Imitation may be the sincerest form of flattery, but one Ugandan startup is certainly not flattered after an innovation it pitched at an app challenge run by MTN Uganda was rehashed and launched as a new service by the telco.
The startup in question is Redtile, who participated in the App challenge organized by MTN last year. Their entry to the contest was a solution that would allow mobile money users to borrow money quickly and instantly at a low, competitive interest rate with a flexible payment plan. It also provided a platform for people to pool their money into funds that would be used as float (electronic money) to be loaned out to others.
In 2004, MTN Uganda allegedly adopted one of Paul Bagyenda's mobile solutions without consulting or compensating him. Bagyenda's Me2U was a peer-to-peer airtime sharing application. Instead of working with him, MTN cut Bagyenda out completely. The short story is there was a lengthy court case to which an undisclosed settlement was made to the plaintiff, Mr. Paul Bagyenda.
The most interesting bit is that RedTile's service was built entirely on USSD, and would use one’s credit history on MTN's mobile money service to determine their credit-worthiness.
As fate would have it, they didn’t win anything from the App challenge, but it seems MTN picked up their idea and rehashed it in their own image.
MTN Uganda has just launched a micro-lending platform dubbed MoKash that allows mobile money users to save their money at an interest rate of between 2 to 5%. They can also borrow micro-loans at a monthly interest rate of 9%.
There are a few subtle differences, but this new service is practically copied from Redtile's proposition just over 12 months ago.
Ideas are stolen every day
There is nothing new under the sun. Ideas are copied and rehashed, and this is what makes the world go round. While Redtile wants to believe that that idea was lifted from their shop, it’s more prudent to believe that MTN actually copied the idea from Safaricom. The Kenyan telco debuted its M-Shwari micro-lending service in 2012, and savings reached 24 billion shillings (US$230 million) within two years.
Mobile money alone accounts for more than 35% of Kenya’s GDP and it’s said that 7 out of 10 Kenyan adults have a mobile money account.
Mobile money is also doing well in Uganda, with 19 million registered users compared to 4 million bank accounts, Uganda ranked highly in a recent survey on financial inclusion based on the high uptake of mobile money services, especially among the 80% of Ugandans that live in rural areas.
MTN’s MoKash and other mobile money services provide many Ugandans with rudimentary access to banking services, meaning that the potential returns from services such as savings and credit facilities, money transfers and payment for utilities are too big to ignore.
Data is the new oil
Redtile’s prototype was the ultimate data driven solution. The technical chops of such a platform demand not only the weight of a financial institution like the Commercial Bank of Africa - which by the way is also behind M-Shwari - to offer some sort of indemnity cover for the loans, but also a sophisticated technology stack to ensure uptime and quick transaction processing.
I had an opportunity to interact with the IBM Africa Nairobi team, who are behind the the technology that assesses the creditworthiness of mobile money subscribers. Aside from checking historical data, duration on platform, they apply machine learning and artificial intelligence algorithms to build a profile for every user who initiates a request to borrow money, and this data is then used to determine how much to lend in a matter of minutes.
These machines can predict one’s chances of repayment beyond a 95% confidence limit. They are incredibly efficient, and so smart, it's scary. They pretty much know whether one is able to pay back a loan better than how traditional banks will possibly ever know. No wonder the non performing loan portfolio on M-Shwari (more than 90 day loans) lies at a measly 2%. As the algorithms are fed on more data, they learn and optimize accordingly.
It is also worth noting that startups like Lenddo are using social media data for credit scoring and extending micro-credit to those who qualify — those who may not particularly qualify for traditional bank loans.
The vast volumes of data that telcos have - what sort of phone you use, how often you send and receive money, what sot of services you're likely to spend money on - provide a much deeper, richer and more contextually relevant profile of you as a customer. It’s a gold mine.
The growth and appetite for micro-credit has given rise to an entirely new market. New enterprises such as Julian Kyula's MODE (Mobile Decisioning) Africa and Airtel Uganda's Beerako have emerged to extend emergency airtime and data services. Many other telcos have jumped on board and so far, they are not doing so bad.
The cost of mobile money
Mobile money is not a perfect substitute for liquid cash. It has its limits. Interoperability between networks remains a challenge, and in some cases it's impossible or prohibitively expensive to send money from one network to another.
It is also expensive to take some of these loans.
The monthly 9% rate by MoKash accumulates to a total of 108% p.a. This is not any different from what loan sharks charge. These sky high rates are partly why many established businesses are being driven out of economic productivity. The lack of regulation and the Central Bank’s indifference as all this happens should raise red flags.
In Sub Saharan Africa, according to the World Bank, 27 out of 57 telcos individually own more than 50% of their constituent markets because of cartels and rigged processes all thanks to selective (and secretive) government support.
It has been alleged that MTN had an agreement with the government of Uganda to bar market entry of any competitor for close to 8 years. In the rapidly advancing technology space this sealed the fate of many competing companies that came after. Their eulogies were written even before they were born.
This kind of high handedness has stifled competition and innovation, and the unfortunate result is that startups are now unwilling to share their ideas with the big players.
Not so long ago, MTN advertised for the position of Product Manager. The main purpose of the job was to manage the overall Product and Services portfolio and strategy and drive the design and development of new products and services.
But what often happens is the sheer lack of creativity and imagination from the telco’s product team. Almost every product in their catalogue has been copied from Kenya’s Safaricom, their local competitors on the market, or from local startups.
Below is the complete text making rounds on whatsapp (and Telegram)
As we are all discussing the new breakthrough in the mobile world “MTN/Mokash”, has someone bothered to know the source of this great idea/innovation. Well.. here is the full story
In May, 2015, MTN Uganda, in partnership with Outbox and Garage48 launched the MTN App Challenge; it was a 3 day event from Friday 29th May 2015 to Sunday 31st May, which brought together great minds and young local innovators to create Mobile Applications
The main objective of the event was to bring together brilliant minds to turn ideas into technology innovations as per http://www.outbox.co.ug/events/mtn-app-challenge-29th-31st-may-2015-mtn-towers
After three sleepless night of hackathon, at least 18 projects made it to the final day of presentation, where the winners were selected.
Of the 18 projects one of them was called “Redtile” this project was pitched by a team off three gentlemen and this is what was pitched
“Redtile is a USSD mobile platform that allows mobile money users to borrow money quickly and instantly at a lower competitive interest rate with flexible payment policy. It also provides a platform for people to invest their money which will be used as a float for giving out quick loans in return they earn interest”
It was even reported in PC Tech magazine after an interview by Mr Albert Mucunguzi on that final day of the event.
Team “Redtile” successfully developed the application, it was the only team that used USSD, it even defended the project on the final day before a team of highly competent judges including Michel Nyitegeka among others in the presence of the MTN CEO and his team
Redtile did not win any award on that evening, that’s why it didn't pick any media attention but the idea was Gold and team continued to work on the idea in the background
To our surprise, MTN is launching MOKASH which is exactly the same idea as REDTILE that was pitched on the event organized by them
This has raised many questions in people’s minds, When did MTN adopt the idea of MOKASH? Was it before the app challenge or after? What is the spirit behind MTN App Challenge? Is it to promote local innovators or to steal their golden ideas? Someone must provide answers
“As Uganda continues to battle challenges like youth unemployment, MTN looks to leverage its position as an industry leader to offer youth opportunities to create solutions that will be commercialized and bring about long-term employment for them,” MTN CEO Brian Gouldie said during the event.
If MTN was to support young innovations, they would have involved the REDTILE team that was behind the mastermind of this Golden Idea
Someone should come out and help us to stop this selfishness, otherwise we shall never have any silicon valley in Uganda at the expense of big companies such as MTN
From a business perspective, it would appear that MTN's actions were completely in order. Maybe the similarities between MoKash and Redtile’s prototype are a result of an accidental overlap.
Perhaps the Redtile team missed out on the terms and conditions — coyly snuck into a clause in the fine print. MTN ran the app challenge under its own terms, and anything that came out of it would be under their purveyance.
This kind of behaviour is not unique to them, but it risks jeopardizing the startup ecosystem by trapping innovators, restricting access to their API gateways, and denying them the potential benefits from their innovations.
But that is the sad reality, corporations are eating startups.