Alex Habet welcomes Alexis Chavez, co-founder of gnuGrid CRB Uganda, the only credit reference bureau in Uganda focused on the informal financial sector (90% of the market) to enable 22 million borrowers to access their own credit scores and prove credit worthiness.
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[Article] Ugandan startup gnuGrid starts operations as a credit reference bureau
Transcript
Alex Habet
Hi, and welcome to The Purposeful Banker, the leading commercial banking podcast brought to you by Q2 PrecisionLender, where we discuss the big topics on the minds of today's best bankers. I'm Alex Habet.
So today we're going to take a little bit of a break from the news cycle, right? Sometimes I think we all need that from time to time, but that's not the reason why we're taking the break today. I had a little bit of an interesting story come across our way recently. A couple of months ago, I got a note from a friend from the high school days, and we were both expat kids in Japan at the time, just to give you a little bit of a context on that. So it's been a while though. In the past 20-plus years, a lot of things have happened, I guess, in both our lives, right? But this friend of mine reached out to say hello. We caught up and she told me everything that she's been up to recently.
So, look, along with all the great memory lane moments that we shared in our chat, her journey was truly interesting since those days. What really caught my interest as it relates to this show is how Alexis Chavez, my friend from high school, is taking on a bold mission to tackle financial inclusion in Uganda. Now, while her story takes place in Africa, it's also a good reflection of a global problem, right? It's an issue everywhere you go. Financial inclusion efforts are under way on every continent, but it's also a story about purpose, which is something that we care a lot about at this show.
So it only felt natural to take her story out from a casual chat that we had and actually bring it onto the show. I've always felt personally that those who are in the arena—who are working to serve the underserved—it's there that you can see the edges of innovation and creative solutions that are being put in place, and that's the story ultimately that I wanted to bring to this show. So I'm pleased to have Alexis come and tell her story in her own words. Alexis, welcome. I guess this is the podcast version of me that you're getting to know right now. What do you think? Am I different or this was more the same?
Alexis Chavez
You're definitely very committed to that microphone. I'm like, "Should I be closer to my microphone?" I don't know. Do I need to do that? I don't know. It's professional.
Alex Habet
Hey, got to fake it 'til you make it.
Alexis Chavez
Yeah, it's good.
Alex Habet
Well, look, thanks for coming on the show and speaking a little bit to this audience about your story. You're now with gnuGrid, which I got to learn from you what a gnu was. When we were catching up, you had a curtain behind you that actually had a picture, I think, of it, right? And so, it's a type of antelope, which something I ... Also, it's a silent G, so it's spelled G-N-U. Anyways, a little bit of a tangent there. Originally, it was founded as an energy startup, but has since branded into other areas, including, of course, what we're here to talk about today, financial inclusion. So, Alexis, how did you get started with the team? What was it in the mission that attracted you to the opportunity to work with them?
Alexis Chavez
So I think I met David, I was working in business development for quite a long time in Uganda, and I met David here through a business accelerator in Seattle. They had a lot of African entrepreneurs. I was consulting for them because they didn't have a lot of African market-based experience, and so they brought me in to do that. But I think what I liked about it was that I have always had this social impact goal, personal mission. And so, with gnuGrid, it was a very profitable business, but it was also ... Man, it was really impacting millions and millions of people. And so, for me, that was the biggest component of it, was that it had this massive social impact and it made money. And so, for me, I personally think that the future is the combination of the two and vertical integration between revenue and social impact, environmental impact, all those types of things.
Alex Habet
Mm-hmm. Tell me a little bit about the team that you work with. What does the organization look like? Who are some of the people you get to work with every day? Give us a little quick story about them.
Alexis Chavez
So David, my business partner, is just a genius. I mean, he is constantly innovating. It's absolutely phenomenal. I mentioned or you mentioned that when we first started, we were working in around solar tech. We were a CRM in solar tech. And so, we were just trying to help track the productivity of panels for solar companies, but now we're at a credit reference bureau. And so, basically, David in his mind goes, "OK. Well, all these people that are working in the solar and off-grid solar, they need batteries."
So a week later, I talked to him and he's like, "I invented a solar battery. It's portable. It's small." I'm like, "Is that what you've been doing all week?" He's like, "Yeah." And then the next week he's like, "I think we should do credit checks." I'm like, "OK. Well, why?" He's like, "Well, because people are in this PayGo industry, they're lending panels and they need to know who they're lending to." And so, that's how we started working in the credit check arena. And then actually the bank piped in and said, "Wait, you guys can't just do credit checks. You're not just allowed to randomly do it." We went, "Oh, really?" And so, then, we started working on a license, but that's a little side note.
Alex Habet
Yeah. Well, why not just ask for forgiveness later, right?
Alexis Chavez
Exactly. Exactly.
Alex Habet
So specific to this credit reference bureau part of it, so Alexis, tell me how the product, how the CRB arm of gnuGrid, works in general. How does one interact with gnuGrid CRB in everyday life?
Alexis Chavez
So there's a couple of different ways. I mean, technically, we're just like every other credit reference bureau in the world: TransUnion, Equifax, Experian, all these other guys. In Uganda, it works the exact same way. So you just get ready to take out your loan. The company or the bank that's doing the lending or the company, they will just come to gnuGrid. They have an account with us. They do the credit check. And then it's pretty simple, pretty easy, but we have a couple other aspects that make us a little bit different in that we're also working with telecoms. One of our unique pieces is that we're working with these telecoms.
So Airtel, for example, is one of the largest air telecoms in the world. How mobile money works in places like Africa or the developing world is that you can actually take out a loan through your telecom. So you could take out a $2 loan, a $5 loan through Airtel. It is backed by a bigger bank. And so, we are working directly with Airtel to be able to run these credit checks to make sure that they're legit, that they're a good borrower. So that is what makes us new in the space and in the field, because we're not just doing ... We have a couple components where we're working with traditional banking systems with ... People can do a credit check through gnuGrid on a large corporation that's trying to take out a very substantial loan. You could be an individual taking out a home loan or something like that, but you could also just be a person working with a savings and loan cooperative, taking out $100 loan all the way down to taking out a $2 loan to help pay for school fees or food, just some of the basic, basic basics.
Alex Habet
Got it.
Alexis Chavez
So that's where the diversity of gnuGrid falls into play, and I think that's the important social component of it, that we work with everybody and we allow everybody the ability to create a ... As much as I think we complain about what our credit score is and how ... Even here, it's like, "Well, why do I only have a 600 something credit score?" It's actually an amazing opportunity for us to be able to get a credit score. For people in Uganda, to build credit, I think, maybe means even more, because for people like women, like younger people that are trying to start their lives, that are trying to be able to enter the financial ecosystem, it's so vital. It's so vital to be able to prove credit worthiness.
Alex Habet
So your comment there, I guess you're suggesting that many take the ability to get a credit score for granted, but in other parts of the world, such as in Uganda, it's not so easy to get a credit score, right? This can be a life-changer for the population, especially when you're talking about 90% of the population living in that tier four category. Is that correct?
Alexis Chavez
Mm-hmm.
Alex Habet
Are you the first vendor in the continent to work in this way to remove friction in new ways, to extend lending capabilities to the underbanked, or is this just your flavor of it?
Alexis Chavez
So I guess the best way to put it is sure, anybody can go to TransUnion or to Experian and get a credit score. However, a lot of times it's expensive. In Uganda, our main competitor, Experian, is very, very expensive. It's unaffordable. It's more than most of these loans actually are ... So we're the first company to really focus on this segment of people. So granted somebody wanted to get a credit score, they can go get it, but we're the first company in the continent that's really focused on it, that's really trying to make waves and move this whole sector forward.
Alex Habet
Right. So without giving away any trade secrets, I mean, is there any way ... Well, what are some ways, I guess, that you can be a better alternative to some of the bigger reference bureaus? How do you keep, for example, I'm assuming your costs lower than theirs? Is it just the sources of information are different? Is it how it's synthesized?
Alexis Chavez
I'm not sure if our costs are lower than theirs, but we definitely ... I think it's just we just have a lot. I think what makes us really disruptive in the marketplace is that we have a cheaper price point, which means we're just hoping that we'll just do the numbers, the volume will be higher. Because we have this 90% of the country, I mean, the volume is high. Airtel, for example, for these mobile money transactions is they do at minimum over a million loans a month. It's just the volume, the numbers are insane, and that's just Airtel, which is not MTN. MTN is the other large telecom there. It's not Orange. It's just there's all of these, so the volume is high. So we're going for those. We're lowering our price point but trying to go for the volume.
Alex Habet
Mm-hmm. Yeah. And so, over the, I guess, recent period, have you noticed a change in that volume? Has it been rising? Is it becoming a more popular source for people to access funds?
Alexis Chavez
It is definitely the way forward on the continent, and people will continue to take out these mobile loans. And so, since they've started, since these companies have started doing this, it is growing and it is growing every single day. So we know that that's the trend that will continue. We know looking at other large companies, this is where they know the market's heading.
Alex Habet
Got it. Got it. So what's next for the group? What are you guys looking to do in some of your upcoming phases? I mean, are you looking at things around geographic expansion or pushing into new markets within Uganda that you're not currently pushing into for whatever reason? Give us a little bit of an inside view of where you see this thing evolving next.
Alexis Chavez
So, we're going for global domination. [laughs] No. I think this first year is really going to be Uganda, Uganda, Uganda. We started making revenues back in August of last year, end of August. And so, really getting these new mobile money contracts up and going, it's really Uganda-focused. But starting next year, our goal is really to start moving into places like Tanzania, Kenya. We've talked about Nigeria. Nigeria is a whole beast of a market on its own, but definitely Kenya and Tanzania are huge opportunities for us. If all goes well with the Airtel contract, we'll be moving into those countries with them. And then it does allow us setting up ... These big companies are there. We're just a new little guy. We're not the megalith that is TransUnion.
So TransUnion in is in Kenya. They're in Rwanda. So for us to branch into those countries on working in the formal financial sector, competing with who they already have as a marketplace, again, it's going to force us to be a disruptive company, where we're just undercutting the price and everybody, they don't have a choice. It's just like, "Why would we not go with gnuGrid? They're cheaper and they do a great job." So that's what we're thinking about as we look down that road. So it's entering into a market that they're not active in because we have these telecom contracts, but then also it's like, "OK. We're going to compete with them directly." Uganda specifically has a tier four license, which is this informal financial sector license, which as far as I am aware, Kenya doesn't have, Tanzania doesn't have, Rwanda doesn't have. So we would probably just be entering into the marketplace with the big guns, which is great, but it's [inaudible 00:17:49].
Alex Habet
Well, it's nice that you'd be doing that with the already established relationships that you have, for example, with a telecom, Airtel, I guess, would be the case. So that's one less thing you got to do, worry about when you go into, but I would think regulation-wise, it's probably not so easy to just flip the switch, right? I mean, moving to a different country probably comes with its own hoops to jump.
Alexis Chavez
It is very. Setting up bureaus is expensive. The regulations, the everything because you're going through the central bank. It's such sensitive information that you're holding. I mean, God forbid if there is a breach. I mean, what a disaster that would be. So it's just like, it's so expensive. So we are having to work with the best developers, the best ... I think for us, I think Kenya, for example, was $10 million to set up a bureau, so that's a pretty big. It's a lot. It's a lot for us as a startup. So unless there's any investors out there that are ready to go, give us a call.
Alex Habet
Well, so speaking about investors, I mean, who are some of the investors that you guys have today?
Alexis Chavez
So, most or all, actually all, of our investors are private investors. We have a couple of Americans and someone out of Hong Kong and Canada, but they're all individual investors who've looked into BCs. But I think in a lot of ways, individual investors are great and they're flexible, but we're definitely ... As we're looking to expand, we're having more conversations with BCs.
Alex Habet
Excellent. Excellent.
Alexis Chavez
Yeah.
Alex Habet
Well, look, I mean, in my opinion, this is quintessential. Meeting your customers where they are, it's something that we talk a lot about here in our company. Forget about branches and bank accounts even, right? You're having to meet those needs in absence of some of those staples that I think the most part people that listen to this show are accustomed to thinking about financial services. It's inspiring. Please pass the message on to the rest of the team that you guys are doing inspiring work, and I hope that you continue and make way, not only in Uganda, but also to spread this kind of capabilities and alternatives to those big bureaus in some of these other markets, as well. So, Alexis, how can people get ahold of you to learn more or to pick your brain on some ideas or things like that? Where is the best place to get ahold of you?
Alexis Chavez
Yeah. Actually, you can find us on LinkedIn. We're launching our new website. Our current website definitely does not look like we're a tech company at all, but we really just don't need it for most purposes. So it's more for forward-facing for investors. But yeah, LinkedIn is good. Facebook actually, because a lot of Africa, Facebook is well leaned on, so Facebook has a lot of info. But you can reach out myself or my co-founder, David Opio. But yeah, we're happy to answer any questions anybody has, or if anybody's interested in investing or learning more or branching out. It's really amazing how many different collaborations that we have and you never know what's going to come out of this.
Alex Habet
Absolutely. Absolutely. Well, thank you again for coming on. I look forward to seeing how things march forward for you and the team, and hopefully having you back here some day to give us an update on where gnuGrid is at in the future.
Alexis Chavez
Awesome. Thank you so much, Alex.
Alex Habet
You're welcome. Alright, well, that's it for this week's episode of The Purposeful Banker. If you want to catch more episodes of the show, please subscribe wherever you like to listen to podcasts, including Apple, Spotify, Stitcher, and iHeartRadio. If you have a minute to spare, let us know what you think in the comments. You can also head over to Q2.com to learn more about the company behind the content. Until next time, this is Alex Habet, and you've been listening to The Purposeful Banker.
