Haba na haba: small investments for big impact

African diaspora are critical yet underutilized source of capital for Africa. In 2023, diaspora remittances to Sub-Saharan Africa was $49bn with majority being sent to family members to cover short-term food, health and education bills.

Remittances to Kenya were $4bn in 2023 - the largest foreign exchange earner ahead of tea, coffee and tourism.

Despite this potential, there are barely any vehicles that facilitate the flow of capital from the diaspora to high-potential opportunities in Africa. The diaspora is rife with stories of being swindled thousands of dollars by close friends and family as they attempted to make an investment back home. There is also limited variety of investment opportunities with land and real estate being the bulk of opportunities offered.

On the flipside, the credit gap in Africa is $330bn, leaving over 20 million formal and informal SMEs without access to capital. In Kenya, this is estimated to be $17bn.

Haba Capital seeks to harness the collective power of diaspora capital in closing the SME credit gap in Africa. We source and vet investment opportunities, match them to diaspora individuals, and manage the investment on their behalf.

We focus on alternative investment opportunities that have potential to bolster employment and creating economic value in Africa; instead of making speculative investments in land or real estate.

By pooling resources, a small investor can access alternative opportunities that would otherwise be a reserve of high-net-worth investors.

Haba Capital is focused on solving a big problem in small way. We obsess over serving our investors and our clients in the best way possible and growth is secondary to quality of execution. Haba capital has grown purely by word of mouth, and we have deployed >$2m from 102 investors thus far.

In the short term, Haba is targeting the ~500,000 Kenyans in diaspora.

Our platform brings much needed professionalism to diaspora investing, which makes it easier for them to hold Haba accountable for our actions or inactions (vs hesitation in confronting a family member, in case of any problems). With a streamlined and scalable platform, we believe that the $4bn in annual remittance to Kenya can be significantly larger.

Haba is also targeting the 68% of Kenyan SMEs that still cite access to finance as a challenge. We focus on entrepreneurs with strong credit profiles but simply facing cash shortfalls due to mismatch in payables and receivables. We also utilize creative ways to secure our investments instead of requiring collateral, which prohibits majority of SMEs from accessing credit.

Haba’s team has an appropriate balance of technical and interpersonal skills, diversity, and global and local experience.

Haba has an executive team that conducts preliminary sourcing, vetting and managing of investment opportunities. They are also the primary points of contact for the diaspora investors.

Three of the four Directors are women and half of Haba investors are women.

Three of the four Directors are all former members of the Diaspora with lived experience of having the desire to invest back home but not finding viable channels to do so. We also have work experience from reputable investment firms abroad and in Kenya. All Directors are based in Kenya, which enables us to have genuine first-hand experience of trends and track where opportunities are. One Director will however leave in September 2023 to join Harvard Business School for her MBA.

Unique to Haba, we also rely on our extensive network of African investors who are professionals around the world. For example, as we evaluate a potential investment in a technology business, we are sure to incorporate input from Haba’s investors who are in tech – working for companies such as Google, Apple, among others.

Haba currently serves at least 102 investors, with some being small groups of friends who invest together. 31% are based in the US, 51% in Kenya of which most are returnees, and 18% split in among various countries.

We have invested in 51 companies, some of which offer credit to thousands of individuals and SMEs; for example Asante Financial Services, Platinum Credit, and Nexen Microcredit

Solve will put us on a path to growth. We have grown organically and have more interested investors and clients than our capacity can handle. Investors are always introducing us to other investors and our client companies are always introducing us to fellow entrepreneurs.

Given the sensitivity of our business, doing it right is better than doing if fast hence our desire to join Solve to connect with a network that can help us prepare for scale.

Specifically, we are keen to adopt a robust technology platform that will serve investors and clients at scale.

Finally, our business has been built on trust thus far and we are alive to the fact that we live and die on trust. We have never pitched Haba Capital and believe that MIT Solve will be a good platform to enhance our validity, as well as demonstrate our genuine intention to make Haba an impactful platform for both our diaspora investors and SME clients.

We do not seek to turbocharge our growth but rather to ensure our growth is sustainable. Solve will enable us to graduate from crawling to walking and then jogging. Later, we will be ready to run, sprint, and eventually fly.

We provide an equitable environment for employees, and potential clients.

We conduct frequent employee appraisals and offer opportunities for them to learn and grow.

We strive to upskill especially women entreprenuers who may be less familiar with private credit, and who may need guidance of how to think about their finances in general.

We charge a fee to our investors comprised of: a percentage of their investment and a percentage of their returns.

Given we can limit our expenses to revenue, we are already sustainable. However, to achieve the minimum team size, office space, technology, etc that we desire, we require a capital base of $10M. The fee we charge on the $10M capital base will be sufficient to cover expenses.

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