OZE: Not Boring Investment Memo

You can’t walk into a bank with a pile of handwritten books and get a loan.

There are some startups, like Khatabook and BukuKas, that do record-keeping, and others, like Tala, that do digital lending. OZE is unique in the developing market in doing both. It’s most similar to Square with a Quickbooks integration.

To be sure, building a business in a developing country is high risk. OZE was the first subscription app in Ghana, for example, so not only did they need to educate users on mobile accounting, they needed to educate them on the business model. There was no guarantee that it would work. But high risk can mean high reward. By being first to market, O... See more

95% of transactions in most African markets, even Nigeria, are still in cash, so the only way to get an accurate picture of performance is to incentivize customers to record cash transactions.

In Africa, where small businesses are the backbone of the economy, most businesses still use paper ledger books to record transactions. That means poor insights, lack of access to credit, and too often, failure.

While there aren’t any scaled digital record-keeping companies in Africa, there are digital lenders. But since they don’t own record-keeping, they actually don’t have a good way of knowing who’s serious. As a result, they mainly target consumers instead of small businesses, because consumers need smaller, and therefore less risky, loans.

Businesses can’t use their data to make smarter decisions.

Paper ledgers are a problem for two reasons:

Payments make the whole cycle more powerful while also generating revenue for the company. By integrating with Paystack, they avoid building a payments company for each market they go into and avoid the regulation (and hefty central banking deposits that come with it) to register as a PSP.