jpg 768w, https://cms.forbesafrica.com/wp-content/uploads/2020/09/GettyImages-1027918206-1218x1536.jpg 1218w, https://cms.forbesafrica.com/wp-content/uploads/2020/09/GettyImages-1027918206-1624x2048.jpg 1624w, https://cms.forbesafrica.com/wp-content/uploads/2020/09/GettyImages-1027918206-scaled.jpg 2029w" sizes="(max-width: 286px) 100vw, 286px" /><figcaption>Robinhood Co-Founder and Co-CEO Baiju Bhatt. (Photo by Steve Jennings/Getty Images for TechCrunch)</figcaption></figure></div>



Then there’s the Robinhood phenomenon. The boredom of being stuck at home, wild stock market swings, and government stimulus checks have turned some Millennials and Generation Zers into day traders and options players. Robinhood’s most recent fundraising round in September gave it an $11.7 billion valuation and its cofounders a paper net worth of $1 billion each. But considering Morgan Stanley’s $13 billion February acquisition of E-Trade and Schwab’s earlier purchase of TD Ameritrade for $26 billion, some think Robinhood could garner a $20 billion valuation if it went public or were acquired. 



If there’s one fintech segment that has been an unalloyed pandemic winner, it’s the business Afterpay is in: online point-of-sale installment financing. It’s benefitting from both consumers&#8217; shift to online buying and their reluctance, in these uncertain economic times, to take on new credit card debt.



While Afterpay’s Nick Molnar and Anthony Eisen hit billionaire status in July, their competitors aren’t far behind. Take Klarna, which was founded in Stockholm in 2005 and entered the U.S. market in 2016. Two of the three founders, Sebastian Siemiatkowski and Niklas Adalberth, met while flipping patties at a Burger King in Sweden. They pioneered the buy-now, pay-later model in fintech, calling it “try before you buy” and letting people own products for 30 days before making their first payment. (That’s a lot more attractive than old-fashioned layaway, the store system once popular for Christmas gifts and large appliance purchases, in which buyers had to make all their installment payments before getting an item.)



Klarna charges retailers 3% to 4% of each transaction—slightly lower than the 4-5% Afterpay charges—to offer its service. One key difference that separates the two companies: Klarna is becoming a full-fledged financial services business. It became a licensed bank in Sweden in 2017 and offers longer-term financing of up to 24 months, with interest charged, for high-ticket items like laptops sold through a small number of retailers. Siemiatkowski has already turned Klarna into a digital bank in Europe with a debit card for spending on everyday purchases. He’ll likely do the same in the U.S. soon.



<div class="wp-block-image is-style-default"><figure class="alignright size-large is-resized"><img decoding="async" loading="lazy" src="https://www.forbesafrica.com/wp-content/uploads/2020/09/GettyImages-1193300011-1024x683.jpg" alt="" class="wp-image-47928" width="350" height="233" srcset="https://cms.forbesafrica.com/wp-content/uploads/2020/09/GettyImages-1193300011-1024x683.jpg 1024w, https://cms.forbesafrica.com/wp-content/uploads/2020/09/GettyImages-1193300011-scaled-300x200.jpg 300w, https://cms.forbesafrica.com/wp-content/uploads/2020/09/GettyImages-1193300011-scaled-600x400.jpg 600w, https://cms.forbesafrica.com/wp-content/uploads/2020/09/GettyImages-1193300011-768x512.jpg 768w, https://cms.forbesafrica.com/wp-content/uploads/2020/09/GettyImages-1193300011-1536x1024.jpg 1536w, https://cms.forbesafrica.com/wp-content/uploads/2020/09/GettyImages-1193300011-2048x1365.jpg 2048w" sizes="(max-width: 350px) 100vw, 350px" /><figcaption> Co-founder and CEO of Klarna Sebastian Siemiatkowski . (Photo by Noam Galai/Getty Images for TechCrunch)</figcaption></figure></div>



The pandemic has catapulted Klarna’s business onto a steep trajectory. By the end of 2020’s first half, its U.S. customer base hit nine million, up&nbsp;<a href="https://www.klarna.com/assets/sites/15/2020/08/27060125/Press-release-Klarna-interim-report-January-June-2020.pdf" target="_blank" rel="noreferrer noopener">550%</a>&nbsp;from the same period the year before. Globally, 55,000 consumers are downloading the Klarna app every day, more than two times last year’s pace. Klarna is now available in 19 countries, has 90 million users and expects to bring in more than $1 billion in revenue this year. When it raised a new round of funding last week, its valuation nearly doubled from a year ago, hitting&nbsp;<a href="https://www.klarna.com/international/press/klarna-announces-650m-funding-round-to-further-accelerate-global-growth" target="_blank" rel="noreferrer noopener">$10.7 billion</a>.



Cofounder Victor Jacobsson has a 10% stake, while Siemiatkowski’s has 8% in the still-private company. (Niklas Adalberth retains just 0.4% after selling some shares to fund his philanthropic organization and investing in startups. Neither he nor Jacobsson are still involved in Klarna.)



<blockquote class="wp-block-quote is-style-large">&#8220;Affirm has also enjoyed a special Covid kicker from pricey home fitness gear. Since 2015, it has powered financing for Peloton, and it now finances purchases of Mirror </blockquote>



Not surprisingly, as the installment purchasing fintechs gain more customers and attention, they’re also facing additional scrutiny from regulators. In March, Afterpay agreed to fork over&nbsp;<a href="https://dbo.ca.gov/2020/03/16/point-of-sale-lender-afterpay-agrees-to-cease-illegal-loans-pay-refunds-in-settlement-with-the-department-of-business-oversight/" target="_blank" rel="noreferrer noopener">$1 million</a>, including $905,000 in consumer refunds, after California’s Department of Business Oversight (DBO) concluded the&nbsp;<a href="https://www.afterpay.com/en-AU/terms-of-service#:~:text=Late%20Fee%3A%20%2410%20Late%20Fee,the%20payment%20is%20still%20unpaid." target="_blank" rel="noreferrer noopener">late fees</a>&nbsp;Afterpay charges meant it was running an unlicensed lending business. “Afterpay rejects the view that the Company operated illegally,” the Australian company said in a&nbsp;<a href="https://www.afterpaytouch.com/images/17032020-US-Regulatory-Settlement.pdf" target="_blank" rel="noreferrer noopener">statement</a>. “While Afterpay does not believe such an arrangement required a licence from the DBO, Afterpay has agreed to conduct its operations under the DBO licence as a part of this settlement.” A spokesperson adds that Afterpay “has been applying for, and has been granted licenses [in other states] where needed.” In 2017, Klarna was fined $15,000 in New Hampshire for operating without a lending license. Today Klarna has such licenses in every U.S. state.&nbsp;



Another fintech winner in the installment-payment business is Silicon Valley-based Affirm, the creation of serial entrepreneur Max Levchin, a founder of PayPal, which itself<a href="https://www.forbes.com/sites/jeffkauflin/2020/08/31/paypal-enters-installment-loan-business-targeting-fintechs-affirm-and-afterpay/#1b1568291478"> jumped into the installment business</a> just last month. Between <a rel="noreferrer noopener" href="https://protect-us.mimecast.com/s/4VcgC4xW0MfEm41WiO1FBR?domain=affirm.com" target="_blank">November 2019</a> and <a rel="noreferrer noopener" href="https://protect-us.mimecast.com/s/f0yMC5yAGNi3xkGKtO8dp_?domain=affirm.com" target="_blank">July 2020</a>, Affirm nearly doubled its U.S. users to 5.6 million. It raised $500 million last week at a valuation of more than $5 billion, up from $2.9 billion last year. While Levchin’s exact stake is undisclosed, it’s likely worth hundreds of millions. 



<figure class="wp-block-image size-large is-style-default"><img decoding="async" loading="lazy" width="1024" height="683" src="https://www.forbesafrica.com/wp-content/uploads/2020/09/GettyImages-1155293772-1024x683.jpg" alt="" class="wp-image-47929" srcset="https://cms.forbesafrica.com/wp-content/uploads/2020/09/GettyImages-1155293772-1024x683.jpg 1024w, https://cms.forbesafrica.com/wp-content/uploads/2020/09/GettyImages-1155293772-scaled-300x200.jpg 300w, https://cms.forbesafrica.com/wp-content/uploads/2020/09/GettyImages-1155293772-scaled-600x400.jpg 600w, https://cms.forbesafrica.com/wp-content/uploads/2020/09/GettyImages-1155293772-768x512.jpg 768w, https://cms.forbesafrica.com/wp-content/uploads/2020/09/GettyImages-1155293772-1536x1024.jpg 1536w, https://cms.forbesafrica.com/wp-content/uploads/2020/09/GettyImages-1155293772-2048x1365.jpg 2048w" sizes="(max-width: 1024px) 100vw, 1024px" /><figcaption> PayPal Co-Founder &amp; Affirm CEO Max Levchin. (Photo by John Lamparski/Getty Images)</figcaption></figure>



Affirm has also enjoyed a special Covid kicker from pricey home fitness gear. Since 2015, it has powered financing for Peloton, whose sales have surged as affluent young consumers, missing the motivation of group exercise classes, have flocked to buy the $2,000-plus stationary bikes with their streaming workout classes. Affirm also now finances purchases of Mirror, the hot $1,495 in-home fitness coaching device acquired by Lululemon this summer.&nbsp;



Of course, the fintech companies’ current lofty valuations depend on consumer spending staying strong and consumers retaining some of the online shopping habits they’ve developed over the past six months. With a pre-election agreement between Congress and the White House on a new stimulus package looking unlikely and the future course of Covid-19 unknown, there are no guarantees. But for now, these fintechs are riding high.



By Jeff Kauflin, Forbes Staff &amp; Eliza Haverstock ,Forbes Staff



With additional reporting by Max Jedeur-Palmgren.

TechCrunch Disrupt NY 2016 – Day 2

The Pandemic Plutocrats: How Covid Is Creating New Fintech Billionaires

People’s safety concerns about transmission through contact has resulted in Covid-19 becoming a catalyst for the adoption of cashless payments globally and even more so in South Africa, with the disruption expected to effect lasting changes in the way people transact with cards and cash.  



While consumers had already begun to embrace digital payment options prior to the pandemic, the health crisis is rapidly accelerating the adoption rate with more consumers seeking safer, contact-free payment methods.



This rapid adoption of digital payments will help shape a new normal as businesses begin to emerge from the more stringent levels of lockdown regulations and attempt to navigate their post-Covid-19 futures.



Derek Cikes, Commercial Director at Payflex, says the pandemic represents a watershed for the payments industry.



“The acceleration towards a cashless society is one of the key opportunities that has emerged from the pandemic, bringing the advantages of digital payments&nbsp; to the fore including lower fees,&nbsp; convenience, seamless delivery, greater security, and more flexible payment options,” says Cikes who adds that what makes this trend so interesting, is that historically, people used to hoard cash in times of crisis. Now, the opposite is occurring.



<a rel="noreferrer noopener" href="http://newsroom.mastercard.com/mea/press-releases/mastercard-study-shows-south-african-consumers-make-the-move-to-contactless-payments-for-everyday-purchases-seeking-touch-free-payment-experiences/" target="_blank">A study</a> by MasterCard revealed that since the beginning of Covid-19 in South Africa, 89 percent of South African respondents have been using contactless methods to pay for groceries, 60 percent for pharmaceutical items, 39 percent for other retail items, 15 percent for fast food, and eight percent for transport.



Similarly, recent figures from <a rel="noreferrer noopener" href="https://www.bain.com/insights/the-covid-19-tipping-point-for-digital-payments/" target="_blank">Bain</a> echo this, with estimates that by 2025, the adoption of digital payments could accelerate by a 5 &#8211; 10 percentage point increase globally, above what was previously anticipated at 57% before Covid-19 to 67% after Covid-19.   



Are contactless payments here to stay?



Cash is perceived as a vehicle for the transmission of the virus.&nbsp;As stores, restaurants and other merchants begin to open their doors again, contactless payments are key in providing consumers with a much-needed sense of comfort and reassurance.



 “Businesses have no option but to rethink their use of shared payment surfaces, with customers more conscious than ever of what they touch. People don’t want to touch ATM or PIN pads or have to hand their cards to store tellers.&nbsp; Once viewed as a convenience or nice-to-have, digital payments are now viewed as a critical service, providing a solution to limiting contact with other surfaces,” says Cikes.



Creation of new payment habits



From banking facilities like tap-to-pay, payment apps such as Zapper and Snapscan, to digital banking&nbsp;and&nbsp;e-wallet providers, South African fintech firms have reported significant increases in the use and adoption of digital payment methods since the outbreak began in March. The simple truth is, while these channels provide a convenient way of paying, they are also contactless, allowing consumers to pay for their goods while not having to exchange cash or cards with merchants.



“The perception of cards and cash as vehicles for transferring microorganisms has changed how people physically interact with their payments in favour of contactless options. With health and safety being top priorities, we anticipate this trend to become more permanent with hygiene measures and social distancing likely to become part and parcel of our daily realities for years to come,” says Cikes.



Retailers drive adoption of digital payments



Both online and brick and mortar retailers are helping to accelerate this trend with stores like Mr Price enabling consumers a contactless way to pay in-store pay via their app, and most South African retailers offering tap-to-pay-methods.&nbsp;There is also an expected uptick in omnichannel capabilities (being able to sell your goods through many channels such as website, app, retail, third-party platforms such as Amazon or Shopify) which bridges payments in any environment, physical or digital.



Another contactless payment method driving this trend is e-wallets with over&nbsp;<a href="https://www.theafricareport.com/25846/africa-over-500-million-mobile-money-users-expected-in-2020/" target="_blank" rel="noreferrer noopener">500 million mobile money</a>&nbsp;users expected on the continent in 2020. In addition, it is anticipated that the capabilities of digital wallets will expand to offer features such as digital IDs and transaction monitoring and reporting, which is expected to create even more growth for this payment mechanism.



 Flexibility needed more than ever



According to&nbsp;<a href="https://www.transunion.com/blog/financial-hardship-study/South-Africa" target="_blank" rel="noreferrer noopener">TransUnion’s Financial Hardship Survey</a>,&nbsp;conducted in the United States, United Kingdom, Canada, India, Hong Kong and South Africa, one in six people lost their job in early May, with defaulting on their bills just seven weeks away. 82% of consumers indicated their household income had been impacted, and on average, consumers who were impacted, expect they will be short by R 7 542.90 when paying bills or loans.



“Many people are financially stretched and need the support of alternative payment solutions to help manage their cash flow without incurring further credit card debt,” says Cikes.



A report by&nbsp;<a href="https://blog.globalwebindex.com/trends/coronavirus-international-study/" target="_blank" rel="noreferrer noopener">GlobalWebIndex&nbsp;</a>shows that 83% of South African consumers are expecting flexible payment options from brands.



“We have seen this play out in the increased uptake of our Payflex&nbsp;Buy Now Pay Later&nbsp;payment solution, which allows people to make interest-free payments over two paychecks,” says Cikes.



With health, safety and financial security at the forefront of consumer sentiments, companies will need to provide payment options which meet these consumer needs.



“Digital payment solutions provide an avenue which safeguards against physical interaction, enabling both consumers and business to navigate the environment as the economy is restarted.&nbsp; These digital adoptions will not only help manage the current situation but will also have far-reaching benefits, facilitating a more customer-centric, efficient and resilient economy,” concludes Cikes.



-Derek Cikes, Commercial Director, Payflex

Financial technology concept.

Op-Ed: From Cashless To Digital: The Covid-19 Tipping Point

When Citigroup opened 2020, the most ambitious projects at the $2.2 trillion in assets lender involved major partnerships with technology companies best known for their internet, social media and ecommerce platforms.&nbsp;



In China, nearly 70% of the payments that Citigroup handles for customers are done through AliPay, the payments business spawned by Alibaba. Citigroup’s digital payments technologies are also present on other popular social messaging platforms like LINE and WeChat. The mega-lender recently launched a credit card partnership with fintech Paytm in India and in Singapore it uses chatbots on Facebook Messenger to help answer customer service inquiries. In November 2019, the bank made a big splash in the United States by unveiling a digital checking account with Google Pay.



These partnerships are part of a new reality for the banking industry’s most important players like Citigroup: Innovative and seamless digital banking capabilities are paramount in a business where basic financial products have become commoditized and rock-bottom interest rates make it hard for lenders to differentiate. Consumers are instead voting with their smartphones, demanding the ability to conduct their financial activities safely and easily on mobile phones and their desktops.



Never were these growing demands more important than during the coronavirus pandemic, which forced countries around the world to announce lockdowns to combat the spread of the virus. Unable to visit bank branches, consumers turned to mobile apps and online services to get transactions done. In the U.S., Citi saw an 84% increase in daily mobile check deposits in May and a tenfold surge in activity on Apple Pay as quarantined customers used digital and contact-less tools to handle their financial activities. The lender’s Mexican operations saw an 80% increase in mobile app logins in March. Downloads of its mobile app surged 116% from February to April, while digital bill payments rose 78%.&nbsp;



“Banking has changed irrevocably as a result of the pandemic. The pivot to digital has been supercharged,” says Jane Fraser, president of Citigroup and CEO of its gigantic consumer bank. “We believe we have the model of the future – a light branch footprint, seamless digital capabilities and a network of partners that expand our reach to hundreds of millions of customers.”



Citi’s increasingly digital approach is visibly evident in Forbes’ second ranking of the World’s Best Banks, based largely on customer satisfaction surveys. Citi rates highly in six of the 23 countries where customers were surveyed (Citi has retail operations in 19 countries).



Forbes partnered with market research firm&nbsp;<a href="https://www.statista.com/" target="_blank" rel="noreferrer noopener">Statista</a>&nbsp;to measure the best banks in nearly two dozen countries. Statista surveyed more than 40,000 customers around the globe for their opinions on their current and former banking relationships. The banks were rated on overall recommendation and satisfaction, as well as five subdimensions (trust, terms and conditions, customer services, digital services and financial advice). Between 5 and 75 banks were identified as top banks in each country, based on the total evaluations collected, the number of banks in the specific country and the scores achieved.



The 2008 financial crisis didn’t just usher in an era of consolidation and low rates that reshaped the banking industry globally, it also coincided with the mass adoption of the smartphone and a shift to digital banking. In the wake, a crop of web-first lenders emerged to challenge the world’s biggest banks and made offering end-to-end mobile banking features a matter of survival. The coronavirus only affirmed that there’s no looking back.



Amsterdam-based ING, ranked highly in eight nations, leading banks worldwide on our list in its reach. The lender, which has a legacy that dates back to the mid-1800s, is a technological pioneer in the banking industry, creating digital bank ING Direct in 1997 at the dawn of the internet age. While ING operates hundreds of bank branches in the Netherlands and Poland, it is known as an entirely web-based bank in markets like Australia, Germany and Spain where it ranks in the top-five.&nbsp;



ING now handles some 4.5 billion digital contacts a year, according to Aris Bogdaneris, head of challengers and growth markets at ING, and it is embarking on an effort to make its digital services uniform worldwide. “We are inspired by the giant technology platforms and their customer engagement,” says Bogdaneris, who points out that user experiences for technology platforms like Uber are the same, regardless of where a customer is located. “We started measuring ourselves more against these platforms than against traditional banks,” he adds.



Now, with Covid-19 affirming most digital banking trends, Bogdaneris wonders whether ING will go all-digital. Says Bogdaneris, “Where we have physical distribution and literally closed branches, [the question is] do we reopen them again? Do we actually need them?”



The other banks that rated highly in more than five regions include HSBC and Santander at six apiece, and digital bank N26, which rated first in Austria and Italy second in Spain and France, and #29 in Germany. Founded in 2013, N26 stands out because it has no physical branches but offers free ATM withdrawals worldwide and recently raised $270 million as part of a Series D round that valued the firm at $3.5 billion.&nbsp;



Digital upstart Nubank is the top-rated bank in Brazil, beating out an oligopoly of legacy banks on our list. “The penetration of the internet and the penetration of smartphones created a window of opportunity for us,” says founder and CEO David Velez. “Even as a startup we could compete head-to-head with the big banks. Suddenly, you didn&#8217;t need billions of dollars to build bank branches and you didn&#8217;t need hundreds of millions of dollars to buy mainframes from IBM. You could use the internet to acquire customers,” adds Velez, “It enables a model that has fundamentally lower costs and a better user experience.”



Growth at Nubank, which operates throughout South America, has been staggering. In 2019, the lender saw its customers surge from 6 million to 20 million and its private valuation now stands at $10 billion.



If there’s any doubt that digital-first banks are the way forward, Velez offers a surprising statistic: Since the pandemic began, Nubank has seen a surge in customers aged sixty and over, the types of clients many bankers once believed would never leave traditional branch networks. Over the past 30-days, for instance, some 300 clients above the age of 90 have become Nubank customers.



Digital banks rated well in the United States as well. Online-only Discover and Capital One ranked #23 and #30, while neobank Chime ranked #36. All three beat out mega-lenders JPMorgan Chase, #36 and Citigroup #71. The other big four lenders, Bank of America and Wells Fargo, didn’t make the top-75.



USAA was the highest-rated bank in the U.S. The bank is open to members of the U.S. military and their families and has more than 13 million members.



&#8211;<a href="https://www.forbes.com/sites/antoinegara/">Antoine Gara</a>, Forbes Staff, <a href="https://www.forbes.com/banking-insurance">Banking &amp; Insurance</a>

Lifestyle late night working Barcelona.

The World’s Best Banks: The Future Of Banking Is Digital After Coronavirus

Nationwide protests following the death of George Floyd have thrown issues of economic inequality, already exasperated by the coronavirus crisis, into sharp relief. The wealth gap in America has been growing since at least the 1970s as income levels stagnated for lower and middle class households while continuing to grow for households at the top of the spectrum.&nbsp;



Centuries of racism and discrimination mean that this divide is a great deal wider for black households that are denied the access to the opportunities and resources available to white households. “No progress has been made in reducing income and wealth inequalities between black and white households over the past 70 years,”&nbsp;<a href="https://www.minneapolisfed.org/research/institute-working-papers/income-and-wealth-inequality-in-america-1949-2016" target="_blank" rel="noreferrer noopener">according</a>&nbsp;to economists Moritz Kuhn, Moritz Schularick and Ulrike I. Steins who published a 2018 paper on U.S. incomes and wealth since 1949. The Brookings Institution&nbsp;<a href="https://www.brookings.edu/blog/up-front/2020/02/27/examining-the-black-white-wealth-gap/" target="_blank" rel="noreferrer noopener">points out</a>&nbsp;that the ratio of white family wealth to black family wealth is higher today that it was at the beginning of the century.&nbsp;



Here are 9 numbers that sum up the vast gap.



<h3>16.8%</h3>



That’s the May 2020 jobless rate for black workers. During the same month, white workers were unemployed at a rate of 12.4%.&nbsp;<a href="https://www.nytimes.com/2020/06/01/business/economy/black-workers-inequality-economic-risks.html" target="_blank" rel="noreferrer noopener">Less than half of black adults</a>&nbsp;currently have a job, compared with just under 60% prior to the beginning of the pandemic layoffs in February. The sobering statistic comes after unemployment rates for black workers reached a record low in the months before the pandemic.



<h3>$17,150</h3>



That was the median net worth of black households in 2016, according to the Federal Reserve’s Survey of Consumer Finances, the <a rel="noreferrer noopener" href="https://www.brookings.edu/blog/up-front/2020/02/27/examining-the-black-white-wealth-gap/" target="_blank">Brookings Institution</a> notes. The median net worth of a white family at the same time was $171,000—nearly ten times as much.



<h3>8.7%</h3>



The Washington Post <a rel="noreferrer noopener" href="https://www.washingtonpost.com/business/2020/06/04/economic-divide-black-households/" target="_blank">points out</a> that in 1968, the median black household had just 9.4% of the wealth of the median white household, according to Fed data. Yet by 2016, that ratio had fallen to just 8.7%. In other words, the wealth divide actually widened a bit over nearly a half century of what is commonly thought of as progress for African-Americans. 



<h3>44.3%</h3>



That’s how much the median net worth of black families fell between 2007 and 2013, reflecting lingering damage from the Great Recession. White families experienced a smaller, though still substantial, drop in median net worth of 26%.&nbsp;



<h3>40%</h3>



That’s how much less likely black families are to&nbsp;<a href="https://www.census.gov/housing/hvs/files/currenthvspress.pdf" target="_blank" rel="noreferrer noopener">own their homes</a>&nbsp;than white families, according to the Census Bureau.&nbsp;



<h3>28%</h3>



That’s the portion of black homeowners who didn’t pay or deferred their mortgage payment in May, during the depths of the covid-19 crisis, compared with just 9% for white homeowners, according to the Urban Institute’s&nbsp;<a href="https://www.urban.org/urban-wire/new-data-suggest-covid-19-widening-housing-disparities-race-and-income" target="_blank" rel="noreferrer noopener">analysis</a>&nbsp;of the Census Bureau’s Household Pulse Survey .&nbsp;



<h3>36%</h3>



That’s the percentage of black respondents who said they had money in the stock market, according to a&nbsp;<a href="https://news.gallup.com/poll/211052/stock-ownership-down-among-older-higher-income.aspx" target="_blank" rel="noreferrer noopener">2017 Gallup poll</a>. The rate was 60% for white respondents. Investing in the stock market is one of many ways families compound their wealth.&nbsp;



<h3>46%</h3>



According to a&nbsp;<a href="https://crr.bc.edu/working-papers/measuring-racial-ethnic-retirement-wealth-inequality/" target="_blank" rel="noreferrer noopener">study</a>&nbsp;from Boston College’s Center for Retirement research, the typical black household had just 46% of the retirement wealth of a typical white household in 2016. The study notes that the gap would be much larger if it weren’t for the value of Social Security benefits households have earned and are expected to receive.



<h3>2 out of 5</h3>



That’s the share of black small businesses that were forced to close down in April because of the pandemic, <a rel="noreferrer noopener" href="https://siepr.stanford.edu/sites/default/files/publications/20-022.pdf" target="_blank">according to</a> University of California, Santa Cruz economist Robert Fairlie. Among white businesses, just 1 out of 5 was forced to close.



&#8211;<a href="https://www.forbes.com/sites/sarahhansen/">Sarah Hansen</a>, Forbes Staff, <a href="https://www.forbes.com/markets">Markets</a>

Miniature people standing on a pile of coins. A concept of income disparity.

Here’s What The Racial Wealth Gap In America Looks Like Today

IMG_6914 copy copy

Covid-19: Beyond The Lockdown: What Big Business Is Doing Now

Coronavirus has affected everyone in the UK, but not everyone has been affected in the same way.



This is starkly apparent when it comes to money. Eight million people are on furlough, receiving 80% of their normal pay from the government’s job retention scheme, while thousands more have been made redundant.



Many self-employed individuals and business owners are likewise under extreme financial pressure because of the lockdown.



But for others, the coronavirus has been a very different experience. Millions have been able to work from home on full pay but with significantly reduced outgoings – no commuting, no expensive coffees or sandwich shop lunches, no dry cleaning bills.



With shopping and entertainment options severely curtailed, general spending has dropping dramatically. According to pollsters YouGov, 1 in 6 people have been able to add to their savings, while 1 in 10 have managed to pay of their debts.



<figure class="wp-block-image size-large"><img decoding="async" loading="lazy" width="960" height="480" src="https://www.forbesafrica.com/wp-content/uploads/2020/05/960x0-1.jpg" alt="" class="wp-image-45517" srcset="https://cms.forbesafrica.com/wp-content/uploads/2020/05/960x0-1.jpg 960w, https://cms.forbesafrica.com/wp-content/uploads/2020/05/960x0-1-300x150.jpg 300w, https://cms.forbesafrica.com/wp-content/uploads/2020/05/960x0-1-600x300.jpg 600w, https://cms.forbesafrica.com/wp-content/uploads/2020/05/960x0-1-768x384.jpg 768w" sizes="(max-width: 960px) 100vw, 960px" /><figcaption>44% of respondents feel less secure about their financial situation   YOUGOV</figcaption></figure>



Perhaps not surprisingly, white collar professionals have been better able to improve their finances. Those in manual occupations are more likely to have continued going into work rather than working from home and enjoying the associated cost savings.



Worryingly, YouGov found that 36% of Britons have dipped into their savings to meet their bills during the pandemic, with 44% feeling less financially secure as a result of the crisis.



Additionally, 16% have reported that their debts have gone up, while over a third (35%) have reported that their incomes have decreased.



Government intervention



The financial situation for many people would undoubtedly have been worse had it not been for swift intervention by the government on an unprecedented scale.



The job retention scheme, originally due to run until the end of July, has been extended until the end of October – although from August employers will be expected to contribute towards the cost.



Businesses are also able to access a range of loans underwritten in full or in part by the government, including the&nbsp;<a href="https://www.forbes.com/sites/advisoruk/2020/05/04/how-to-contact-your-bank-for-bounce-back-loan-details/#11cce61b1f87">Bounce Back Loans Scheme</a>&nbsp;and the&nbsp;<a href="https://www.forbes.com/sites/advisoruk/2020/05/19/government-increases-loans-limit-refunds-sick-pay-as-jobs-data-triggers-gloomy-forecasts/#734d76484e4e">Coronavirus Large Business Interruption Loan Scheme</a>, where the maximum loan size was increased from £50 million to £200 million earlier this week.



Additional funding has also been made available to large corporations by the Bank of England.



Other government measures include the&nbsp;<a href="https://www.forbes.com/sites/advisoruk/2020/05/13/income-support-scheme-for-uk-self-employed-goes-live/#25de46e032b1">Self Employment Income Support Scheme</a>. However, at present, this only provides payments to cover the months of March, April and May, and there has been no suggestion that it will be extended in the same way as the job retention scheme.



Mortgage payments holiday



The government is planning to extend its&nbsp;<a href="https://www.forbes.com/sites/advisoruk/2020/05/22/fca-proposes-to-extend-access-to-mortgage-payment-holidays/#299ed5084c47">mortgage payments holiday initiative,</a>&nbsp;whereby banks and building societies are instructed to allow borrowers to miss repayments on the understanding they will make up the accrued capital and interest debt over the rest of their loan.



The scheme was originally due to run until 20 June 2020, but under propoals expected to be rubber-stamped this week, those who have already taken payment holidays will be able to apply for an extension of up to three months, while those who have not yet applied will be able to do so until 31 October 2020.



UK Finance, which represents lenders, says 1.82 million mortgages were subject to a payments holiday as of 20 May – roughly 1 in 6 of all mortgages.



The three-month payment holiday for credit cards and other credit-based products is under active review – we may hear more on that from the Financial Conduct Authority in the coming days.



Impact on motoring



One area of the economy that has seen a huge contraction is motoring, from car sales to fuel consumption.



The number of new car registrations collapsed in April, the first full month of the lockdown, falling 97.3% year on year, from 161,064 in 2019 to 4,321 in 2020.



The restrictions imposed by the lockdown inevitably led to most people driving less or not at all, which had a knock-on effect on sales of petrol. The reduction in supermarket pump prices to below £1 a litre earlier in May was a clear indicator that supply was well ahead of demand.



Research from Lloyds Bank suggests fuel spending in April was down 58%, while day-to-day commuting expenditure was 86% lower.



Online car retailer CarWow reckons more than two fifths of Britons have spent less than £10 on petrol during the last month, with a third purchasing no petrol at all.



Vix Leyton at CarWow, said: “After more than two months in lockdown, the idea of a regular petrol station top-up no doubt seems like a distant memory to the millions of British motorists who’ve not needed fuel &#8211; or perhaps even driven &#8211;&nbsp;for weeks.”



With some of the lockdown restrictions beginning to easy, Leyton suggests now might be a time to fill up: “For those wanting to take advantage of low pump prices, now is arguably the time to do so &#8211; providing you can do so safely &#8211;&nbsp;before lockdown measures are eased even further and long queues begin forming.”



Bike use &#8211; and thefts &#8211; on the up



Another effect of the lockdown has been an rise in the number of people cycling for their permitted daily exercise, but a consequence of this has been an increase in the number of bicycles being stolen.



David Fowkes of insurer Admiral said: “Several cycle retailers have reported that they’ve sold out of many models. We’ve seen a 46% increase in the number of bicycle theft claims over the last seven weeks compared with the same period in 2019. That’s incredible when you consider that overall theft claims have fallen during the lockdown as people have stayed at home, deterring burglars.”



Admiral won plaudits in April when it became the first UK insurer to give&nbsp;<a href="https://www.forbes.com/sites/advisoruk/2020/04/21/uk-car-insurer-admiral-announces-customers-refunds-and-support-for-key-workers/#d4367ac6af35">a cash rebate (£25)</a>&nbsp;to all its car insurance policyholders. Only LV has made a similar pro-active gesture, leading the Financial Conduct Authority to impose a&nbsp;<a href="https://www.forbes.com/sites/advisoruk/2020/05/14/fca-unveils-measures-to-help-insurance-policyholders-hit-by-covid-19/#76d28bd731e3">package of measures</a>&nbsp;that require insurance companies to provide support to customers in financial distress as a result of the pandemic.



Energy bills



With more people working from home and staying at home in line with government stipulations, there has been an increase in domestic energy consumption, with comparison site Compare the Market suggesting annual bills could rise by £400.



However, global demand for energy has reduced sharply, with factories and offices mothballed and travel services limited.



Stephen Murray, energy spokesperson at MoneySuperMarket, says cheaper domestic energy deals are available as a result:&nbsp;“A cocktail of factors have come together to make this is a great time to switch supplier.&nbsp;



“There’s been a major drop in the wholesale element of domestic energy prices of nearly 40%- something partly explained by oversupply in the market due to declining business energy usage as a result of the coronavirus crisis.”



As economies gradually emerge from lockdown and energy demand increases, there is likely to be an impact on prices in the opposite direction.



Tips to keep your finances in shape



Here’s a to-do list for anyone wanting to save money and get their finances in the best possible shape:



<ul><li>Compare energy prices:&nbsp;use a comparison site to see if you can save money by switching. If you’ve never switched or haven’t switched for two or three years, there are likely to be cheap fixed rate deals available</li><li>Talk to your insurer about saving money:&nbsp;the regulator has told car and home insurance companies to help customer whose finances have been harmed by coronavirus, but it’s up to you to contact them to discuss the options, such as reducing the estimated annual mileage on your car insurance and getting a premium refund</li><li>Don’t automatically renew insurance:&nbsp;whenever a car or home insurance policy comes up for renewal, run a quote on a comparison site to see if there’s a better deal out there</li><li>Get the best broadband deal:&nbsp;check you’re on the best deal, especially if you’re working from home or using streaming services more than usual. You need the best combination of speed, capacity, reliability and price. See if your existing service provider can improve its offer</li><li>Talk to your lender:&nbsp;if you have debt, such as a mortgage, personal loan, credit card balance or car finance, and you are struggling to meet your repayments, talk to your lender to see what options are open to you. Don’t be tempted simply to stop making payments as this will have a long-term effect on your financial record.</li></ul>



If you are in financial distress as a result of the pandemic, or it has made your situation worse, contact a debt charity such as <a rel="noreferrer noopener" href="https://www.nationaldebtline.org/" target="_blank">National Debtline</a> or <a rel="noreferrer noopener" href="https://www.stepchange.org/" target="_blank">Stepchange</a> for advice and support.



&#8211;<a href="https://www.forbes.com/sites/kevinpratt/">Kevin Pratt</a>, Forbes Staff, <a href="https://www.forbes.com/sites/advisoruk/">Advisor UK</a>



Contributor Group, <a href="https://www.forbes.com/personal-finance">Personal Finance</a>

Piggy bank, laptop, purse with money, coffee cup on wooden table top.

Finances And Coronavirus: Threats And Opportunities In Lockdown Era

Paul Cook, co-Managing Director of Silvertree Internet Holdings, the investment growth partner behind some of South Africa’s internet brands, on what startup companies must do to survive.

<h3>Resilience</h3>
There are many reasons why a business could fail within the first year. In some cases, the plan itself does not make sense and in some cases, it is the execution of it that fails. Whenever someone starts a business, they are often doing it out of a sense of personal passion or a sense of excitement and that can lead to overly optimistic projections, and we see this all the time.
There is always going to be a tough period during the first year or two when reality bites. It will happen in some way and it will happen in some form – there will be some piece of bad luck or a difficult time. It is at this time a real make-or-break situation happens.
If you have the right people around you, if you have the right personal resilience; that is what gets companies through.
If you don’t get past that point, the business fails. It is about resilience when you start a new company.
By definition, you don’t know what is going to happen…no matter how hard you plan for a new business, you will face unexpected events.
&nbsp;
<h3>Planning</h3>
Make sure that you are good for the good and bad times during your entrepreneurial journey.
Your family too should be ready for the good and bad times&#8230; Try and build the right partnerships earlier on. Make sure that your relationships with whoever might be funding you – if there is an external funder – is right.
<img decoding="async" loading="lazy" class="aligncenter wp-image-37233 size-large" src="https://www.forbesafrica.com/wp-content/uploads/2018/09/Paul-Cook-553-1024x682.jpg" alt="" width="740" height="493" srcset="https://cms.forbesafrica.com/wp-content/uploads/2018/09/Paul-Cook-553-1024x682.jpg 1024w, https://cms.forbesafrica.com/wp-content/uploads/2018/09/Paul-Cook-553-300x200.jpg 300w, https://cms.forbesafrica.com/wp-content/uploads/2018/09/Paul-Cook-553-600x400.jpg 600w, https://cms.forbesafrica.com/wp-content/uploads/2018/09/Paul-Cook-553-768x512.jpg 768w, https://cms.forbesafrica.com/wp-content/uploads/2018/09/Paul-Cook-553.jpg 1241w" sizes="(max-width: 740px) 100vw, 740px" />
<blockquote>&#8220;No matter how hard you plan for a new business, you will face unexpected events.&#8221;</blockquote>
<h3>Finances</h3>
You should not be seeking funding for its own sake. It is very seductive to suddenly have a lot of money in the bank. You can also fail if you don’t have money, but if you have too much money, then you are tempted to focus on the wrong Key Performance Indicators (KPIs). Your objective in a startup is not to raise money; it is not to build revenue for its own sake, it is to build a business.
A business requires cost-control and it requires good unit economics. The more money you have in the bank, the harder it is to focus on cost-control. What you will end up doing is build a business that keeps growing but could never make any money&#8230; Also, if you raise too much money as an entrepreneur, you will end up not taking as many good terms [in deals] as you can.
Have a clear mind about what you want to get out of an investment&#8230;If you have proven as much as you can with a certain amount of money, you will be able to invest in marketing, stocks etc., then that makes sense.
<h3>Communication</h3>
When you are at an early stage of your business and are less than 10 employees, typically, everybody is in, not because of the salary but because of their passion for the business. You need to be a team and everybody needs to be on the same page.The period when you grow, from 10 to 50 employees, then all of a sudden, that is no longer the case. That is an extremely dangerous time for many companies.
We have seen several companies not succeeding, and that is a very sad part of the journey. It is then that you need to think who your core management is, [and] who are staff who don’t necessarily need to know everything. But you can also go too far the other way. Everyone needs to know the broad outlines of your thinking; keep the message simple for your team.
<h3>Transparency</h3>
Be honest about where you need help and make sure your partners are able to help you on those topics. You should look at all the different [aspects] of your business.
<h3>Marketing and sales</h3>
Marketing and sales are absolutely vital, it is non-negotiable. But how you do it depends on your business. In some cases, it is going to be marketing and in some cases, it is going to be sales. So you need to work out the strategy and how it will be different as well.
<h3>Tips ForStartup Success</h3>
<ol>
<li>Build a business that can make money: We are very tempted to copy Silicon Valley’s approach where you come up with an idea and you work out how to make money at a later stage. That makes sense in Silicon Valley but it doesn’t make sense here [in Africa], because there isn’t that tonne of money that is going to postpone your day of reckoning…You need to have a revenue model and whatever you are selling needs to be a lot more than your cost price.</li>
<li>Find the right business partner: If you look for investment, make sure that you find the right partner whose incentives and offerings match your own, for now, and in the future.</li>
<li>Build resilience: Make sure you are ready for tough times because there will be tough times.</li>
</ol>

Work colleagues brainstorming in creative office

Why Most Startups Fail In The First Year

Ask someone for a large donation and the person is likely to balk. If considerate, a polite plea to mull it for a while might be made. Ask for something smaller, akin to pocket change, and there probably would not be much resistance to it. That is the underlying wisdom behind crowdfunding.
The network effect of the internet means small donations from a vast number of people can amount to a lot. Now imagine if, instead of a charitable course, the proposition is one of profit, naturally with some risk. It has the potential to attract many takers.
But how is that any different from the normal stock or bond issuance process? Do interested investors not similarly take as many units of a share or bond sale as they want or can afford? Well, crowdfunding avoids the regulators and transcends borders. Of course, these supposed advantages also come with risks. Even so, they provide an opportunity for small- and medium-sized enterprises (SMEs) to secure alternative sources of financing in difficult environments; especially in African countries where SMEs constitute more than 90% of businesses, according to the International Finance Corporation (IFC). SMEs also account for about 80% of employment in Africa. Top among their challenges is access to credit; which even when they are able to secure, is usually at exorbitant interest rates.
<a href="http://www.forbesafrica.com/investment-guide/2018/02/15/first-peace-progress/" target="_blank" rel="noopener">READ MORE: First Peace, Then Progress</a>
Crowdfunding, a form of so-called “alternative debt”, is just one of a few new approaches to financing SMEs. Asset-based finance is already widely used. Approaches other than the typical bank debt are beginning to be used, with fancy titles like hybrid instruments and equity instruments, albeit limitedly, according to a report by the Organisation for Economic Co-operation and Development (OECD).
Crowdfunding is different in that it is mostly project-focused, as opposed to financing the entire business. Although still mostly debt financing, equity type financing is beginning to evolve. Whether it is via donations, reward or sponsorship, pre-selling or pre-ordering, lending or equity, not needing an intermediary other than the platform through which the financing is facilitated is a key attraction. And potential returns to backers need not be financial. For the reward or sponshorship type, an acknowledgement, service or token of appreciation suffices.
As the name implies, investors who back a venture in the pre-selling or pre-ordering format sometimes expect no more than the product they backed before it gets to the mass market; and may be at a much lower price. In the lending format, it is the typical payment of interest and principal that one finds in other credit environments that prevails. Alternatively, the parties could agree to share revenue and thus partake in the risk of the venture. And the equity form is no more than the investors buying into the venture via shares.
Global crowdfunding financing was $34.4 billion in 2015 and more than 70% of it was through lending, according to a 2016 report by research firm Massolution. How much of this went to Africa? A paltry $24.2 million, which is less than 1%. Most crowdfunding financing still takes place in North America ($17.25 billion) and Europe ($6.48 billion); about 70% of the global total.
<a href="http://www.forbesafrica.com/investment-guide/2018/01/15/change-rules-rewarded/" target="_blank" rel="noopener">READ MORE: Change The Rules And Be Rewarded</a>
Since crowdfunding has so far been limited in Africa, what is the potential for indigenous platforms? A sense of this potential would first have to be inferred from current savings in African countries of about 15% of GDP, according to the International Monetary Fund (IMF). This is not ideal. What funds could potentially be put into such ventures are increasingly destined for ponzi-type schemes that offer ridiculously high returns. That is not to say there is no potential. In Nigeria recently, funds were successfully raised for the family of a deceased policeman via crowdfunding. But if the object is a business venture, without the sentimentality of a supposed noble cause, how easy would it be to similarly mobilize funds?
It seems the potential is limited – for now at least. &#8211; Written by Victor Mamora

Is Africa Ripe For Crowdfunding?

Forgive me for sounding like a crank, but it&#8217;s okay to totally ignore the Bitcoin rally.
Sure Bitcoin&#8217;s up over 1,400% this year (that&#8217;s as of the time I started typing) and its market capitalization now significantly exceeds that of <a href="https://www.forbes.com/companies/procter-gamble/" target="_blank" rel="noopener">Procter &amp; Gamble</a>, the best performing stock in <a href="https://www.forbes.com/sites/antoinegara/2017/09/19/boom-bust-bankruptcy-how-americas-biggest-companies-performed-in-forbes-first-100-years/#5a247baa612a" target="_blank" rel="noopener noreferrer">Forbes&#8217; first 100 years of existence</a>. Despite Bitcoin&#8217;s boom, the digital currency just doesn&#8217;t seem to have any impact on the important financial issues of the day, whether that&#8217;s saving, borrowing, or conducting everyday transactions.
If Bitcoin doesn&#8217;t influence how you save, how you borrow, or how you transact, then maybe there&#8217;s no point paying attention to its staggering rise in 2017. Now might be a good time to push against fears of missing out (FOMO) on the rally, with good reason.
Does Bitcoin really impact your portfolio or your financial plans? When it comes to retirement there are two major, trillion-dollar themes for savers. Nearly a decade after the financial crisis, Americans are returning to the stock market in droves, having been generally underinvested since the 2008 carnage and the market&#8217;s bottoming a year later. As people return to the market, they&#8217;re doing so using low-cost index mutual funds or exchange-traded funds, instead of high-priced managers. Broadly speaking, this a big positive.
After all, the stock market&#8217;s 10%-plus annualized total return over the past 100-years, and a less impressive 7% annual return since December 1997, is the growing bedrock of America&#8217;s retirement system. Big-data tools now show savers how they can plan their finances to meet retirement and other financial goals with a few mouse clicks. Innovations like target-date funds and <a href="http://www.forbes.com/etfs/" target="_blank" rel="noopener">ETFs</a> are creating new levels of precision when building these plans. All the while, fees are falling fast and Wall Street&#8217;s take is mired a steep decline. These trends are being driven by the BlackRocks, Vanguards and Fidelitys of the world, in addition to robo advisors such as Betterment and Wealthfront.
To all of this, Bitcoin is utterly non existent: It has no influence on stock market returns, it isn&#8217;t part of the fee-disruption equation, 401k plans tracking the S&amp;P 500 are doing just fine this year despite missing on &#8220;crypto&#8221;.
There&#8217;s talk of a stock market bubble with each new record high, but some of the fastest-rising companies on the S&amp;P 500, from <a href="https://www.forbes.com/companies/apple/" target="_blank" rel="noopener">Apple</a> to <a href="https://www.forbes.com/companies/facebook/" target="_blank" rel="noopener">Facebook</a> and Amazon, are luring the most careful investors like <a href="http://www.forbes.com/profile/warren-buffett/" target="_blank" rel="noopener">Warren Buffett</a> to Glen Kacher (<a href="https://www.forbes.com/sites/nathanvardi/2017/11/21/the-tiger-of-silicon-valley-glen-kachers-sizzling-hedge-fund/" target="_blank" rel="noopener noreferrer">read our exclusive profile</a>) and <a href="http://www.forbes.com/profile/stanley-druckenmiller/" target="_blank" rel="noopener">Stanley Druckenmiller</a> due to their fundamentals. We&#8217;ll hear from time-to-time about some <a href="https://www.forbes.com/sites/nathanvardi/2017/11/27/cryptocurrency-hedge-fund-fired-rogue-trader-amid-claims-of-incompetence/#7d651d693a82" target="_blank" rel="noopener noreferrer">hedge fund guy buying Bitcoin</a>, and I&#8217;ve even written <a href="https://www.forbes.com/sites/antoinegara/2017/07/18/the-unreformed-stock-picker-without-a-boss-bill-miller-is-betting-on-amazon-bitcoin-and-bob-dylan/#7646ff3549f8" target="_blank" rel="noopener noreferrer">a story or two about the newest</a> Bitcoin bull, but generally the smart money remains in non-crypto assets.
The S&amp;P 500 trades at a price of 25-times earnings and it carries a dividend yield of about 2%; it&#8217;s not cheap by historical standards but anyone who entered the market in the early 1960s at a similarly expensive valuation and stuck with their plans through good and bad times would likely be enjoying a bountiful retirement. At Forbes&#8217; 100th birthday party, <a href="https://www.forbes.com/sites/antoinegara/2017/09/20/dow-1000000-thats-warren-buffetts-latest-call/" target="_blank" rel="noopener noreferrer">Buffett predicted the Dow will exceed $1,000,000 by the time we turn 200</a>, and that&#8217;s possibly the safest prediction he&#8217;s ever offered.
<a href="http://www.forbesafrica.com/cover-story/2017/09/04/bitcoin-blockchain-billions/" target="_blank" rel="noopener">READ MORE: Bitcoin, Blockchain And Billions</a>
The same theme emerges in the big-short and long-term financial moves people have to make in their lives, for instance borrowing to buy a home, finance an education, or in making slightly smaller auto and big-ticket consumer purchases.
These can be major decisions and the current landscape is marked by plenty of &#8220;disruption&#8221;. Virtually all of it is coming from fintech startups, not cryptocurrencies and their attendant networks. Digital-first companies are becoming mainstays in America&#8217;s largest lending markets; competition is increasing, risk assessments are improving, transparency and seamlessness is rising, consumer costs are broadly plunging.
After all, it&#8217;s a new crop of companies like  <a href="https://www.forbes.com/companies/quicken-loans/" target="_blank" rel="noopener">Quicken Loans</a>, SoFi, GreenSky, Credit Karma, LendingClub that are transforming the way everything from a home loan to a college education or pile of credit card debt is handled. Improving credit access is still one of the big non partisan topics of discussion in America and waves of novel solutions are emerging. Entire financing markets, from clean software interfaces originating loans all the way to new securitization markets to distribute debt to institutional investors have emerged in recent years. Bitcoin is nowhere to be found.
Even in payments and other basic transactions, there&#8217;s a growing menu of digital-first options that casts into question whether cryptocurrencies and their associated networks are actually that relevant.
When it comes to electronic payments, it is still <a href="https://www.forbes.com/companies/visa/" target="_blank" rel="noopener">Visa</a> and MasterCard who are winning on a dollar basis. Payment volumes at Visa increased 41% in 2017 to $7.3 trillion, at MasterCard volumes rose 10% to $1.4 trillion last quarter. Cryptocurrencies seek to disrupt these networks, offering no-cost transactions, but the day-to-day flow of money seems to be falling to the incumbents and it is disrupting the use of cash.
<a href="http://www.forbesafrica.com/focus/2017/10/26/will-battle-soul-bitcoin-destroy/" target="_blank" rel="noopener">READ MORE: Will This Battle For The Soul Of Bitcoin Destroy It?</a>
Meanwhile, the market isn&#8217;t static. PayPal&#8217;s Venmo has made person-to-person payments cost free and utterly seamless, like a social network of money. Small businesses are gaining new options; <a href="https://www.forbes.com/companies/square/" target="_blank" rel="noopener">Square</a> recently reported a 31% quarterly increase in payment volumes as it offers merchant sellers access to better and lower cost transaction networks. The world&#8217;s most valuable private financial technology company is <a href="https://www.forbes.com/companies/stripe/" target="_blank" rel="noopener">Stripe</a> , another distruptor in e-commerce and payments.
Behind all of this, it must be said, is the rule of law.
If you get screwed you may have your day in court. Some entities are bound by investor protections and fiduciary standards. Depending on what&#8217;s being done, there&#8217;s also careful assessments of credit risk, identity, and the like. Yes these entrenched systems are the establishment, but that&#8217;s a major advantage.
Of course, cryptocurrencies like Bitcoin and their associated networks promise to disrupt it all. It is presented as potentially a new way to raise capital (goodbye Goldman bankers), a new peer-to-peer sharing tool for everything from data to real estate deals, a cheap alternative to transactions (sorry, greedy MasterCard), and even a novel take on the concept of currency itself. Some view Bitcoin as a store of value like gold, or a slightly damaged and possibly fake Leonardo Da Vinci painting. Others view it as part a sort of new world order liberated from tax authorities, governments, and money-printing central banks. Maybe it is the 2017 fear and volatility trade since the Cboe VIX index remains in single digits despite a profusion of global risk?
Everyday, price graphs that resemble the textbook definition of every bubble ever in history are bandied about as evidence of Bitcoin&#8217;s validity. Judging by the relentless and inexplicable gains, there are likely new converts to Bitcoin by the minute, or hour. The price rise may also cause skeptics to dig their heels further, increasing their bubble talk.
There&#8217;s another, possibly better option: You can simply stick to your plans and ignore Bitcoin. &#8211; Written by <a href="https://www.forbes.com/sites/antoinegara/" target="_blank" rel="noopener" data-ga-track="contrib block byline">Antoine Gara</a>, FORBES STAFF

It’s Actually Okay To Completely Ignore Bitcoin’s 1,400% Rally

My guests in the office on a warm weekday afternoon in Johannesburg are two sisters, two entrepreneurs from Pretoria, bonded by business and blood.
As we settle for the interview, Zahra Rawjee, the older sister, speaks with a firm voice while Nadia comes across as more bubbly.
The two were raised in a business family, but are now CEOs of a company they both created ground-up. In 1937, their grandfather had set up a food distribution business, a small shop called Hoxies in Marabastad in South Africa’s capital city Pretoria, then passed on to their father, Karim Rawjee.
As young girls, during school vacations, Zahra and Nadia spent most of their time at the shop packing and selling goods, even fish. It was expected of them to be fully involved in the business.
In their growing years, they would prepare weekly reports for their father on where the markets were sitting, and what was happening in the food business internationally.
“Every single Monday, we had a report that had to go into the executive meeting at my dad’s distribution company. Come hell or high water, that report was put in. Through that we learned business development, market research and international markets,” says Nadia.
While at varsity, the pair decided to venture into business and met their first business partners; they were friends, Siphokazi Majola and Mantsadi Mokoane.
The four started SAMAZANA in 2008 developing products and mobile applications for the 2010 World Cup aiming to help people get around using Unstructured Supplementary Service Data (USSD) because apps were not around at the time. Due to differences, the business dissolved.
After varsity, Zahra headed to Portugal, the country of her birth, while Nadia stayed on to look after the family business full-time. Zahra searched for business opportunities in Portugal but it was 2008, and the global financial crisis was just unraveling.
She spent two years there, returned to South Africa and immersed herself in the family business again looking to expand and diversify. The two sisters took over sales and procurement.
“We started identifying that there were issues with the family business because it had been passed on to management. We saw that things weren’t going well, people were taking liberties. We had to get involved to try turn the business around. We weren’t able to, we got involved too late, and end of 2012, unfortunately, we had to close the business,” say the sisters, who were in their mid-20s and couldn’t turn around the 75-year-old company.
“We were too young and too female, our gender did play against us,” says Nadia.
The sisters had to think of something else, and look into possible sources of funding. That is how they got to understanding the landscape around business development in South Africa through such institutions as the Department of Trade and Industry and Industrial Development Corporation.
With the experience the two gained from SAMAZANA, Hoxies and armed with their passion for small businesses, they decided to create a niche firm focusing on helping businesses access developmental finance. Uzenzele Holdings was born.
“We facilitate access to funding. We help businesses understand what they need funding for. We analyze needs of the business and match that with funding available,” says Nadia.
The sisters had failed to resurrect their family business, but didn’t let setbacks get in the way of their resolve to help small and medium enterprises move on – just like they did.

Blood, Setbacks And Tears

It is a hot, windy summer’s day in Road Port, Harare. A Coca-Cola can blows merrily down the street. The can has freedom many others here envy. This place is seized by an oppressive gloom. It is filled by a crowd of people pushing, shoving, shouting, buying and selling. There is dirty water flowing down the street and litter fills the potholes. Yet, this grubby place is seeing more trade than Zimbabwe’s biggest banks. Here, the black market is king and the new bond notes are pawns that can be sacrificed.
“The bond notes came recently and we are business people so we have already seen an opportunity to make a bit of money. We don’t see bond notes as having any sort of value, if you have 100 bond notes, I will give you US$70,” says Tapiwa Makoni, an informal money trader.
The Reserve Bank may say bond notes are 1:1 to the US dollar; the free market says no.
“People are already getting desperate for US dollars, especially when they are traveling out of the country. They are happy to get any real currency from us at whatever rate,” he says.
It all began in May, when the Reserve Bank Governor, John Mangudya, announced the bond note. Mangudya argued the notes would ease the cash crisis that saw the US dollar become scarce. It was going to come in gradually.
“The Reserve Bank has established a US$200 million foreign exchange and export incentive facility which is supported by the African Export-Import Bank to provide cushion on the high demand for foreign exchange and to provide an incentive facility of 5 percent on all foreign exchange receipts, including tobacco and gold sale proceeds,” says Mangudya.
The bond notes don’t seem to be helping much; as they too are restricted. The withdrawal limit of bond notes is $50 per day and a $150 per week.
Despite the introduction of the bond notes – that were touted by authorities as a solution to the liquidity crisis – there seems to be little improvement.
“There is a shortage of bond notes and there seems to be less US dollars on the streets. We used to get US$100 a day, but now my bank gave me only US$50 and 25 bond notes. The money is not enough because I need cash for my buying and selling business,” says a Harare trader who refused to be named.
Neville Mandimika, Africa Strategist at Rand Merchant Bank, says the bond notes are non-convertible.
“It is by decree that it is 1:1. The problem we are facing now is that because of the misunderstanding, fear and mistrust currently circulating in the economy, the US dollar is beginning to trade against itself because actual cash is more valuable than money in the bank because of the cash shortages. So [1:1] is of theoretical value but on the street, the market is saying otherwise,” says Mandimika.
According to Mandimika, the panic and kneejerk reaction has seen people holding on to their US dollars and moving it out of the country, which mitigates against the cash crisis being eased.
“That’s why the campaign by the authorities has been to reassure the market that this is not a fully-fledged return of the Zimbabwe dollar… The bond notes will spur inflation but not hyperinflation; at least we are not there yet… Everyone is trying to adjust.”
People have to adjust to it. If you have banked money in US dollars, you may get it in bond notes. This is not a currency and can’t be traded for another currency. Mandimika says Zimbabwe is likely to continue decelerating on a multi-quarter basis because of the debilitating liquidity crisis that continues to grip it.
“The continuation of the liquidity crunch has fueled the rise of the parallel market (US dollars are trading at a premium to the bond notes) which will likely add to the inflationary pressures. Although the latest inflation prints (November 2016), shows the year-on-year figure is still negative but month-on-month numbers suggests renewed inflationary pressure. This will likely be the trend for this year in the absence of a more permanent solution to the liquidity crisis,” he says.
It means the bond notes have been met with mounting anger and questions of legality. The city is full of protest banners mounted on brick walls, advertising billboards have #NoToBondNotes plastered all over them. Peaceful protesters are thrown into jail. One of them was Fadzayi Mahere, an advocate of the High Court and Supreme Court of Zimbabwe.
“Peaceful demonstrations are a constitutional right under Section 59. A demonstration had been organized by another entity, we believed in the cause. Unfortunately the organizers got abducted so the demonstration couldn’t happen,” says Mahere.
Once Mahere and her friends got news of the abduction, they decided to sit peacefully in the park. A handful of police came and ordered her and seven others into police vehicles.
“[Our rights weren’t read to us] in fact, we weren’t informed of the charges we were facing at that time. As citizens we are required by the law not to resist arrest so we went with them to the police station&#8230; We weren’t told about what charges we were facing until later on in the evening. We were asked to pay an admission of guilt fine and as a matter of principle, I was not prepared to admit guilt… the charges we were faced with were unfounded and trumped up,” says Mahere.
This meant spending the night in a filthy cell at the Harare Central Police Station. The tiny cell is cold and dark. There are no mattresses and blankets are infested with insects. The toilet is broken and water and urine floods the floor where some have to sleep, and no sanitary towels available.
“This is degrading to anyone. No one should be subjected to such conditions, even if you are held in cells pending trial. It was a long night. I am grateful I was in a group so there were moments of humour,” she says.
Mahere says, as unlawful as their arrest was, so are the bond notes. She says the term “bond note” is not defined anywhere in the Reserve Bank Act or the Banking Act.
“Bond note is not a term of conventional economics but an invention on the part of the Governor. It is clear that the law does not empower the Governor to create this, with respect, fictitious money,” says Mahere.
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However, Patrick Chinamasa, Minister of Finance and Economic Development, argues, in a statement, that under existing legislation, the Reserve Bank of Zimbabwe has the power to issue bond notes.
“I need to highlight that under existing legislation the Reserve Bank of Zimbabwe has power to issue Bond Notes in terms of the provisions of Section 7 of the Reserve Bank of Zimbabwe Act Chapter (22:15). The Export Incentive Scheme could also have been introduced through Section 2 of the Exchange Control Act (Chapter 22:05) which empowers the President to make regulations relating directly or indirectly to exchange transactions and the control of imports into and exports from Zimbabwe, and payments,” says Chinamasa.
Mahere, however, argues that the Reserve Bank Act authorizes issuing Reserve Bank vouchers, not bond notes, when there is a shortage of currency of any denomination to pay civil servants or employees of the state.
“The shortage must be shown to require urgent action in the interests of public order or the economic interests of the state. The justification given by the Governor for the creation of bond notes is, therefore, inconsistent with section 42B of the Reserve Bank Act. The Governor’s justification for the curious move relates to foreign exchange stabilization and an unsatisfactory attempt to ease the cash crisis.”
“Within a few months, because we are such an import driven economy, when people are trying to replenish their stock, we will see what happens, we will see what our government does when it has the scope of printing money. We have seen that in 2008,” she says.
Mahere adds that her problem is not the bond note itself but the refusal by government to address issues at their root and attend to the fundamental causes to economic problems in Zimbabwe.
According to the Reserve Bank, the Retailers Association of Zimbabwe, fuel companies, representatives of the various business associations and the Consumer Council of Zimbabwe agreed on the use of bond notes as a medium of exchange in the country. Most traders are accepting the bond notes but worry about their future.
“I hope this will not be a repeat of 2008 where government will start printing money that is actually worthless. I have to buy my stock in South Africa because no company makes the hardware I sell here. I heard some petrol stations are already rejecting it,” says Clive Moyo, a cabinet and coffin handle trader.
The argument goes on. What is clear is people are buying and selling pieces of paper they aren’t sure about.

It Is Bond Belief

11r the past few years, Kenya has witnessed considerable growth in Shariah-compliant products, a sign of the vast potential of Islamic finance in Kenya. The country now boasts two fully fledged Islamic banks, one fully fledged insurance provider (Takaful), one Islamic fund manager and one approved Collective Investment Scheme (CIS). For all this, as at December 2014, the Global Islamic Finance Report (GIFR), the developers and publishers of the Islamic Finance Country Index (IFCI), an indicator of developments in Islamic financial services, ranked Kenya 22nd globally and third in Africa behind Sudan and Egypt, but ahead of South Africa, Tunisia, Algeria, Nigeria, Senegal and the Gambia.
According to the IMF’s Islamic Finance: Opportunities, Challenges and Policy Options, Kenya is poised to see further contributions in at least three dimensions: greater financial inclusion, especially of large underserved Muslim populations; greater support for small and medium-sized enterprises (SME), due to its risk-sharing features; and the lowering of systemic risk, owing to its prohibition of speculation – a major risk for conventional finance. Clearly, the decision to amend the Central Bank Act, allowing the monetary authority to recognize the payment of profits based on income from underlying assets rather than interest on government securities, thereby opening up the spectrum of Sharia-compliant investments, was a sound one.
Kenya is now gearing up to issue its eagerly-awaited Sukuk (Islamic bond) in the 2016/2017 fiscal year, hoping to limit domestic borrowing and increase funding for mega infrastructure projects. The government appears to be following in the footsteps of Senegal and South Africa, both of which managed to raise $200 million and $500 million respectively through Sukuks. Countries and companies raise $100 billion globally every year through Sukuks, with African countries accounting for just 1% of the issues. The planned sovereign issue is also set to pave the way for the private sector and further development of Kenya’s capital markets.
From a sovereign perspective, through Islamic bonds, the Kenyan government will able to access a new investor base. According to a report by Standard &amp; Poor’s (S&amp;P), the Islamic Sukuk investor base is estimated to be over $500 billion, excluding sovereign wealth funds, official investors (central banks and multilateral organizations), and other conventional investors. Essentially, the move will tap into a vast pool of Persian wealth.
Sukuk bonds are known to offer more favorable repayment terms than conventional bonds and therefore attract infrastructure financing. It’s also worth noting that investors from the Middle East accounted for only 2% of Kenya’s debut Eurobond. The planned Shariah-compliant bond should see a ramp up in participation.
Individual investors in the country are also set to benefit immensely as Shariah-compliant products are not restricted to Muslims. What is also vital, perhaps due to its unique qualities, is that Islamic finance has become a good vehicle to diversify risk away from traditional asset classes. It is noted that Sukuk bonds and other financial instruments avoided many of the most severe consequences of the recent financial crisis because they were underpinned by equity, as opposed to debt. For instance, while the S&amp;P 500 dropped 64%, Shariah-compliant indices lost no more than 53% and showed lower volatility, according to KPMG’s report, Islamic finance: From niche to mainstream.
Although Islamic finance has already taken off, there are some challenges facing the niche market. In January, the first International Islamic Finance Conference of Africa was held in Nairobi. It highlighted issues around regulations, investor education, compliance, and the limited range of available products and services. Kenya needs to deal with these challenges to see a smooth increase in Islamic financial products in its financial markets.
As the country positions itself as a financial and investment hub to tap into the growing capital inflows into Africa, it is important to celebrate the milestones achieved so far while working to improve further. With Islamic finance set to grow to $3 trillion within the next decade, according to S&amp;P’s report: Islamic Finance To Still Grow In 2016 But With A Sag, rising popularity of Shariah-compliant products in Kenya will surely contribute to the country’s growth story.

Islamic Finance On  The Rise In Africa

With the range of investment options available for the individual investor, it can be difficult to determine which investment is right for you. With stock markets up one day and down the next, many investors face the dilemma of whether to invest directly in stocks or to use mutual funds as their investment tool. In order to decide which approach best meets your needs, it is important to consider the pros and cons of each.
The solution will vary from person to person, depending on how much risk you are comfortable with, how much money you have to invest, how knowledgeable you are about financial matters and how much time and effort you are willing and able to devote to this task.
Do you have the knowledge, time or inclination to build your portfolio and monitor your investments yourself? Mutual funds are managed by experienced professionals who are well acquainted with the risks and opportunities that come with investing; they will make the day-to-day, buy and sell decisions about which stocks, bonds, or other securities to invest in, thus relieving the investor of that responsibility. As with all investments, mutual funds will not perform to expectations all the time. To have the best chance of success, it is important to select a fund manager with a quality management team and a good track record, but even then, only a few funds will consistently outperform the market.
If you decide to buy stocks on your own, you will have more control over your investing. It is important to make a realistic assessment of your ability to handle that responsibility as you will also have to devote more time and attention to your investments.
You should have a sense of how to analyze a company to be able to arrive at your own independent judgment of its value and how that compares to its current market price. You should certainly be prepared to spend time reviewing your portfolio periodically. The alternative is to manage your own portfolio of individual stocks and bonds. If you do not have the knowledge, experience or inclination then this is may not be a good idea.
Do you have enough money to be able to create a diversified portfolio? How much do you have to invest? Mutual funds offer a clear opportunity for smaller investors who do not have a lot of money to invest.
Mutual funds can reach a wider diversification than can be reached by individual stocks. Dividing up your funds among a few stocks isn’t usually enough to cushion you against a severe market downturn but by pooling several stocks as an equity fund does, the risk of loss in investing is reduced. If one company or sector performs badly, it tends to be balanced by other companies that may be recording better performance.
There are different types of mutual funds to choose from including money market funds, bond funds and equity funds to suit different objectives. It is important to note however, that individual stocks tend to have a greater potential upside than most mutual funds; as with all investing, you trade some risk for greater potential reward.
Mutual funds are considered to be among the most liquid investments. As shares in a mutual fund can be bought and sold any business day, it is easy for investors to have access to their money, as the fund is always available to buy its own shares. When you invest in individual stocks, you have to wait for a broker to find a buyer for your shares; this could take several days or longer particularly if the stock is not widely traded.
The overarching consideration must be to adopt a long-term investment strategy and to ensure that a diversified portfolio is built with clear financial goals and objectives in mind.

Mutual Funds Or Stocks?

When I meet Julian Kyula in his office at the penthouse of the International Life House, smack in the middle of the bustling Nairobi central business district, I cannot make up my mind whether I should address him as pastor or by his surname because rarely do you meet a church minister who doubles up as a shrewd businessman.
Obviously exhausted after a long flight from New York, Kyula tells me he needs to beat the annoying Nairobi traffic jam to be home with his family in around an hour, so we get down to our interview.
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In the world of mobile commerce Julian Kyula needs no introduction, he is the co-founder and CEO of MoDe, a company he describes as disruptive by nature. MoDe is a nano-finance company that lends credit, as low as 50 cents, profitably through mobile phones.
“When you are in need of cash at 3AM and you cannot access the ATM, or you run out of internet bundles somewhere in Africa, or want a bus coupon or need to buy a day’s worth of electricity in a prepaid facility, that is when MoDE steps in,” he says.
For a company in its third year of existence, having successfully completed its first financial transaction in September of 2010, MoDe has done admirably in the mobile money arena. By June this year, the company was handling 500 million transactions, each ranging from 50 cents to $10 and serving 105 million customers across the 17 African countries it operates in and recording over $750 million in sales revenue since its inception. MoDe is also making inroads in the Asian markets, making it among the top global FinTech companies.
“We have opened new offices in Delhi and Mumbai and we plan to go for the American market by opening offices in the United States in 2014,” says Kyula.
“We believe we are at the forefront of building one of the largest FinTech businesses globally and what is so exciting is that the next big thing is coming from Africa. This will boost our efforts as we seek to deepen partnerships with the United States and Europe as we chase for opportunities in that market,” he says, struggling to hide the smile on his face.
MoDe has partnered with the giant mobile telephony service provider Airtel group, and MTN in the African market, with intentions to hit 13 more markets before the end of the year.
Whenever conversations about the African telecoms sector are held, Kenya always features largely due to the success of M-Pesa, the mobile money transfer system. However, the Kenyan telecoms sector is one that has evolved faster than the legislation designed to regulate it and Kyula knows this too well, observing that when he started there were all kinds of licenses required by the government, most of which were unnecessary.
“Legislation should enable business, it shouldn’t be an impediment,” he says.
Getting over the challenge of cumbersome regulations was the first hurdle in Kyula’s quest at providing nano-finance. Next was to convince a mobile service provider with a significant subscriber base to take a chance on a little-known outfit.
Airtel was an obvious choice for Kyula despite it being the second largest service provider in Kenya after the dominant Vodafone powered Safaricom. Airtel has an impressive subscriber base in West and Central Africa and it has a footprint in India and other emerging markets, exactly what Kyula was looking for.
“If you want to build something that is global you must work with a partner who can take you outside the continent and Airtel was willing to do that for us,” he says.
Looking at the dynamic nature of mobile money innovations in the recent past, one would wonder just how relevant a company like MoDe will be in the next five to ten years.
“We do understand that problems surrounding the access of credit in Kenya, Singapore, Vietnam or America are similar and we are preparing ourselves by spreading our geographical risk by being in as many markets as possible.’’
Kyula’s strategy seems to be working for the company.
“Look, when you stop innovating you begin to die,” he says as he moves towards a trophy the company won at the IBM global entrepreneurs award.
In 2012, Kyula was IBM’s Africa Entrepreneur of The Year, the IBM Latin America Entrepreneur of the Year as well as the recipient of the African Leadership Network Of Top 12 Companies.
Kyula’s share in MoDe stands at around $85 million, however, his total investment portfolio and companies in agriculture, equity investment, and real estate seated on his firm Kyula Holdings, give him a total net worth of $115 million.
So when Kyula, or Coach as he is fondly referred to by his employees, is not jumping into planes to close deals halfway across the world he is busy preaching at his local church called The Purpose Centre. One would wonder how he is able to balance both worlds.
As opposed to a businessman who moonlights as a pastor, Kyula claims to be a pastor who moonlights as a businessman. He insists that church and business are two worlds that can complement each other if the right balance is achieved.
“My best decision and my worst mistake is failure. I was naïve when I was much younger to think that when you are upset with someone you go ahead and compete with him,” explains Kyula.
“There is no better school than failure, you just have to pick up the pieces, take time to recover, reassess, reconfigure, rest and revive. These are my five ‘R’s of life.’’
For an entrepreneur who has experienced significant success and wealth, you may wonder what is left on Kyula’s bucket list.
“The one thing that I want to be able to achieve is to shift the dimension of how we look at those at the bottom of the pyramid. I would like to innovate something that shakes the way businesses look at people that are underprivileged. I want to be able, in my lifetime, to have a million children in Africa going to school because I lived,” he declares.
To this I say amen.

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