The Mobile Platform Democratizing Investing for Young People in Nigeria
Cowrywise is giving young Nigerians new tools to build their wealth over time
When Razaq Ahmed’s friends turned to him for financial advice not long after they’d graduated college in Nigeria together thirteen years ago, he had little to offer. As an investment analyst, money planning was his bread and butter, but like all fund managers in Nigeria, Ahmed worked only with the country’s wealthiest people. His friends just out of college had nowhere near the kind of cash it would take to open an investment account, never mind making long-term financial plans. “In Nigeria, fund managers focus on the top one percent,” he says. “They are either not focusing on scaling or found scaling a difficult path to tread.”
But Ahmed couldn’t get the question out of his mind: Where were the investment and financial tools for young people like himself in Nigeria? He saw a massive untapped need. In a country dominated by young people, where the median age is 19, why was there no way for the average person to invest and plan for their financial future?
Since the start of democracy in 1999, Nigeria — the largest economy in Africa — has become increasingly market-friendly. The gradual removal of economic barriers has resulted in a rapidly growing GDP — up fourfold from $500 per capita in 1999 to more than $2,200 in 2019. What’s more, with virtually every young person owning a smartphone, today the vast majority of Nigerians are far more tech-savvy and globally connected than they were a decade ago. “While the per capita income is still relatively low, there’s huge potential for growth,” says Ahmed.
This untapped potential is what drove Ahmed and his cofounder Edward Popoola to launch Cowrywise in 2017, an investment platform designed to meet the needs of young Nigerians wanting to take control of their finances. Between Ahmed’s deep understanding of Nigeria’s financial markets and Popoola’s computer engineering experience in the telecom sector, the longtime college buddies were able to design a mobile platform that made the investment process easy and gave users tools to make the best financial decisions.
For users, getting started takes five minutes. They simply need to input their name, email address, phone number, and bank verification number — the Nigerian equivalent of a social security number. Users can set up a savings and investment account with as little as 25 cents. And they can automate the process of moving money they earn into an investment account so that they are continuously on track for their financial goals.
The platform’s name is inspired by the cowry, a sea snail representing wealth that was once used as a form of currency throughout Africa. “Just as we have paper money today, cowries were once used as money,” says Ahmed. “The whole idea behind Cowrywise is to be wise with your money. How do you build sustainable wealth over time? You need to understand how money works and be financially responsible.”
But optimizing and getting the right tools to users took its own trial and error. When the co-founders approached major telecom companies across Nigeria to help bring financial services to the mass market, they quickly realized the effort wasn’t scalable. Telecom companies were asking for as much as 30 percent of the amount invested, a share far too high to make the kinds of small money investments they were looking at feasible. “That failed massively because the economics didn’t make any sense,” says Ahmed. “If someone was investing $100, they were asking for $30 to $40 of that to use their rails.”
Luckily around that same time, a modern payment infrastructure was being built in Nigeria with newcomers like Paystack and Flutterwave creating a way to move money digitally. This meant the average young person could easily move their money online instead of having to deal with the traditional cumbersome investment paperwork and high fees. Suddenly they were able to turn their idea into an actual tangible tool.
Cowrywise makes the minimum amount needed to start investing incredibly low, with users needing little over US 25 cents to open an investment account in contrast to traditional investment companies in Nigeria where the minimum entry amount is as high as US $20,000 for some investment types. The app’s target base is millennials, with about 70 percent of current users between the ages of 20 and 30. “That to a very large extent mirrors the demographic structure of the country,” says Ahmed. “We are building for the next generation. As this cohort grows older, they grow older with the platform.”
For their app to work, they needed to not just give users the means to invest, but also teach them how to make the best financial decisions. For example, in planning for an emergency fund, Cowrywise crunches the numbers for each user’s income and expense data to recommend an optimal five-months’ savings threshold. The platform then offers options for how each user can go about meeting that savings goal and allows them to automate the process to start saving right away.
Building trust with users was one of the biggest hurdles they faced given the plethora of scams and Ponzi schemes online targeting their same demographic. To build trust and credibility, Cowrywise partnered with five major fund managers across Nigeria. The platform also emphasizes transparency so that users aren’t hit with hidden fees and know what they’re signing up for. With no money spent on advertising throughout 2020, word of mouth and referrals have been the main way the platform has acquired new users — another crucial element to building trust. And it seems to be working. What started as a base of 2,000 users at the end of 2017, has quickly grown to more than 200,000 by the end of 2020.
Today Cowrywise is focused on diversifying its asset platforms so that young Nigerians can plan for a broader range of life events — from emergency funds to education savings to retirement plans. “These young people need the tools to invest and manage their money so they can grow their wealth over time,” says Ahmed. “Their entrepreneurial spirit is extremely inspiring given their access to global knowledge. What we are sitting on is huge potential.”
Quona was proud to lead a pre-Series A investment in Cowrywise in early 2021, the firm’s first investment in Nigeria. As a fund focused on financial inclusion, we believe educating consumers and democratizing access to financial services can provide a long term impact on consumers and a nation’s economy. One of the many reasons we backed Cowrywise is the company’s core focus on educating its customer base and striving to build a comprehensive suite of products to help them grow their wealth. We are thrilled to back a founding team with significant expertise in the industry, and happily roll up our sleeves to increase the financial resiliency of the largest demographic in the nation. — Kofoworola Agbaje, Quona Capital
Disclaimer: Quona portfolio companies were selected for profiles based on objective, non-performance-based criteria for the purpose of illustrating the types of investment made by Quona funds and their impacts. These profiles are being provided for illustrative purposes only, in order to provide examples of the idea generation, research, and thought process of Quona investment teams. No representation is made as to whether or if the investment ideas represented in these profiles have been or will be profitable. It should not be assumed that Quona will be able to identify similar investment opportunities in the future, or that any such opportunities will be profitable. The above statements include the opinions of the Firm and are for illustrative purposes only. There is no assurance that any trends depicted or objectives described in Quona profiles will continue or become successful.