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How AI Is Supercharging Financial Fraud–And Making It Harder To Spot

Forbes2021-86

Nigeria’s Fintech Frenzy: Onwards And Upwards

Over the past decade, Kenya has taken considerable steps towards deepening financial inclusion. This is reflected in the 2016 FinAccess Household Survey which shows that slightly more than three-quarters of Kenyans are now formally included by the financial system, which is a 50% increase over the past 10 years.
According to the report, the percentage of Kenyans relying on informal services providers decreased from 32.11% in 2006 to 7.2% in 2015. Thanks to technology, 18% of Kenyans now use new mobile banking services such as M-Shwari and M-Pesa, a scenario that has pushed the proportion of bank account users to 38%, up 10% from 2013, while traditional bank accounts have decreased.
Despite the significant progress seen towards enhancing financial inclusion, there is much less success in the use of investment products, such as shares, mutual funds and treasuries. The study showed that the use of investment products decreased to 10.6% in 2016 compared to 11.6% in 2013. Findings by the same survey also revealed that the number of Kenyans familiar with the Nairobi Securities Exchange (NSE) stood at only 38%. It seems that a lack of awareness could be why less than 30% of daily market transactions at the NSE are attributed to local individual investors.
But there is hope. Mobile phone platforms are being used to increase awareness and participation. Data shows that 26% of Kenya’s adult population own a smartphone or other smart devices. The uptake of mobile banking services has led to an increase in the banks’ penetration in the past 10 years, from 14% in 2006 to 38.4% in 2015. Investment managers, stockbrokers and insurance companies will also be buoyed by market studies that show that 71% of the population uses financial services provided by mobile financial service providers. This is a clear sign that mobile phones are the best way to encourage investments.
In light of this, the Kenyan government is launching the mobile-traded government security, M-Akiba. Kenyans with as little as $30 will be able to bid for the upcoming five-year income tax-free bond using their M-Pesa accounts. Investors will rejoice; M-Akiba returns are expected to be better than the current fixed deposit rates and most money market accounts. Stockbrokers have not been left behind either – at least three of them have recently launched mobile apps aimed at retail investors looking to buy shares, monitor their portfolio holdings and check account balances via their mobile phones.
But, the road ahead is not without obstacles. One is the low incomes among Kenyans. According to household survey, 75% of adults earn less than $150 per month. This may hinder most Kenyans from taking up financial products. A lack of trust among women towards formal financial institution is another major challenge. According to the latest quarterly report by the Capital Markets Authority (CMA), women account for merely a third of the total number of investors. Low levels of education in the country are also an issue, with 60% of the population not completing a secondary level of education. With this in mind, it could be daunting when it comes to selling sophisticated financial products, such as derivatives and exchanged traded funds. Even among the educated, stakeholders will have to fight to shake off the persistent fascination with real estate.
At least Kenya is showing resolve to deal with the challenges. There is a big chance to make real changes to how people invest; all that is needed is a phone.

More Phones more finance

Exchange-traded funds (ETFs) are one of the greatest financial innovations in recent years. ETFs, which are essentially investment funds traded like other securities on securities exchange, much like stocks, have enjoyed remarkable success since being introduced in the 1980s. The global ETF industry, and its related products, is now estimated to have assets worth $2.6 trillion listed on 61 exchanges. Not to be left behind, Africa has steadily been growing its share in this burgeoning industry. Currently, there are six nations offering ETFs: South Africa, Botswana, Ghana, Nigeria, Egypt and Namibia. South Africa, a long-time leader in this area, has 34 ETFs ranging from those based on indexes to those based on commodities.
Kenya, through the Nairobi Securities Exchange (NSE), is seeking to become the latest entrant. In a bid to raise its profile, the Capital Markets Authority (CMA) of Kenya has been planning to launch the new product since July 2013. Partly aimed at attracting foreign investors, the expected launch comes at a time when the local equity market is increasingly attracting international investor interest. As the global markets become increasingly correlated, forcing portfolio managers around the world to become more familiar with frontier markets such as Kenya’s, it appears the new product is set to meet ready demand.
NSE’s Head of Market and Product Development, Donald Ouma, says that ETFs will be an affordable form of investment for retail investors as they give broad exposure to equities without having to spend a huge amount of cash. The new product promises to give investors the ability to track indices of various stocks spread out in various countries that would otherwise have been expensive or tricky to come by before.
Furthermore, ETFs are expected to improve liquidity of the overall market which currently spots turnover rates lower than 10%. The low fee structure also means benefits from the relatively lower expense ratios are passed to the investor. Locally, the average mutual fund charges an advertised management fee of 2%. The new product is also set to give easy access to alternative assets such as oil, gold and currencies. The latter could have come handy this year as the local currency lost nearly 5% of its value against the US dollar.
However, limited available exposure could leave potential growth opportunities out of reach of ETF investors. Since the NSE’s main index is still limited to a small number of stocks, ETF promoters may find it challenging to achieve a respectable scale. Another potential roadblock could be slow retail acceptance. According to the Ernst &amp; Young, EY Global ETF Survey: 2015 and beyond, outside the US, the ETF industry’s biggest long-term challenge is low retail adoption. With no way around this, acceptance by retail investors will certainly take time to realize despite huge potential for retail growth. Nevertheless, the benefits outweigh the challenges.
In the initial years, I see Kenya’s ETF industry dominated by very large funds and issuers such as the FTSE Group. The latter, which already has two off-shore NSE-based tradable indexes; FTSE NSE Kenya 15 Index and FTSE NSE 25 Index, plans to list its FTSE-based indexes. South African group, Absa Capital, is said to be in talks with CMA and NSE to list its gold-backed ETF, the New Gold ETF. More large-scale issuers are likely to enter the market. Ultimately, this will strengthen the industry’s outlook by giving investors a broader choice of ETF promoters and product range.
Moving forward, as the growing wave of international interest continues to focus on markets like Kenya, certain key factors will be crucial to ensure the success of the new industry; price transparency, education, investor engagement, patience, liquidity and technology. If ETFs are to fulfil their undoubted potential for long-term growth, all the stakeholders need to ensure that these building blocks are in place. If this happens, then NSE-listed ETFs could easily revolutionize the securities markets in the region.

Revolutionary  And Rewarding

The World Economic Forum (WEF) is the gold standard for every financial journalist. A long-haul flight from Johannesburg to Zurich and a short trainride later, we arrived in Davos, Switzerland, to the world’s biggest summit, ready to wire the views of influential business leaders to the world.
The big players of the global economy – from the deal-makers to the political powerhouses and movers and shakers – arrived in their smart suits to the summit’s alpine reaches, to discuss this year’s theme, A New Global Context. Here are some of the key takeaways from the Davos debates:
The European Central Bank’s bold announcement to pump in €60 billion in bonds every month to reignite growth took center stage. The world was officially in a new phase of global monetary policy divergence. The withdrawal of stimulus in the United States as the economy staggered back to its feet and this new development in Europe created interesting times for emerging markets.
In all our conversations with African leaders, what emerged was that despite the Ebola outbreak and terror attacks in some parts of the continent, Africa should still be every investor’s high-growth high-return destination. In fact, with the exception of the President of Guinea, African leaders dismissed both crises as inconsequential to Africa’s growth narrative. Displaying genius, the President of Guinea used his interview to bring the world in on the request he had made to Christine Lagarde, President of the International Monetary Fund: “Clear our debt so that we may have a fighting chance against Ebola.”
The small delegation from Nigeria, the continent’s biggest economy, did not go unnoticed. With an upcoming presidential election (mid-February), and in the midst of a tense domestic environment, this was somewhat understandable. What the forum lacked in Nigeria’s presence, South Africa more than made up for with a seven-member strong ministerial delegation. They were easily spotted in their long black coats and colorful flag-scarves. From the Finance Minister to the Governor of the Reserve Bank, the delegation put on a brave front tackling the energy crisis and lackluster take-off of the National Development Plan. The country’s public relations machine was spot on and it was evident members had clearly been put through their paces.
I couldn’t help but acknowledge that some of the delegates in attendance at Davos challenged my conventional definition of ‘world leaders’.
Also present were titans from the music world – from the legendary Andrea Bocelli to African songstress Angelique Kidjo and world-renowned hip hop producer Pharrel Williams. It was clear they were being recognized for their pulling power at such a forum.
Kidjo is credited with putting the African country of Benin on the map.
“If we want Africa to be top of mind for the world leaders here, Africans need to make Africa their priority,” she told me. Her passion for Africa’s development agenda pushed me to stretch my own perception of what leadership really is.
The small representation of women was difficult to ignore. One of this year’s co-chairs was Winfred Binyama, Executive Director, Oxfam. In an unapologetic, straight-talking style, she spoke about the world’s continued exclusion of women in positions of influence and power.
Binyama shared some of the highlights of Oxfam’s latest report saying it would take 80 years for women to balance the scales professionally with their male counterparts without the intervention of platforms like WEF.
I hope to return to Davos many more times. One can surely track at least this one indicator over a few years, but I certainly hope it’s not 80 years before we see that happening.

EBOLA. TERRORISM. SO WHAT? COME TO AFRICA

Since 1985, Africa’s growth has dipped below zero only twice – in 1991 and 1992. Over the past 10 to 15 years, the continent’s growth has been impressive, fueled by fast-paced urbanization, increasing political stability, connectivity, a youthful population and an expanding middle class.
Another contribution to its success is the emerging trend towards economic diversification. While in the past, Africa’s growth has been largely resource-dependent, the 2008 global financial crisis exposed the continent’s vulnerability to external economic shocks. Those economies largely dependent on the export of commodities were hardest hit.
The movement towards economic diversification has the potential to increase Africa’s resilience. It will also contribute to the continent’s development and ability to achieve sustainable, long-term economic growth.
Small, medium and micro enterprises (SMMEs) have played a critical role in the stability of economies on the continent. Overall, SMMEs account for 20% of Africa’s gross domestic product (GDP) and 50% of the continent’s jobs. In South Africa’s case, an estimated 2.8 million SMMEs contribute between 52% and 57% of GDP. They also provide about 61% of employment, according to official government figures.
However, the development of these budding areas of economic prosperity requires the combined efforts of African governments and the private sector.
“Finance is the number-one biggest constraint for businesses, particularly in Africa,” says Delphine Govender, co-founder of Perpetua Investment Managers. Finance is thus a very nece-ssary discussion to have. In Nigeria, for instance, the formal financial sector meets only 1% of business needs. In China and India, these percentages are above 20% and 30%, respectively.
There is no denying that Africa’s needs are great. But in addition to the construction of physical infrastructure, there is social infrastructure and business growth. Finding sound projects can be a challenge, Govender says. Investors require returns that commensurate with risk, and often, the challenge is not necessarily in financing the project, but in repaying that finance.
Brian Molefe, the chief executive officer (CEO) of South African rail and infrastructure company Transnet, believes “transformational leadership” is key to growth. He says leadership is about making bold and audacious decisions. And then acting on those decisions: “We’re good at talking, but we need to start doing.”
Furthermore, Africa’s leadership needs to decentralize and become more accessible. This is where social media platforms can play a role. In Rwanda, for example, the president and many politicians are active on Twitter, keeping the government accountable to ordinary citizens.
Admassu Tadesse, the CEO of the Burundi-headquartered Eastern and Southern African Trade and Development Bank, commonly known as the PTA Bank, says that leaders on the continent are under pressure to live up to expectations.
“We’ve done well but there is huge pent-up demand that needs to be dealt with, such as infrastructure. This is the challenge we face.”
Tadesse points out that Africa’s strong growth has also not translated into jobs, which is of major concern, given the millions of young people who enter the job market every year.
“Average growth rates of six percent are not sufficient. Rather, we should be targeting nine percent,” he says. Tadesse has also highlighted that African investment as a percentage of GDP at 22% still lags behind other regions, including Latin America at 32% and Asia at more than 40%. The solution, he argues, is to ensure that Africa’s growth becomes inclusive.
One of the key challenges African companies face is how best to take advantage of the continent’s status as the new economic frontier.
Opportunities abound in developing industries such information and communications technology (ICT) and energy. This is evident from the growing investment in alternative sources of power, such as nuclear, gas and renewable energy (hydro, wind and solar). Immense quantities of natural gas have been discovered in South Africa’s Karoo region. It has led to fierce public debate, weighing up the possible impact on the environment against potential job creation.
Organizations such as the International Finance Corporation, the World Bank’s private sector arm, are investing in the sector, particularly in energy efficiency and in renewable energy.
And the critical role that ICT is playing in transforming Africa by connecting businesses, citizens and governments cannot be undermined.
However, it is only through emphasizing intra-African trade that the continent’s growth and prosperity can be truly inclusive and sustainable.
The continent’s resources will not last forever, especially with a population that is expected to double in the next 30 years. This warrants more focus on diversifying economies, ensuring financial inclusion and emphasizing sustainable growth.
For Pravin Gordhan, South Africa’s finance minister, the solution lies in developing the kind of business models that will buffer the economy against further shocks. “Africa has come a long way in terms of reducing risk premiums… (But) we do have a perception deficit,” he points out.
The continent’s time has come, but success depends on the choices that African leaders make and the institutions they build.
The authors are media consultants. This article is based on discussions held at the Association of Black Securities and Investment Professionals conference in September.

Africa Rising How Africans can Dynamize the Continent

It’s 10AM on a Thursday on Victoria Island, Lagos; the pulse of the Nigerian financial world is racing. Blue-chip boardrooms buzz; so does the traffic. I’ve eased my way to the serene offices of a man who surveys it all from the 12th floor.
The view is framed by the Atlantic Ocean to the south and some of Nigeria’s richest buildings to the north. From his vantage point, Jim Ovia can pick out the twin pillars of his success. Across the city is the unmistakable red of Zenith Bank, where he made most of his $825-million fortune. Company insiders say that his wealth is nearer $1 billion after a string of lucrative deals this year. Also on the Lagos horizon are Visafone billboards, his telecommunications business and moneymaker, with a current subscriber base of  around 2.3 million.
Inside the huge office are shelves of plaques, awards and photographs of Ovia with Bill Clinton, Arnold Schwarzenegger and Goodluck Jonathan, alongside pieces of literature and art.
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Dressed in a well-cut suit, he greets me like an old friend. They call him ‘the godfather of Nigerian banking’ and in many ways, he is. Banking is where he began life as a clerk; it was also the vehicle that carried him to his fortune. He created West Africa’s largest financial services provider, according to market capitalization and assets.
Ovia transformed Zenith from a small commercial bank into a financial services conglomerate, with operations in private and retail banking and investments around the world. After nearly two decades at the helm he stepped down, but he remains its largest individual shareholder with a 15% stake in the company.
“When we started Zenith in 1990, it was extremely difficult as the necessary resources and infrastructure to do business, particularly banking, were not in place. There were no ATMs, no mobile phones and ICT was a rarely known concept in the business space,” he says.
“When, in 1990, banking licenses were being issued, indigenous private individuals were being offered the opportunity to set up financial institutions. Prior to that, you either needed to be a foreign global financial institution, or a federal or state government institution, to own or set up a bank in Nigeria. Businesses and entrepreneurs could not possibly get these licenses because of the prerequisites attached. It was perceived then, that Nigeria did not have the technical expertise to run or manage banks.”
A surge of liberalization soon changed this. On May 30, 1990, doors were opened for Ovia and 119 other hopefuls, who received their bank licenses. It was a long-awaited breakthrough. Ovia and his team got down to work quickly. They commenced operations on July 16 for what proved to be a rocky beginning, with technology very thin on the ground.
Improvisation was the way forward. Ovia had to be creative with the sparse telecommunications and financial services on offer. In time, with the help of improved infrastructure, the bank found its feet.
Ovia saw a silver lining, then noticed the cloud. The introduction of ATMs to Nigeria was not an easy one. It proved difficult to win over people who had grown up with counters and rubber stamps. People worried about fraud and it also took time and feasibility studies to decide where to place the ATMs. Ovia and his team persevered and Zenith blossomed.
Banking isn’t Ovia’s only game. He also owns an expansive real estate portfolio with landmark commercial and residential properties. These include the Civic Centre  and an exclusive boat club, Aquamarine in Lagos, where Africa’s richest man, Aliko Dangote, is a member. Ovia is known to have a weakness for expensive boats.
It is his infectious entrepreneurial passion that paid for this lifestyle.
“Your passions are always in sync with opportunities. You’re naturally able to identify them and respond to them as they materialize because of the passion you have for them,” he says.
It is an intuition that has driven Ovia through life as an entrepreneur. Choices came early for the young Ovia, who grew up one of many children in a large family in Akbor in Nigeria’s Delta State. As a young man, Ovia pondered what to study. He was encouraged by his uncles, who had run successful businesses, to pursue a qualification in business administration. To this day, for most Nigerian families, business administration, alongside medicine, law, accounting and engineering are the keys to success. Ovia went for it and enrolled for a degree in business administration at Southern University, Louisiana, in the States.
“It so happened that halfway through my studies, my keen interest in computer science and information technology was heightened… I couldn’t help it and decided to incorporate computer science into my program. One of my uncles advised me against this, as he reckoned that it was an immature industry at that point. Business administration was the way forward,” he says.
Ovia carried on regardless of avuncular warnings.
“Like any young man, I was full of hopes… [there were] tremendous opportunities in the future. It wasn’t so much what you studied but what you did with the knowledge that mattered.”
Ovia earned an MBA from the University of Louisiana, after which he returned to Nigeria to do his National Youth Service Corps, where he worked with one of the government-owned banks. He secured a job with First National Bank of Chicago—then International Merchant Bank—in Lagos, where he was trained as a financial analyst. This was just one of many strings to Ovia’s bow.
“I’ve worked as everything, from a junior clerical officer in a bank to a middle management trainee. I really did work my way up the ladder. I had enjoyed banking as a profession right from the onset and because of the passion I had for it, it became a place that I went to be happy. I worked 16 hours a day and I enjoyed every minute of it,” he says.
Many years later, Ovia knew the business inside-out and nurtured his brainchild, Zenith Bank, to rude health. ICT was the next fertile field.
“The way I see it, all are seamlessly interwoven. You can’t do telecommunications without combining information and vice versa. As part of my interwoven passions, it became my immediate desire, and the next level of evolution for me was the establishment of a mobile phone company,” he says.
Ovia was one of the early players in the internet space and established a company called Cyberspace in 1995, when the internet was almost unheard of in Nigeria.
“We were the pioneering set of internet service providers in the country and it was very challenging back then because there were no submarine fiber optic cables to give us the bandwidth and speed we needed to download data. We then had to rely on satellite dishes that would provide this speed to log into any portal out of the country,” he says.
As the private sector fought steadily for its place, the government kept a firm grasp on major sectors, especially telecommunications. Nigerian Telecommunications (NITEL) enjoyed a monopoly.
“It had the density of only about 0.04 percent, which equated to about 250 entities and homes sharing a telephone line. There were hardly 450,000 existing lines for an entire population of about 120 million Nigerians then. Today, we have about three other submarine cables that enable high-speed broadband technology internet services in the country.”
Ovia’s telecommunications company, Visafone, was another testament to his faith in timing and instinct. The Nigerian government, after an apparent communications epiphany, decided to license the Global System for Communications (GSM) services to a few bidders. Ovia didn’t participate in this auction—an opportunity every bidder couldn’t afford to miss back then.
“All my attention was focused on building a strong financial institution at that point, I couldn’t afford to be distracted and the timing was unfortunately not good for me. Failure is an opportunity to learn&#8230; You can only succeed when you fail, get up and then run again. I was determined to keep running.”
Ovia’s philosophy on setbacks was useful when a new directive from the Central Bank of Nigeria, on the tenure of bank CEOs, forced him to step down from an organization he had built from scratch.
“I immediately took it in my stride and couldn’t find any reason for resistance… I’m in fact glad that decision was made, because it also opened up tremendous opportunities for me and this allowed me to move on to accomplish new things I wouldn’t have had the time for.”
With this philosophy in mind, Ovia started anew. Along one of the major roads in Victoria Island, Ozumba Mbadiwe, is the waterfront, which used to be refuse dump. A drive along this road saw the genesis of Ovia’s real estate empire.
“I saw an opportunity on this refuse dump and decided to transform it into something else. The result of this foresight is the famous Lagos Civic Centre—a masterpiece event venue on the waterfront. This development immediately opened up other opportunities,” says Ovia.
Lagos, a metropolitan mega-city with a population of around 21 million, scores poorly when it comes to hotel rooms per head. Ovia saw the gap. As the result of a multi million dollar deal, the Lagos Marriott Hotel is set to open in December next year.
“This is one of the ways to create an enabling environment for the future of tourism in Nigeria,” says Ovia.
Philanthropy is equally important to him. He has embarked on the establishment of a free, co-educational high school, James Hope College, in Delta State, the place where he pondered his future as a young man. The school, an 18-month project, launches in September with an initial capacity for 420 students. He is also the founder of Mankind United To Support Total Education (MUSTE), an organization providing scholarships for the underprivileged.
“This will provide an opportunity for our future leaders. It is a mission I’m thrilled to drive, as it is a great investment in the future of my country. The first thing you learn in business is to make profit. However, how you choose to spend the profits is just as important. Philanthropy is important to me as I derive more joy from spending mine this way. You need to give back, reach out to the larger society and less privileged,” he says.
In the past year, Ovia gave $6.3 million to help the rehabilitation of flood victims across Nigeria. He also runs a non-governmental organization for young Nigerians that drives social change through information and communications technologies. Ovia is a father of five and a family man.
“Family is very important and I derive tremendous joy from being with [them]. I’ve always been family-focused. My father had three wives and I have almost a dozen siblings but we’ve always been very close-knit,” he says.
While he is revered by many, Ovia has also been influenced by a few. One of his inspirations is Akintola Williams, the first African to qualify as a chartered accountant, whose firm, Akintola Williams &amp; Co., was founded in 1952. The company merged with two other accounting firms to create Akintola Williams Deloitte, the largest professional services firm in Nigeria today—a position it has held since 2004.
“This 94-year-old man is someone that I have so much respect and gratitude for. He inspired me very greatly, because he’s a man of honor, integrity and an unbelievable level of discipline,” says Ovia.
Ovia learned from many to become the fourth richest man in Nigeria and the 19th richest in Africa. I ask him about his fortune but he becomes reticent.
“Wealth means nothing to me—it’s what you do with it that is truly important. Yes, I am blessed but there is really nothing special about me. I’m just a regular guy who has a hunch for identifying opportunities and taking advantage of them.”
He says that he achieved his success by remaining truthful to every partner and stakeholder.
“Honesty and integrity are key. Always honor contracts. That speaks volumes. It’s very important to be of tremendous integrity. There are really no shortcuts. Those who try to take shortcuts will always fail,” he says.
When it comes to Nigeria and its entrepreneurs, Ovia is fulsome, believing that with improving infrastructure and the privatization of the power sector, the country is a breeding ground for entrepreneurial spirit.
“Nigeria will be a gold mine in the next few years… Every day, international airlines are fully-booked to come to Nigeria and the only reason they do this is because the return on investment here is one of the highest in the world. I’m very proud to be a Nigerian because this country gives… tremendous opportunity to blossom,” he says.
Nigeria is a country that rewards hard work and Ovia says that some foreign investors misunderstand the terrain. The solution, he says, is understanding that while the work is tough, it is very rewarding.
Zenith has seen the fruits of this kind of hard work. This was reflected in the 2012 financial year, as it achieved $634 million profit after tax, according to reports released by the Nigerian Stock Exchange (NSE) a grand feat that not only saw it become the first bank to cross the 100 billion naira mark within a financial year, but also reflected an impressive 106.7% growth on the $303.2 million profit after tax recorded for the 2011 financial year.
Zenith is now Nigeria’s largest bank. It recently listed $850-million worth of shares on the London Stock Exchange at $6.80 a share, to improve its liquidity through Global Depository Receipts (GDR). It has a current market capitalization of around $4 billion, according to the NSE.
In recognition of his accomplishments in the banking sector, Ovia was conferred with the national award of the Commander of the Order of the Niger (CON) in November 2011.
From these achievements, it may seem to many that Ovia has reached his zenith with a sharp mind that once saw value in a refuse dump.

Tag: Financial

FORBES AFRICA SOCIAL MEDIA

How AI Is Supercharging Financial Fraud–And Making It Harder To Spot

Nigeria’s Fintech Frenzy: Onwards And Upwards

More Phones more finance

Revolutionary And Rewarding

EBOLA. TERRORISM. SO WHAT? COME TO AFRICA

Africa Rising How Africans can Dynamize the Continent

The Godfather of Nigerian Banking