The fintech reopening access to African markets

Editorial

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Esca positions itself as a platform that enables stability and revenue protection within volatile and emerging markets. Particularly, they are interested in the African markets and the difficulties institutions and banks have faced with growth and investment in an area prone to frequent market volatility.

CEO and founder, Shalom Osiadi said “A lot of these business were unable to actually acquire the hard currencies required to book the profits they had made in the country. For example, GlaxoSmithKline has existed in Nigeria since 1955, they generate all their revenue in the local currency: the naira. They book this revenue by a forward contract with the Central Bank of Nigeria. The Central Bank of Nigeria does not have enough foreign currencies to actually settle this debt that they have with these multinationals. And so businesses like GSK, they go to the parallel market to look for liquidity and then the parallel market is 3-500 naira above what the central bank rate base is, so they’re already losing a significant amount of profit margin just by trading on the spot.”

The concept of Esca is essentially to take this on-the-spot fragility and replace it with a predictable, stable platform that protects revenue and, by extension, reopens growth within the continent.

Osiadi explained this: “We have understood that financial engineering really is the key to these markets, right? Once we understand how the macroeconomic environment works, how the numbers work, we can easily translate that into code. So what we’re trying to do now is take our algorithms from Excel spreadsheets onto our platform.”

With a long-term vision to increase foreign direct investment in the continent, they recognise that it must be done in a safe, transparent, and predictable way. Restabilising investment into the area provides a number of challenges, fundamentally education and platform experience.

Speaking about the platform’s future, Olumide Olugbemiro, co-founder and CTO, said the user experience has to be consistently seamless: “To be honest, the more complicated it is, the more they don’t understand it, the more we have to jump on calls to explain. So, I’d say making the experience as seamless as possible, as easy and explanatory as possible.”

On education, Osiadi explained how “One of the biggest challenges we had and we still have at Esca is educating African finance managers, CEOs, and CFOs on why currency hedging is important for their business.[…] so you have to change the mindset slightly to let them understand that long-term gain is better than short-term accumulation.”

Part of their approach to encouraging investment has also included making cryptocurrency accessible to non-crypto firms. This educational point has been key to this; by simplifying the complex elements and focussing on using their own experience to allow users to send, for example, fiat currency to an account and receieve cryptocurrency in a wallet tomorrow. 

Osiadi said “By using that experience, we’ve grown our business by over 300% in the last six months. We’re forecasted about $6 million in revenue this year. Based off of that knowledge that we’ve gained from an existing product we’ve built, we’re now translating it into complex products like derivatives.”