A report by the East African Venture Capital Association (EAVCA) indicates that a 2022 US$30 million follow-on investment in two-wheeler asset financing company- Asaak -by Resolute Ventures and an assortment of co-investors, as well as a US$ 20 million [private] debt facility extended to Asaak by Cauris in the same year- by far, represents the largest private capital deployment to a Ugandan company- outside energy infrastructure, telecommunications, and [commercial] banking tracked by EAVCA in a single year.
It further signals a strategic shift from traditional sectors and a growing investor appetite for nascent, high-potential, and high-growth sectors. This is as private capital providers increasingly look to enter new industry segments- supposed Blue Oceans- rather than compete with the fray in the more traditional sectors.
Data from the EAVCA Deal Tracker provides adequate evidence of the strategic shift, – particularly showing substantial investor interest in asset financing companies targeting Uganda’s motorcycle taxi industry (locally known as Boda-Bodas). In its latest sector series report, EAVCA takes a deep dive into Uganda’s Two-Wheeler asset financing industry segment- as an emerging and fast-growing frontier of private capital investments into the Country.
The East Africa Private Equity and Venture Capital Association (“EAVCA”) has partnered with the Sustainable Business for Uganda (SB4U) Platform in the upcoming Uganda-EU Business Forum – to be held from the 26th to the 27th of October at Speke Resort Muyonyo-Kampala, Uganda and virtually. The second of its kind, and the first after a two-year hiatus, this year’s forum is themed “mobilising quality investments and enhancing trade between Uganda and the European Union” – and is aligned with EAVCA’s overarching goal of attracting private capital investments into the region. A key feature of the forum will include live pitching sessions featuring 100 bankable projects in ticket sizes of up to US$ 1 million, as well B2B sessions, which presents an opportunity for fund managers to network and build deal pipeline in Uganda.
Growth Drivers for Boda-Boda Asset Financing
Adequate end-user demand for Boda-Boda services implies a large and growing population of both BodaBoda riders and, by extension- Boda-Boda bikes- with the industry an appealing entry point into the job market for urban youths. Conservative estimates place the Boda-Boda population at 250,000 to 500,000 riders [and bikes] In Uganda’s Capital (Kampala) and at 1 million nationally.
The Boda-Boda asset financing gap and other factors thus provide fertile ground for the emergence and scale-up of asset financing companies targeting the Boda-Boda industry. Many of these are flipping the Pay-As-You-Go (PayGo) model initially applied to last-mile financing for low-income markets in the solar industry- and are using a similar- but adapted model for Boda-Boda asset financing. Under the model, riders issue a ~ US$ 200- 260 down payment and thereafter use mobile money or point of sales platforms (MTN, Airtel, and Pay Way18) to disburse ~US$ 20 weekly payments, over 18-24 months- towards eventual ownership.