Introducing Kappa: Solving a Major Problem for Cameroonian Businesses

March 9, 2022 | 3-min. read

In October of 2021, Kappa closed a $2.1M pre-seed round led by Morningside with participation from Lake Partners. Moving money in and out of Africa remains a massive challenge that has held back African businesses and consumers for decades. Kappa is being built to fix that.

CEO and co-founder Blaise Buma was studying as a first-year candidate at Harvard Business School in March 2020 when the pandemic hit. For the rest of his MBA program, he studied remotely from his home country of Cameroon. He saw that his friends who import and export goods had a difficult time making payments and getting paid. Money transfer apps like Wise or PayPal were unavailable to them, while international wires were prohibitively expensive and slow.

While remittance apps have made it easier to move money into Africa, they aren’t designed for businesses and don’t support bidirectional flows required by most merchants. To work around these limitations, businesses typically go through intermediaries who collect local currency in Cameroon and use affiliates in the US to pay in dollars. Fees range from 5 to 20% with reliability and security posing major concerns.

Speaking to importers and exporters, Blaise quickly realized how dysfunctional the entire financial value chain was — built on top of legacy systems and beset by punitive costs and delays.

Unlike in other parts of the world, Africa’s manufacturing sector is yet to take off. As a result, Africans import almost everything — from food to garments to consumer electronics like phones, tablets, and computers — to the tune of about $600 billion per year. These importers must make payments to their global suppliers in the US, China, Europe, and elsewhere. Usually, the only options are banks or the black market.

Going through banks is an onerous and time-consuming process. Poor customer service, high transaction costs, and unfavorable exchange rates are the norm. Transactions that should take a few days end up taking weeks and cost merchants up to 9% in fees. For those looking to make frequent payments on an expedited basis, this presents a huge problem. The situation is equally dire for individuals.

In one experience, a friend of Blaise wanted to pay for an online course that cost $2,000. After completing reams of paperwork and depositing the money at his local bank, the institution still hadn’t sent the money a month later. These examples are true not just for Blaise’s friends, but also for millions of people and enterprises across Africa who must send or receive money from abroad.

While modern remittance apps have facilitated inbound money transfer, African businesses and consumers ultimately need reliable, bidirectional payment methods to connect them to the rest of the world economy. Kappa is setting out to build the infrastructure to do that — designed for ultra-low cost, near-instant local and cross-border transfers.

Building financial infrastructure is hard — especially in a fragmented market like Africa. With the investment team at Morningside, Kappa has the right backers on board to do that. For the first time, the future looks bright for Cameroonian businesses to have a better way to send and receive payments.