Jipange KuSave, M-Shwari, and the Influence of Startups

If we asked you to name a successful startup, who would you say?

Chances are you’ll think of a company like Google, Facebook, or Twitter, all of which followed the classic ideal for a startup trajectory: start small (ideally a garage or dorm room), get big, go public, and make people rich along the way. Who can argue with that?

Or perhaps you think of Instagram, which launched in 2010, never made a dime in revenue, but still managed to sell itself to Facebook for just over $1 billion. Also not a bad path: start small, become a little less small, and then let someone else buy you and scale. (Of course, this also made some people rich.)

In both stories, an idea conceived and hatched by a startup leads directly to big growth and widespread usage, hopefully making users’ lives better in the process. But can a startup “fail” and yet “succeed” at the same time? We think so – but you need to think a bit differently about what success looks like.

River crossing River crossing

Photo Credit: Joydeep Mukherjee

Consider Jipange Kusave (JKS). In 2010, a startup called Mobile Ventures Kenya (MVK) launched JKS, a flexible savings product aimed at solving a persistent financial problem faced by poor people: how to build sizeable savings on irregular, unpredictable incomes? (For a more detailed account of JKS, see this case study by CGAP) Leveraging the mobile banking platform, JKS gave each customer a nominal, interest-free loan, and held back a portion of the loan in a newly-established savings account. The use of the mobile channel enabled a quick yes/no decision about loan eligibility and immediate disbursement. Customers loved this point, especially when compared with the traditional microfinance institution, which can often take two weeks or more to approve and disburse loans. The customers could also pay back their loans as they saw fit – there were no regular installments. After repayment, they were automatically granted a larger loan (with part of the loan again diverted to the savings account).

All of this activity – loan requests, funds disbursement, savings allocation – was facilitated electronically using Kenya’s mobile money platform, M-PESA. JKS made money by charging setup fees for the accounts and a fee per loan issued, and the company began to see strong uptake of the product during its pilot phase. By 2011, JKS had acquired close to 1,000 customers; however, as the company readied for full-scale launch, the team ran into significant challenges with partner dynamics and regulatory requirements they simply couldn’t comply with on their own. Eventually, the management team decided to wind down the product, in part because M-KOPA, another promising entrepreneurial venture being launched by MVK, was taking off and consuming more time.

The end of the story, right? Another “failed” startup? Perhaps that’s true for the financial stakeholders in JKS. But for the broader financial inclusion community, the story doesn’t end there. Instead, with the help of some of the folks behind JKS, industry heavyweights Safaricom (the Kenyan telecom giant that owns and operates M-PESA) and the Commercial Bank of Africa (CBA) joined forces to launch M-Shwari. Like JKS, M-Shwari is a dual-credit/savings product, but unlike JKS, it’s distinctly savings-led: customers are able to sign up for a CBA savings account over their mobile phone and once they begin depositing money into that account, they become eligible for an unsecured, 30-day loan.

M-Shwari also benefits from the unique advantages of being able to leverage the distribution and marketing muscle of Safaricom and the balance sheet and financial compliance capabilities of CBA. The bank initially uses Safaricom’s M-PESA data to underwrite new customers, but shifts to scoring existing customers based on their savings and loan repayment behaviors.

And in just about a year, M-Shwari has reached over 5 million customers, capturing a total savings amount of $300 million and lending a total loan amount of $60 million.*

Are these the same products? No. Does JKS deserve the credit for M-Shwari? Of course not. M-PESA and CBA deserve applause for the way they’ve navigated complex customer, market, regulatory, and partnership dynamics to bring a killer value proposition to market. But, it seems to us that many of the insights and ideas from the JKS experience found their way into M-Shwari. The lessons from this experience influenced the way in which M-Shwari was designed and implemented, and the market opportunity exposed by JKS de-risked the Safaricom and CBA decisions to move forward with M-Shwari at full speed.

So JKS may have “failed” as an enterprise. It didn’t make its promoters rich. But it demonstrates another way that a startup can be successful. JKS exposed a massive customer need and a market opportunity that the incumbents had missed – and we’d like to think it played a small yet important role in enabling the now thrilling success and scale of M-Shwari.

As investors and funders consider the best way to spark innovation in financial inclusion, stories like this should prompt a closer look at how startups can expose big ideas and untapped market opportunities. Startups are nimble. They’re less invested in the status quo, and they can go after niche market opportunities that would be too small for the big fish. They have little to lose and everything to gain.

Of course, startups won’t always be the ones to scale new innovations in the financial inclusion space – this most often happens when bigger players get involved as partners, acquirers, or even imitators – but that doesn’t dilute their importance and fitness to lead the way into unknown and experimental territory.

Yes, startups often fail. But when they do, we hope the industry will be on the lookout for ways their ideas and lessons can live on as we search for the next groundbreaking way to expand financial access or service quality for millions of people around the world.

Paul Breloff and Nate Gonzalez work with Accion Venture Lab, a seed-stage investment initiative supporting the world’s most innovative financial inclusion startups. Paul is based in Washington DC and Nate is based in Nairobi, Kenya.


*These figures have been shared in presentations by executives at forums around the world, but have not yet been published formally.


22 November 2013 Submitted by Hyung-Gon Paul Yoo (not verified)

Paul and Nate, thank you for this article. It's spot on. That some portion of innovative startups will fail commercially is statistically inevitable. But as you point out, almost every major innovation, including m-Shwari, has been fueled by startups that paved the way. I continue to believe that Accion Venture Lab and other early stage emerging market investors are a crucial part of developing the ecosystem--takings risks and backing early innovators, even knowing some portion will fail. Because those "failures" will no doubt sow the seeds of the next great company/product, whatever that may be.

01 December 2013 Submitted by Owureku Asare (not verified)

Paul and Nate this is insightful and it gives some of the drive to move above any hurdle to bank the poor.

15 January 2014 Submitted by Jonathan Petrides (not verified)

Thanks for this viewpoint Nate and Paul. As M-Shwari continues to grow in Kenya and beyond the whole Jipange KuSave team are very proud of the seeds we sowed.

Although at M-Shwari we ended-up vanilla-ising (as banks love to) the products design, investing multiple millions $$ in back-end infrastructure and systems and an additional 18 months of corporate and regulator negotiations, it is without doubt that the brash experimentation and persistent lobbying and business development of the JKS team opened both Safaricom and CBA's executives eyes to the burgeoning opportunity to launch Africa's first purely mobile bank.

Interestingly an oft unsung player, and yet a prevailingly consistent leader in both JKS' and M-Shwari's development was David Ferrand and FSD. They both funded, advised, staffed and influenced the breadth of crazy inventors, entrepreneurs, analysts, regulators and banking executives down a path of success and major disruption.

My #1 lesson in this, is in future businesses oriented to upend any industry, you must find a route-to-market that does not require participation from the incumbents - which is a real challenge in the hyper regulated realm of financial services!

12 August 2015 Submitted by Caleb Wasilwa (not verified)

Thanks for this insightful article.

I am working on starting a hub in Kenya to support start ups and existing entrepreneurs.
Could you be having data on start ups in Kenya disaggregated in any form?
Any help extended to me will be greatly appreciated.

15 September 2015 Submitted by Doreen (not verified)

Very insightful indeed. and those failures really provide lessons learned that sow seeds for opportunities and innovation!

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