South Africa’s Standard Bank has taken a stake in local fintech firm Nomanini to offer credit to potentially millions of small shop owners and other informal retailers across Africa that have limited access to banking services.

Africa’s biggest bank by assets has invested $4 million in Nomanini, which connects informal merchants with distributors via an e-wallet, and aims to roll the service out across 14 African countries by early 2021.

Nine out of 10 retail transactions in Africa are conducted in cash or via informal channels like kiosks and open-air markets, according to a 2017 report by audit firm Deloitte.

Using Nomanini technology, Standard Bank will collect and analyse data on the retailers. Adrian Vermooten, Standard Bank’s head of digital in Africa regions, said data on just one primary product line, such as pre-paid airtime, was enough to proxy the risk associated to that shop, build up a financial profile and understand its ordering patterns.

This will allow the bank to pre-empt the trader’s re-stocking needs and send them alerts offering to arrange and underwrite its next order, for instance.

This could be done via Nomanini or Standard Bank devices supplied to the traders or by leveraging other existing networks or devices from third parties - whatever fits best in each market.

Vermooten pointed to tens of thousands of informal traders who currently act as mobile money agents in African countries. “Those are all small little businesses that we find really attractive,” he said.

At a later stage, the bank will look to help those retailers offer financial services, like cash deposits and withdrawals, to their customers.

Vahid Monadjem, founder and CEO of Nomanini, said even just 100,000 retailers could reach between 50 million and 150 million people.

Standard Bank hopes that its licences to lend and offer other products, such as insurance, will give it the edge over mobile operators that currently dominate financial services in markets like Kenya.

Kenyan telecom company Safaricom has pioneered offering Kenyans without bank accounts a network to transfer cash via mobile phones with its M-Pesa mobile payment service platform.

Standard Bank will also face competition from traditional rivals such as FirstRand, which has also teamed up with a fintech firm to target informal businesses.

New players are entering the fray too. Digital-only lender TymeBank, which launched this year, is planning to offer business accounts, while a bank set up by money transfer service Hello Paisa and lender Sasfin is specifically targeting informal retailers.

Hello Paisa’s Managing Director Ahmed Cassim told Reuters in an interview on Monday that the bank, launched in June, would offer retailers point-of-sale devices in order to collect data that would allow it to sell them products like loans and insurance - a strategy similar to Standard Bank’s.

“I think the penny has dropped that the opportunity exists,” Cassim said, adding that moving a retailer away from cash also allows its customers to shift towards other methods of payment, further expanding the addressable market for financial services.

LONG-TERM OPPORTUNITY

Africa is the world’s second-fastest growing banking market, according to a 2017 McKinsey report.

Standard Bank and Nomanini will roll out their service in South Africa, Zambia, Mozambique, Malawi, Angola, Zimbabwe, Namibia, Ghana, Nigeria, Kenya, Tanzania, eSwatini and Lesotho.

Other products it will offer the retailers include short-term savings and insurance.

Nomanini is open to partnerships with other banks elsewhere, but says its partnership with Standard Bank alone will give it substantial geographical reach and product range.

“The scale of the opportunity for Nomanini within Standard Bank’s footprint can keep us busy for a very, very, very long time,” Manadjem said.