Catalyst Fund recently launched a $4.3 million Inclusive Digital Commerce Accelerator in Ghana to improve the financial resilience of informal micro, small, and medium enterprises (MSMEs).

Managed by BFA Global, Catalyst Fund partnered with Mastercard Foundation and MEST to scale up digital commerce companies in Ghana to support the digitisation of micro and small enterprises (MSMEs) in the country.

The two-year program aims to improve the livelihoods and financial resilience of MSMEs in Ghana impacted by COVID-19, enabling them access to digital commerce platforms and access to markest.

Techbuild.africa had a chat with Jane Del Sar, Program Lead at Catalyst Fund, Ghana, and she took us through the state of digital commerce companies in Ghana and what the funding meant to them.

The state of digital commerce companies in Ghana

According to the Partech 2019 Africa report, tech startups in Africa raised a record-breaking $2 billion in 2019, recording a 74% growth.

“In Africa, $134 million was invested in startups in the E/M/S/commerce space, which accounts for just 6.6% of the total funding across 30 deals, but it is exhibiting 36% growth.”

Jane explained that by comparison, startups in Ghana raised $55 million in funding, and none of the companies’ primary sectors were E/M/S/commerce.

“They rather focused on off-grid tech, health tech, insurance, and fintech more broadly.“, Jane noted

According to Jane, Briter Intelligence estimates that e-commerce funding from 2019 for companies with operations in Ghana amounts to $21 million.

This excludes regional players like Jumia Group who has raised upwards of $823 million and IPOed in April 2019, nor the recent acquisition of Paystack, a fintech player that touches digital commerce, for $200 million.

Digitising MSMEs in Ghana outside of the Catalyst Fund initiative

According to Jane, the Ghanaian Government announced the Digital Ghana Agenda in 2018, an initiative that seeks to:

digitise government services
build a biometric National Identity register
deploy a digital property addressing system and
promote mobile money interoperability.

Included in this was institutionalising paperless port operations as part of the development of a robust framework to support the digitisation of the Ghanaian economy, and in a manner that captures and benefits every citizen.

“The Government laid out the 2019 roadmap with specific initiatives that will turn Ghana into an ICT hub for sub-Saharan Africa and transform Ghana’s economy into a digitised, formalised one.

The roadmap focuses on extending digital public services, especially to the informal economy where vulnerable populations are concentrated.”, Jane explained

In May 2020, Ghana launched the world’s first digital financial services policy (DFS), to increase access to formal financial services and amplify the effectiveness of DFS-related COVID-19 measures, to boost business patterns in the informal economy.”

Jane further explained that digitisation regarding digital commerce, Ghana ranks 7th among 10 African countries in the United Nations Conference on Trade and Development 2019 B2C E-commerce Index and has a 55% mobile penetration- the highest in West Africa.

Ghana has a population of about 31 million people, and 15 million smartphone users, 10 million mobile internet users, and 13 million active mobile money accounts, and E-commerce revenue in the country projects to reach $855 million by 2024.

The Effect of non-digitisation on Ghanaian MSMEs during the lockdown

“COVID-19 has threatened the livelihoods of an estimated 1.6 billion workers in the informal economy.

The Ghanaian economy is characterised by informal establishments (62%), where MSMEs makeup 92% of all businesses while contributing to 70% of the GDP.

The smallest of the small – the micro and small enterprises are concentrated in the informal sector and tend to be operated by youth and women (women constitute about 90% of labor in an informal economy) since opportunities for formal employment are limited.”

Jane noted that from a BFA Global COVID-19 survey, indications show that 44% of low to middle-income self-employed people in Ghana had lost their jobs or could not find work.

“The Ghana Statistical Survey business tracker data reports that 92.2% of micro-enterprises reported decreased sales (compared to 89% of small and medium enterprises, and 45% of large enterprises), and sales across industries have fallen by 60.9% relative to last April, with 46% of businesses reducing wages for 25% of their workforce.”

Benefits of digital commerce

Techbuild.africa quizzed Jane on her thoughts about the advantages digital commerce pose to Ghanaian MSMEs.

She explained that the Catalyst Fund Inclusive Digital Commerce Accelerator will scale 6 digital commerce companies in Ghana to improve the livelihoods and financial resilience of informal micro and small enterprises who impacted by COVID-19.

“By enabling access to digital commerce platforms, we will help informal businesses and workers to engage in the digital economy, providing access to new opportunities

In Ghana, digital commerce companies have yet to reach the mainstream, nor are many existing solutions designed in an accessible, affordable, or appropriate way for the low-income, digitally and financially excluded populations

In seeking to strengthen resilience against the systemic shock of events like the COVID-19 pandemic, we believe that digital commerce can help under-served segments rebuild their livelihoods

Opening doors for new or additional income sources, the discovery of new types of digitally-enabled livelihoods, and the pursuit of meaningful and decent work.”

Driving digital commerce around MSMEs in Ghana

On what Catalyst Fund is doing to drive the narrative from physical to digital commerce around MSMEs in Ghana, Jane noted that digital commerce companies struggle to grow their B2B customer base from offline to digital, as acquisition is time-consuming and resource-intensive.

Jane highlighted that Catalyst Fund acceleration model provides expert support on elements including:

marketing and customer education
operational and business insights
development of accessible technical infrastructure
facilitating partnerships with logistics
digital payments

Also included are the financial players who can help these companies scale and create meaningful value for informal micro and small businesses.

“A key area of focus for our work with digital commerce companies is to scale their onboarding strategy to easily enable informal micro and small enterprises to begin leveraging digital commerce.

As a program, we hope to bring 25,000 new small businesses into the digital economy in Ghana

“We know from our years conducting consumer research in last-mile and digital and finance excluded markets, that increasing trust in selling and buying online is very vital.”

Both consumers and businesses are wary of making online payments and fear the risk of fraud throughout an online transaction, as there is often a lack of information, transparency and buyer or seller protection, and standard return policies in digital commerce.

Jane further explained that Catalyst Fund’s AAA approach, as well its trust toolkit offers inclusive fintech frameworks that companies can apply to the design of offerings seeking to digitise underserved customers in ways that increase trust and adoption of digital products and services.

Catalsyt Fund’s partnership with Mastercard Foundation and MEST

Jane noted that the Catalyst Fund Inclusive Digital Commerce is the first expansion of its flagship program into new sectors, as it looks to focus on new areas where embedded finance plays a role by enabling digital commerce.

According to Jane, the new program has support from Mastercard Foundation, as part of its COVID-19 Recovery and Resilience Program.

This is in alignment, with its Young Africa Works strategy to enable 30 million young people in Africa, especially young women, to secure employment they see as dignified and fulfilling by 2030.

The program operates with MEST as a country partner.

“We are currently preparing for our first program cycle, for which we will start vetting growth-stage digital commerce companies in November of 2020 to select for the program.

Companies interested in the program can express interest here.

We will work with the first cohort of 3 companies from December 2020 to June 2021 and the second cohort of 3 companies from September 2021 to March 2022.”, Jane noted

Lessons learned from supporting inclusive fintech companies

Along with 3 peer accelerators in the fintech space, Catalyst Fund recently published a brief which discusses core elements of effective acceleration for inclusive fintech startups.

Key observations from Catalyst Fund include the impact of sourcing and selecting startups for the accelerator, through objective expert advisory committees who also agree to mentor the companies throughout their journeys.

With deep, bespoke venture building support that meets entrepreneurs’ particular needs at the time they are entering the accelerator, combined with flexible grant capital; and the need to also build the ecosystem around companies, unlocking capital through one-on-one connections with investors and de-risking companies for potential partnerships with corporate innovators.

Catalyst Fund has delivered out-sized success through its model which combines these core elements, led by experts from BFA Global, and works on two levels to advance the inclusive fintech ecosystem:

1) Company acceleration consisting of catalytic grant capital, bespoke venture building support, and connections to investors and corporate innovators

2) Ecosystem acceleration to unlock capital from investors, enable pathways to scale, and bridge talent gaps.

Featured Image: Jane Del Sar, Program Lead at Catalyst Fund, Ghana

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