Asset financing for e-mobility is steadily gaining momentum in Kenya and across Africa, driven by increasing demand for Electric Vehicles (EVs) and the need for sustainable transport solutions.
In Kenya, companies like Watu Africa and other players are spearheading this shift by offering tailored financing options for electric motorbikes and other EVs.
Founded in 2015, asset financing fintech Watu Africa has today financed over 500,000 two- and three-wheelers, with operations across 8 African markets; DRC, Kenya, Nigeria, Sierra Leone, South Africa, Rwanda, Tanzania and Uganda.
The company’s asset financing is focused on two categories;
Mobility- Watu Boda is the flagship project under this category. They provide financing for both two-wheelers and three-wheelers for both ICE (Internal Combustion Engine) and EV (Electric Vehicle). They also had a product dubbed Watu Gari but the idea was scaled down.
Additionally, Watu has a complimentary product called Watu Shule which is the first financed mobile driving school in Kenya. It is currently in operation where they educate and provide driving licences for boda boda riders.
Connected devices- Today, Watu finances smartphones and tablets, an initiative that was started in Q4 of 2022. Now approaching over 1 million customers, the smartphone financing is in partnership with Samsung.
Watu started with Samsung because the latter has a locking solution called Knox Guard which is quite robust and allows Watu to finance smartphones and tablets on a pay-go model.
The software basically locks and unlocks the gadget depending on customer payment which allows Watu to self-collateralise the asset opening up the opportunity for people who do not have collateral and mass market in that regard.
In this interview, TechTrends Media speak to Watu Africa Country Manager for Kenya Erick Massawe who gives his insights on how exactly they are revolutionising financial inclusion in Kenya and across their African markets in the e-mobility sector through asset financing.
Massawe also speaks on how Watu’s piece of cake in the e-mobility space is changing the dynamics of owning an EV, electric two-wheeler or three-wheeler while creating socio-economic sustainability.
Watu is centred on revolutionising financial inclusion in Africa. How does e-mobility fit into this vision and what motivated you to focus on asset financing for EVs?
EV for us represents the future of Africa which is a firm belief and a vision that we have. This is informed by two very important values; care for the environment and our customers.
Our vision is to empower entrepreneurs and there is a very strong business case to be made on the economic benefits of EVs or rather e-mobility as compared to ICE.
By doing so, we maximise the potential of our customers to make more money and be successful at whatever they do.
When you think about Africa’s infrastructure, be it road network, terrain etc, one does not take the time to appreciate the role that boda boda has in terms of revolutionising how we move, how we move goods and services as well as how we create economic opportunities such as delivery services industries which is now booming.
Based on this, we believe that by making the sector much better economically, this is going to be a dream come true for us where we empower young people in this sector and basically transform their lives as well as empowering them to become the future billionaires of Africa through e-mobility.
Speaking about empowerment, how exactly is Watu bridging the gap in financial accessibility for underserved communities especially in terms of accessing e-mobility solutions like EV motorcycles, tuk-tuks and such?
This is what makes Watu and other players like us different from the formal financial institutions. In formal financial lending, you deal with banks which are risk averse and for one to access financing, they have to bring in securities.
It is only a small fragment of our society which can afford this. When we started out, we started with such a form of financing then we introduced group collateral kinds of securities but it also did not work well but we implemented a new financing solution.
This is where we do not require any collateral but we hedge the risk around the asset. These may be self-collateralised assets like smartphones or a repossession model that we implement with vehicles. This is where we say, you do not have to bring us any security but we will track the asset and repossess it.
How effective is this?
It is challenging but there is a way to make it work. We have created a number of value-added services around our core product to ensure that the customer who takes a loan and works for it at the end of the day becomes a successful asset owner.
These services range from, for example, doing everything for the customer that may keep them from being on the road. This might include processing of the log books and number plates, acquiring comprehensive insurance cover for the asset but there is also support for eventualities.
For example, if an asset is stolen, we have a comprehensive process to assist our customers to find the asset and if we can’t find it, we issue them with a replacement asset so that they can keep going until we process that insurance claim.
We also do have other services such as repairs and servicing the EVs and the customers pay 30% of the repair costs and Watu finances 70% but it will be added as a series loan.
Which other unique challenges have you encountered when financing EV assets in Kenya and other African markets? Also, compared to traditional financial institutions, how do you address these challenges?
Some of the major challenges that we face include regulation across the different African markets. It is important to note that each country has its own regulatory jurisdiction and they vary a lot.
The business that we are doing is also evolving so fast that some of these changes take time to be incorporated into the regulatory frameworks even though they exist.
A good example is here in Kenya, where in May 2024, we basically saw an industrial action where parliament was asking every industry player to come and meet with the finance committee.
The main takeaway was that even in Kenya’s legislative environment, there is no clear definition of who is an asset financing company and how they differ from digital vs non-digital.
The only law that could try to answer that question was the Hire Purchase Act of 1970 which is old. This is in Kenya alone but if you go to the continental level, there are also similar challenges.
These challenges not only hinder growth but also creates an unfriendly space not only for the players but also for the customers.
We also have infrastructural challenges where you get systems like the charging infrastructure is very cost effective. In Kenya, for instance, we have a relatively stable, reliable and predictable grid that makes it easier to think about EV unlike in other markets.
With ICE vehicles, one can go to any station and have their vehicle fueled but with EVs because all manufacturers are in the MVP stage with their solutions, they do not want to expose the technology to others.
So you will find that charging that is compatible with asset brand A is not compatible with asset brand B. This creates a challenge because can these individual players concentrate the market with charging infrastructure? The answer is yes but at what cost and what time?
Where you see there is a single dominant player like in Rwanda, the expansion is happening because there is no complexity while in Kenya, because we have 10 EV manufacturers, we will need to have 10 different charging infrastructure.
Do you advise customers on which EVs they should go for?
No, we are a brand agnostic company and this is a very central part of our business. We do not want to dictate our customers’ choices and by doing so we encourage them to go for choices that we think will fit their needs.
We also create a friendly competitive ground for all players and through this way, we encourage technological advancements and price competition hence the sector keeps growing.
Would you say that you have innovative financing models that you have developed or adopted to support e-mobility transmission?
I wouldn’t say that it is innovative or rather a different solution. By recognising that with e-mobility, you get an advantage that you don’t have over ICE which is IoT (Internet of Things).
Something that is really exciting about EVs is that, for example, with a boda boda, if you want, you can control the number of passengers that can go on one motorbike and you can even put weight limitations real time. Everything is connected electronically.
The risk of operating an asset can also be minimised because once can control the behaviour of their customers, this ranges from how fast they can drive, how many kilos they can carry to even what location they can go to.
For financiers like us, this means a minimised risk. If you look at our portfolio, EV come at the lowest price as well as lowest barrier to access which is the down payment. For ICE, a customer will have to pay anything from 15% to 50% of the asset’s value down payment while for EV it starts at 8%.
E-mobility requires a strong ecosystem i.e., vehicle suppliers, charging infrastructure and maintenance services which can be very cost intensive as you had earlier mentioned. How have you collaborated with key stakeholders to create a seamless ecosystem for e-mobility financing?
If you reflect back to 2023, in Kenya, this was when we started seeing some serious efforts being poured to drive the adoption of electric vehicles. By the end of the year, collectively as players in the EV sector, we had put 2,000 bikes on the road in Kenya.
While this was happening in Kenya, in Uganda, Watu was doing a pilot where we were trying to vertically integrate our business. We strategically invested and partnered with vehicle and battery manufacturer company, GOGO, and built our own charging infrastructure from Entebbe to Kampala.
In less than 8 months, we were able to finance over 1,000 electric bikes. This shows that there is a big room for disruptive innovation to the existing models so that we can actually drive the adoption faster. We can say this with confidence because we did four times what the e-mobility sector did in Kenya, in Uganda.
This year, we will likely finance 5,000 electric bikes in Uganda and this is a scale Kenya is yet to achieve irrespective of how many players there are.
It is not like the way we finance or our terms. We basically play around how the entire value chain looks like and ask ourselves, what if we control everything or what if we control this part and not this part? What will happen?
This is a promising end game because what if it was 10 companies doing something similar in different markets? It means that in two or three years we would have an interesting solution that indicates that if you want to scale, this is the formula.
How do you measure the environmental and social impact of the assets you finance particularly with regard to reducing carbon emissions and creating new job opportunities?
We have a carbon credits system where we calculate the carbon tonnage that we are either displacing or placing by putting the EVs on the road. We have employed over 3,000 full-time employees across our markets where 1,400 are in Kenya.
Watu does not own any asset until a customer has defaulted to pay because when a customer is purchasing a new asset, they get it from the dealerships who have equally employed people.
Defaulting to pay for an asset by our customers rarely happens but we have designed a business model to hedge against such risks.
Through our dealership networks, we estimate 3000-4000 indirect job opportunities have been created.
Some of our customers are individual entrepreneurs where some of them have fleets of motorcycles and are employing other people. Considering we have financed over 500,000 boda bodas over time, this means that we have created over 500,000 jobs opportunities through our clients.
How receptive have customers been to the idea of financing of EVs? What strategies have you employed to build trust and encourage the adoption of these new technologies?
Adoption of EV is not entirely a customer problem but is highly dependent on the infrastructure which is a huge challenge.
The biggest driver for customers to go the EV way is actually driven by economic benefits. On average for a boda boda rider to operate an EV, the cost including fuel is less than 50%. If you reverse the equation, it means they are making more than 50% of what they used to make.
With the right infrastructure in place, I do not believe it would be a big push to drive that adoption.
How is tech, particularly AI and data analytics shaping Watu’s approach to risk assessment and loan approval for e-mobility assets? Do you have any plans to scale in this regard?
I wouldn’t say we are using AI and Big Data to do customer selection, risk assessment or credit vetting. We have factored that into our business model to open up opportunities for everyone, literally.
The reason is when you start doing so in any African market where digital adoption is probably not that high, you are already segregating a majority of people.
For example, on average today 40% of our new smartphone customers who take smartphone financing are migrating from feature phones which is basically 4 out of 10.
Our philosophy is simple. We operate with trust largely and that gives us the confidence to tell that boda boda rider that we trust them and even though there are a million biases against them from society, we know they have a vision, they are hard workers and contribute positively to the economy.
In the push for gender inclusivity in financial services, how exactly are you ensuring that women, youth and other marginalised groups can access financing for e-mobility and what are some of the results you have seen so far?
The good news is roughly over 90% of our customers are youth under the age of 30. On the mobility side, you may think the gender split between our customers will be skewed towards the male figure which is not true.
Majority of our customers are men but the majority of the owners of the boda bodas are women. An interesting fact is that women are better at repaying as compared to men.
We also conduct capacity building during our onboarding processes which is a thorough walk through of how the asset financing works with Watu, terms and conditions and even after issuing an asset, there is an open opt-out option where a customer can drop out, return the asset and they receive their down payment.
What do you see as the future of e-mobility in Africa and how do you envision your fintech contributing to the larger goal of making financing more inclusive and sustainable across the continent?
We believe the future of last-mile transportation in Africa should be electric. This is why we are championing adoption and accelerating e-mobility.
By making these efforts, we believe, at scale, the economic incentive will pour in because this will be the most profitable, cleanest and sustainable form of transportation.
Even in countries where there are grid connectivity challenges, there has never been a shortage of sun in Africa.
One can actually invest in solar and wind to actually power the charging stations. Africa is positioned in an interesting space where we can actually tap into this and drive this agenda forward fast and also at such an unprecedented scale.
Given that we are still in the early days, we are still experimenting but when we get there I believe the future will be electric.
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