A conversation with Tavonga Muchuchuti, president of the Fintech Association of Botswana, about the state of the country’s fintech ecosystem.
For most people outside the landlocked southern African country, Botswana is associated with diamonds and not a booming tech ecosystem. Despite efforts from both the government and private sector to push a digitalisation mandate, the country’s tech ecosystem can only be described as nascent at best.
According to data by Disrupt Africa, there is only one fintech startup in the country. Despite this, the presence of multinational banks and telcos and high internet penetration rates suggest the country’s financial services sector is fertile ground for fintech success. With a financial inclusion rate of only 45% according to data by Statista , finding success with financial technology is crucial.
Despite relative inactivity in the ecosystem, there are bodies working towards catalysing activity in the country’s fintech ecosystem. One of those is the Fintech Association of Botswana. Initially founded in 2020, the association wants to provide a consolidated platform to address the needs of all fintech players in the country including banks, insurance companies, telcos, startups and regulators.
The body recently elected a new executive leadership team to execute on its mandate for the next three years. TechCabal spoke to Tavonga Muchuchuti, the incoming president of the association, to get a clearer idea of Botswana’s fintech landscape and how the association intends to change its fortunes.
TechCabal: Please share more on the mandate of the Fintech Association of Botswana
Tavonga Muchuchuti: Its main mandate was originally to facilitate the creation of a fintech ecosystem in Botswana which at that time was virtually non-existent. This was to be done by empowering all its key stakeholders to connect and collaborate.
If you look at the fintech landscape in Botswana today, it’s not just the disruptive companies that are coming in. It also includes mobile money operators, insurance firms, banks, and regulators. So there was a need for us to bring all these different parties together for us to collaboratively create frameworks that would enable the creation of products that would benefit the consumer.
As you stated, Botswana’s fintech ecosystem, especially on the startup side, has seen low activity over the years. How will the association catalyse innovation?
TM: When we first started the association, we wanted to understand what the key inhibitors were stopping us from growing and establishing ourselves as an ecosystem. And the key issues we found were on three layers.
Number one was that the fintech firms around the country didn’t have the requisite financing and funds that they needed to get their solutions off the ground. As you know, when you’re working in fintech, whether it’s payments or lending, the capital requirements are pretty substantive. And raising money was difficult because you’re looking at a total addressable market of no more than 2 million people if you only focusing on Botswana. Obviously its difficult to convince a VC that your solution can reap venture scale rewards.
The second issue was the regulation of the regulatory part. If you want to play in fintech, banks are an important partner. Now, for you to go to the banks, you have to have a solid and strong business case and a proven pilot. The challenge was that we had no sandbox whereby entrepreneurs could be able to build quick products and prototypes that could serve as proof of concept. This made collaboration between startups and such institutions complex.
The third factor was also a subset of the regulation issue but this time, the environment made it difficult for even banks and insurance companies to innovate and create different types of financial products for themselves, because it was highly inhibited and there was a lot of red tape to get through.
So to address all these, the association started engaging with these regulators, for us to be able to create frameworks and open up for innovation. So I really think that’s the kind of role that we’re going to be playing over the next three years.
Please share some of these initiatives that you will be executing to address the aforementioned inhibitions
TM: For starters, when the association was started, it was not formalised via registration. It was highly informal at first and was just active via the WhatsApp groups. And then over time, we managed to get our registration right. And then we started engaging with other stakeholders. And then we managed to join the Africa FinTech Network. And then from joining the African FinTech network, we managed to join the digital finance network across Africa.
And now that we have these building blocks, the next step is to solidify the progress. So the very first step is putting together agreements with all the key financial regulators to allow our members to have a regulatory sandbox that they can be able to work within. This will not only help with testing products but also test them in a regulatory environment to make sure that regulators have a thorough understanding of what the key risks are going to look like and come up with mitigations together with the innovators.
The second thing is putting together an advisory committee. One of our biggest strengths as an association is that we’ve got a large set of skills across the fintech ecosystem. So we’re putting together this advisory committee, that’s going to be able to advise institutions across the country on how they can be able to adopt best practices and fintech. We are also going to be doing a form of matchmaking because what you see is that we’ve got a gap within the market where the incumbents want to be able to innovate whilst the smaller startups already have some of the solutions that they’ve built which could address what incumbents are trying to build from scratch.
So with the matchmaking, we are bringing together to actually co-create and collaborate on an even scale. To realise this, we have put together a list of some of the most innovative startups that have come out of the country and brought them all into one place. We are now starting to work on helping them actually become ready suppliers for larger incumbents.
We are also facilitating the process of large incumbents putting down some of their walls to allow the smaller players to also be able to work with them. We understand the incumbents have secured the market and as a smaller startup, you’re able to collaborate with somebody with a bigger market, then you can be able to actually grow much faster. And ultimately, some of our key problems can be solved.
To make the matchmaking work, we’re going to be introducing masterclasses in January to bring everybody into the same room to align interests and identify synergies. And then from those engagements, the matchmaking will start to happen.
The regulatory framework around fintech is currently not very enabling for innovation. How will the association address this pain point?
TM: That’s an area that we started working on about a year ago. Firstly, the idea was to work with the regulators to establish fintech offices in the respective bodies. As we speak, our key regulators have come up with these offices. So for example, the Non-Banking Financial Institutions Regulatory Authority (NBFIRA) has a fintech office now. The Bank of Botswana also has a similar unit.
The lack of a regulatory framework for risk assessment was one of the biggest factors inhibiting startups from working with larger corporations and now that we are actively building that up, we believe it will boost cross-innovation. For example, the technical risks we have outlined ensure that players cover up all these key technical risks that you might have from a cybersecurity or code stack perspective.
So to advance the completion of this framework, we have been working together with some of the large corporates within the association to finish it off so we can distribute it to everybody to get this work started.
There is also the issue of lack of inclusive fintech solutions, especially for rural dwellers. How will the association address this challenge?
TM: Financial inclusion is very big on our agenda. Our fundamental belief is that, once we’re able to jump the barriers of entry for key fintech players, a lot of people that are currently unbanked or unable to get access to financial services are going to be able to get access to them.
We believe that by opening up the doors of regulation, by opening up the doors of funds, and opening up the doors of collaboration in the current incumbents, there is a lot of innovation that will be unlocked for the margonalised and excluded. Our role is facilitating and opening up doors to allow for open innovation in our ecosystem. And I think that’s where the solutions to economic inclusion are going to come from.
What opportunities would you say are present in the Botswana fintech ecosystem at the moment?
TM: I think there’s quite a number of opportunities that are there within our market which encompasses not only Botswana but the region as well. The first big thing is looking from a regional perspective in terms of the Southern African Development Community (SADC). The other opportunity is with Botswana’s high literacy rates which significantly boost the adoption of technology innovations as long as other inhibitions are addressed.
Another area of opportunity is Botswana’s large technical talent pool. We have one of the largest growing pools of digital talent in the region so we are able to actually create and launch these innovative products. There is an opportunity to leverage regional integration, talent and literacy rates to build, launch and scale impactful products. If you look at products like E-wallet, Orange Money Wallet, MyZaka, and N’stakolle, you realise that there is a real appetite in the market for fintech solutions and our job is to facilitate the introduction of even more solutions.
How important will a consolidated voice through the association help expedite the process of growing fintech in Botswana?
TM: The challenge of everybody working in silos is that the regulators, customers and other external stakeholders do not have a consolidated source of truth to get insights into the market. So that’s really the kind of benefit of an association; to bundle together all our voices. An association also allows for collective bargaining. And for the startups, it’s even more important because they won’t be able to have the kind of access that the larger institutions are going to have. So an association ensures that everybody can be able to have a voice and lobby on behalf of the entire ecosystem.
Any parting thoughts?
TM: The biggest thing for us at the moment is that we have seen the transformative impact of associations through our relations with the Africa FinTech Network. We’ve seen, for example, how collaborative case studies in countries like South Africa have been able to identify and exploit opportunities in the market which might not have been possible if stakeholders did not have a collective voice.
We look at markets like Egypt and Nigeria and learnt that reason why they’ve been able to really build solutions which lead the continent is because of these collaborations. So for us, it will really be an exciting journey over the next couple of years which will hopefully lead to transformative change in the Botswana fintech ecosystem.
Interview has been edited for length and clarity.
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