Empowering African Capital Markets: Insights from Collen Tapfumaneyi, CEO of Escrow Group

Interview with Collen Tapfumaneyi, CEO of Escrow Group

Could you provide more details about the functions and extent of Escrow Group’s operations?

Escrow Group is a diversified entity specializing in solutions for both capital and commodity markets. We position ourselves as enablers within these markets, offering operational and technological solutions. Our primary focus is on enhancing financial inclusion by introducing innovative, cost-effective, and convenient access to these markets, regardless of location. Our platforms serve as the nexus for connecting market participants and streamlining intermediary processes, thereby facilitating the execution of mandates in both capital and commodity markets.

Could you share examples of the primary solutions offered by Escrow Group?

We provide a range of solutions, starting with issuance platforms for securities. This involves facilitating the issuance and listing of securities on both formal and informal markets, along with trading and clearing solutions for these securities. Essentially, we centralize the processes of issuance, listing, trading, and settlement for securities and commodities. Surrounding these core platforms, we offer access channels for various ecosystem participants, such as order management systems and onboarding systems. Additionally, we provide back-office solutions to efficiently manage and settle transactions. Our solutions are accessible via mobile platforms, catering to both demand and supply sides of securities and capital markets.

We employ a similar model in commodity markets, facilitating the conversion of physical commodities into tradable securities. For instance, a farmer can deposit maize in a certified warehouse, which we then convert into a tradable instrument—a receipt granting access to trading and financing opportunities. Our payment agents facilitate smooth fund transfers between buyers and sellers, eliminating the need for direct bank interactions. Essentially, our comprehensive services benefit various market operators, including stock exchanges, depositories, fund managers, traders, stockbrokers, custodian banks, and are often integrated with mobile network operators and payment switch operators across both capital and commodity markets ecosystems.

Could you elaborate further on how your integrated platform streamlines the capital market participation process for your customers?

Traditionally, engaging in capital markets required multiple visits—to stockbrokers, banks, custodians, and depositories—for various account openings and paperwork. However, with our integrated platform, it is streamlined onto a single interface. You register once, and your details are shared across the entire ecosystem. Once registered, you are visible at every stage, whether it is with a depository or a chosen stockbroker. This means you can start buying securities within minutes, compared to the previous process that took days or even weeks navigating registrations and depositing funds before placing orders.

Could you delineate your competitive edge, particularly in light of the presence of systems developed by larger IT and financial services companies already established in Zimbabwe or Kenya?

It is important to note that platforms like the New York Stock Exchange and NASDAQ are primarily driven by the marketplace provider. When accessing securities on these platforms, there are numerous options available, with multiple platforms facilitating trading activities. However, local stock exchanges such as the Lusaka Stock Exchange or the Nairobi Stock Exchange require unique platforms tailored to their specific ecosystems and regulatory frameworks. This represents a gap where similar platforms, while prevalent elsewhere, may not be available on our platform. For instance, while trading foreign currency on a mobile platform in Zimbabwe is feasible, trading local securities issued in Zimbabwe might lack accessible platforms. This is where we come in to bridge the gap. Additionally, in the domain of commodities, regions may lack organized commodity exchanges altogether. Our company not only facilitates the creation of these markets but also provides the necessary platforms. Furthermore, we extend our services to include mobile platforms accessible even to rural farmers, enabling them to participate in organized commodity markets with simplicity and ease. In essence, our competitive advantage lies in our specialization in innovation and our ability to cater to unique market needs.

Do you encounter competitors, or do you operate as the exclusive provider in Zimbabwe?

I would not say we are the only provider, but in terms of our scope, it is quite unique. While there may be variations or fragments of what we offer available elsewhere, the Escrow approach stands out as a comprehensive platform. For instance, a stockbroker might offer a mobile app for client transactions, but that is just a fraction of what the Escrow platform encompasses. We have developed a platform that integrates seamlessly with stock exchanges, fund managers, banks, and stockbrokers, providing a unified solution. While individual parties may have partial solutions, such as a bank offering a mobile app for transactions, it does not encompass the broader reach of a stock exchange, which we provide. In Zimbabwe, our Escrow platform allows access to any stockbroker, commodity, security, custodian, or fund manager, all on a single platform. This unique integration sets us apart as a one-of-a-kind solution.

What are the main challenges you are currently facing?

Our markets are still in the early stages of development, even in their basic form. Consequently, liquidity can be an issue, and transaction volumes are often low. This poses challenges in envisioning the scalability of our initiatives. Take Zimbabwe, for instance, with a population of around 15 to 16 million. When you consider the minuscule percentage of financial inclusion, particularly in the capital markets, simply having a platform available does not automatically attract users; we need to generate awareness and educate people about the assets and instruments available. It is a complex process, especially when explaining concepts like converting commodities into financial instruments listed on an exchange, which requires significant investment in raising awareness.

That does sound like a considerable communication effort. However, isn’t this typically the responsibility of banks? Shouldn’t they be the ones offering such solutions to both institutions and the public? Essentially, you’re reaching out to banks, traders, and financial institutions to offer your solution. These major banks already have established networks; they could readily incorporate this additional service into their offerings, facilitating access to the capital market.

Absolutely, I agree. But it is a gradual process. It starts with ideation, then moves through development, testing, and piloting until you have a functional prototype. We invest our own resources to demonstrate its viability. As it starts functioning, it begins to attract interest. It is about transitioning through these phases. The fact that it is operational means several parties have accepted it, but now we need the wider ecosystem to embrace and promote it. The timeline for this transition depends on resources. With adequate capital and resources, it could take a few months, but without, it may take longer. We have been investing time to prove a concept previously untouched in this region. This requires significant sacrifice on our part. However, these solutions are live and operational. We have already garnered interest from several banks and even the national switch. But to expedite adoption, we need a budget for communication efforts. Above-the-line communication, like holding conferences and appearing on platforms like TV and DStv, along with third-party endorsements, can accelerate acceptance, but, of course, this requires investment.

What are the main projects you’re currently concentrating on? Could you share some details about your ongoing efforts and initiatives?

Currently, we have successfully implemented a comprehensive commodity exchange platform in Zimbabwe. This platform encompasses the warehouse receipt system, spot market trading, and derivatives trading. Presently, we are focusing on developing financing products where banks and other financial institutions can provide liquidity against this solution, accessible to registered producers on the platform. We have covered the trading and warehousing aspects and are now concentrating on unlocking the financing aspect. This is a significant project in Zimbabwe, and we are also exploring similar initiatives in a few other African countries.

Another project we are deeply engaged in is SME financing, aimed at automating access to capital markets funding for small and medium enterprises (SMEs). Traditionally, capital markets have catered to large companies capable of listing, leaving smaller enterprises underserved. We are leveraging technology and innovation to bridge this gap, providing visibility to up-and-coming SMEs to capital market investors through automated processes. Currently, we are in the process of implementing this initiative in Zimbabwe, Zambia (with the Lusaka Stock Exchange), and Kenya (with the Nairobi Stock Exchange). Our focus now is on rolling out these platforms in these respective markets. These are the primary initiatives we are currently pursuing.

How do you envision the position of Escrow Group three years from now, especially regarding your strategies for market acceptance of your product, among other factors?

In terms of our vision for Escrow Group, we aim to facilitate inclusion of small businesses into the mainstream capital markets at a continental level, specifically focusing on the African continent. Ideally, within three years, we envision our platform covering the entirety of Africa, enabling small and medium enterprises that meet the criteria to access capital markets digitally. On one hand, we aim for these enterprises to be primarily financed by African individuals, mobilizing savings and converting them into investments targeted at high-growth, emerging enterprises.

Our goal is to build such an ecosystem, addressing two significant aspects. Firstly, providing support to these enterprises with patient capital, fostering sustainable development through employment creation and increased productivity. This stands in contrast to microfinance capital, which often burdens these enterprises with high-interest rates.

On the other hand, considering the youthfulness and informality of the African economy, we are concerned about social protection for this population as they age. Traditional retirement plans are inadequate, hence our aim to influence an investment culture through these platforms. Not only do we seek to offer individuals a decent return on their investments, but we also aim to foster a long-term savings culture.

In three years, we anticipate our platforms to have firmly established themselves, providing both retail investors and Small Business Enterprises with access to transformative opportunities, thereby contributing to the overall transformation of economies.

We are interested in learning about your sources of inspiration. What motivates you in your work, and what guiding principles shape your life philosophy?

My perspective on life revolves around viewing every challenge or problem in society as an opportunity for innovation and solution-building. I believe that problems serve as a catalyst for thinking outside the box and fostering innovation. It may be tempting to avoid challenges and seek comfort in easier endeavors, but I am driven to make a difference where it is most needed, where problems exist. However, it is essential not to misconstrue these as purely charitable intentions. I firmly believe that individuals should be entitled to receive returns or compensation for their efforts, creating a win-win scenario. This ethos extends beyond personal life and permeates into business. I believe that business should be about more than just survival and profit-making; it should also be about making a positive impact on society.

For me, satisfaction comes from two fronts. Firstly, there is the sense of accomplishment in surviving and generating profits. Secondly, there is immense gratification in witnessing the tangible difference we make in society. It is incredibly fulfilling to encounter individuals who genuinely appreciate the work of Escrow Group. Seeing someone hold shares in a large company for the first time, even if it is just a few shares, and knowing that our innovation made it possible, is deeply rewarding. Previously, without this innovation, participation in capital markets might have been inaccessible. Knowing that I have contributed to such changes motivates me to wake up every day and head to the office.

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