Bringing Bankless Banking to East Africa

Written

Bringing Bankless Banking to East Africa

Tanzania’s Benjamin Fernandes took his Stanford MBA and went home.
Benjamin Fernandes. Credit: Drew Kelly
In Africa, “the opportunity to streamline and simplify the payments process is massive,” Benjamin Fernandes says. | Drew Kelly

Benjamin Fernandes was confident he and his Seattle-based business partner, Sam Castle, had developed the equivalent of a better mousetrap — in their case, a simple mobile device interface that promised to make digital banking accessible to anyone with a smartphone, even without internet access.

And he knew just the place that needed it: Tanzania.

For most of the East African country’s 60 million residents, managing or transferring money via a digital device involves using the cumbersome Unstructured Supplementary Service Data system, which Fernandes says requires users to type up to 46 digits into their phone to make one peer-to-peer payment. The interface he and Castle developed can transfer money seven times faster, he says, usually within 10 seconds, after a few simple commands.

“We’re a massive country,” says the 26-year-old Fernandes, adding that 70% of his fellow Tanzanians are younger than 24. “Tanzania’s land mass is two and a half times the size of California. We’re growing, and we have this huge, youthful population. What’s going to happen when the country’s economy relies on these people to drive it forward? How will they fund themselves and be aware of their finances?”

Fernandes, a one-time national Tanzanian TV sports broadcaster and Stanford Africa MBA Fellow graduated in 2017, then returned to his home country to build a fintech company. Using the $20,000 Frances & Arjay Miller Prize he received during his final year at the school (given to students trying to build a more just, sustainable, and prosperous world), he and Castle committed to intense focus and austere living in order to create their mobile app company, NALA. Since releasing the beta version in April 2018, Fernandes says it has attracted more than 100,000 downloads without a single launch event.

You’ve quoted a Swahili saying that means, “If one of us makes it, we all make it. If one of us celebrates, we all celebrate.” How does that apply to what you’re doing?

Giving people access to financial services is fundamental to both NALA’s success and to their well-being. And if one company like NALA makes it, it gives people access all around the country to make these financial transactions, to understand budgeting tools, and to make better data-driven decisions with the hope of creating greater impact in the future.

Returning to Tanzania to develop NALA was a risky option after Stanford. Why’d you choose it?

I had never experienced the feeling of privilege as much as I did at Stanford, and recognizing that privilege made me feel responsible. There are less than 10,000 Tanzanians in the whole country who have a master’s degree. All of that was given to me, and I felt responsible to pay it forward for the other millions in my country who wish they could be sitting in the same seat I’m in. One of our lecturers, Tyra Banks, told me, “Benji, being different is better than better. Remember that.” That gave me confidence and made it possible to take the risk.

Any regrets?

There are things I miss. One is being surrounded by a group of really driven people all the time. My classmates for the two years were, “Go go go! You can do it! But I’m going to give you brutal and great feedback to help you and make sure you succeed!” I miss that. Probably 60 to 70% of my classmate friends are based in San Francisco, so I don’t have the pleasure of just catching up with them over coffee.

Those classmates were critical in the early stages of this business, right?

They helped me conduct long-distance research with Tanzanian friends, family, and acquaintances over the course of multiple school projects. We listened to their perspectives, then built a framework to help us understand what else we needed to learn. About 140 people participated in our interviews, patiently and passionately answering our detailed questions — most times late into the night because of the time zone differences. What we learned was key to building a product that worked for people. When I moved back to Tanzania in July 2017, we repeated the same work in person. Over the course of a few months, we conducted over 670 in-person user interviews in multiple regions and over 11,000 online surveys. This enabled us to pivot and adapt the product even before writing our first line of code.

How much money did you raise to launch NALA, and how did you raise it?

The Miller award left me with about $14,000 after taxes. So I called Sam in Seattle and said, “This is all I’ve got. Can we make something work?” He said, “Let’s do it.” So I asked him what was the minimum amount of money he needed to survive in Seattle. I decided to live with my parents in my family’s house. We don’t pay ourselves salaries; we’re just covering costs. We ran through that $14,000 by January last year and had to call a few local friends to lend me money so we could keep our company alive. After that, the DFS (Digital Financial Services) Lab from the Gates Foundation reached out and made us a portfolio company. They gave us $50,000, and that kept us alive for a while. Then we got $150,000 from Y Combinator to be part of their winter 2019 batch in January of this year. We’re more excited about the value of mentorship YC brings than the money itself. We’re the first Tanzanian company to ever get into YC. The signaling this creates for us in our market and for potential investors was one of the core reasons why we decided to do it. It enables us to stay focused and grow.

What’s your ultimate goal with NALA?

We want NALA to evolve into being a pan-African digital bank, and I’m confident in our team’s ability to do this. In Africa, there are more than 420 million active mobile money accounts, with few people using bank accounts. Mobile money is everything to people on the continent. For example, in Tanzania, 47% of our GDP is transacted with mobile money. The opportunity to streamline and simplify the payments process is massive. We want to give people access to make better and smarter decisions with their money. It’s tough but I’m confident it will be worth it. My ambitious dream is to be the first African tech company to go public on the New York Stock Exchange.

What specific obstacles stand in your way?

I thought I was good at time management and focus, then I got to Stanford GSB and realized the bar was at a whole other level.
Benjamin Fernandes

Human capital is by far one of the hardest things to find on the continent. There are smart people, but a lot of them end up staying in the countries where they received their education (e.g., the United States) or working at a large firm locally and think it’s crazy to take a massive pay cut to join a startup. We’re finding it difficult to get the right people to help scale the business.

Is Tanzania’s young population an advantage or disadvantage for NALA?

Overall, I think it’s a large advantage. Tanzania is importing more smartphones than any other East African country, about 100,000 phones a month. They’re going for as low as $26 now, these super-cheap Chinese devices. Our core users are younger and more tech-savvy, between the ages of 23 and 26, and for the volume game it’s going to be young people.

Your Facebook profile includes a Bible citation: “Do not conform to the pattern of this world, but be transformed by the renewing of your mind. Then you will be able to test and approve what God’s will is — his good, pleasing and perfect will.” Why is that passage meaningful to you?

I grew up in the Pentecostal church and saw how much faith did for people in Tanzania. I personally believe in miracles. I personally believe in God’s blessings. My parents sacrificed a lot of money at church as a seed to educate my sister and me, and we both got these scholarships to go to school abroad. One undergrad professor told me I should get an MBA and to apply to Stanford and Harvard and nothing else. Those are schools I never even dreamed of going to in my life. But he planted the seed in my head. So I went back home and took all the money in my bank account and put it at the altar at church. I said, “God, this is for my education. If you want me to go there, you’ll make it happen, not me.”

How much was that?

A few hundred dollars. Like $450. All the cash I had. Six months later I got a phone call from Stanford, giving me admission and a full ride through the Africa MBA Fellowship. I was in tears. So I’m a strong believer in faith. I want to be part of the world but not be transformed by it. I want to be transformed by what God has given me.

You once identified The Hard Thing About Hard Things: Building a Business When There Are No Easy Answers, by Ben Horowitz, as one of the best books you’ve ever read. What lessons did you take from it?

The parts that resonated with me were not about dreaming big but about waking up in the middle of the night after your dream has turned into a nightmare. What do you do then? There’s no easy answer to anything. That was really powerful. He talks about the importance of embracing the struggle while focusing on the mission.

What’s the most important lesson you took away from your Stanford GSB experience?

Ah, this is hard, there are so many. I think for me in particular, given the market I operate in, the importance of focus and time management. I thought I was good at time management and focus, then I got to Stanford GSB and realized the bar was at a whole other level.

Anything you wish you’d known at the start of your time at Stanford that you know now?

Go for it. Seriously. I was so scared and shy when I first got there. My first day on campus, I was in tears. I remember looking around at all these buildings and thinking of all the people who walked those steps and grounds, the path they paved for all of us. It took me a while to take all that in. When I started in class, I was scared of saying the wrong thing or asking a dumb question. But I learned that nobody knows everything — nobody has it all figured out. So just go for it. Be bold. Ask for help, ask your questions. That’s something I’d tell myself if I was starting all over again.

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