After leaving his managerial career in IT companies in Moscow, Mikhail Lyapin, a native of chilly Murmansk, found himself in steaming Kenya. Since 2017, he has been developing a microloan business there for the local self-employed under the brand Patron, while simultaneously building up a Russian-speaking business community in Africa. In an interview with Vladimir Volkov, the entrepreneur spoke about the complex twists and turns his path has taken, the talent and hard work of the local people, and the battle for the modern world’s last undeveloped frontier – Africa.
You are a Russian IT entrepreneur operating in the field of microlending in Kenya. How did you get involved in this business and end up in Africa?
In 2007, I moved from Murmansk, where I was born 39 years ago, to Moscow. For about ten years, I worked for big Russian IT companies. In 2015, I became a hired director of a credit risk management startup, whose clients were banks and microfinance institutions from all over the world. Over a few years, I got acquainted with bankers and owners of microcredit companies, one of them being my future partner, who already had his own microfinance institution.
Together, we decided to set up a business in the online lending niche in countries that would be like Russia, only twenty years ago: a weak competitive environment, tolerable regulation, adequate Internet penetration, linguistic uniformity, and comprehensible ways to invest money and withdraw profits.
Where did you start?
We started in Southeast Asia. Someone who has worked in Russia their whole life doesn’t see much difference between Nicaragua, Mozambique, and Cambodia. We began in Cambodia because the launch pad didn’t really matter to us. The market proved not to be very promising but we quickly realized the requirements our ideal market should meet. So we continued in Latin America.
Why there specifically?
First, the widespread use of a common language, Spanish, in almost two dozen countries: we thought we could set up a call centre in one place and immediately cover the entire region. Second, the combined population of these countries exceeds half a billion.
Initially, it seemed a very reliable undertaking. But, within six months, we learned a lot about Latin Americans that didn’t match our expectations. For example, Spanish varies significantly from country to country and its speakers in the region aren’t generally inclined to repay loans.
Moreover, we saw how high crime levels are here. For instance, in Mexico, where we decided to launch, the per capita murder rate today is roughly equivalent to that in Russia in the mid-1990s.
During the Cancun earthquake in 2016, we lost our call centre. A month later, its manager’s apartment was burgled. In general, things just didn’t go well, and we understood that this wasn’t our story. Yet, we formed very clear requirements for the region where we could conduct business successfully.
Eventually, you ended up in Kenya. What determined your choice?
If you’re planning to open a fin-tech company in Sub-Saharan Africa, the choice is limited: Nigeria or Kenya. These are the two key business hubs on the western and eastern sides of the continent, respectively. Nigeria has 230 million inhabitants, of whom approximately 100 million are Internet users. This provides an excellent pool of financially capable individuals. Unfortunately, Nigeria still suffers from high crime rates, including mass kidnappings and terrorist attacks in so-called red zones in the northern part of the country. Even so, Nigerians themselves are likable people; I see them as African Russians. They’re loud, expressive, and tend to speak openly and directly.
The alternative to Nigeria is East Africa. It’s a fairly homogeneous hub consisting of several densely populated countries. For example, there are around 60–65 million people each in Kenya and Tanzania, 49 million in Uganda, and 126 million in Ethiopia. This is perfect for our business, which targets a mass audience. Moreover, most of the population in the region speaks Swahili and English, indicating a certain cultural similarity. Additionally, Kenya leads the East African market in terms of GDP, appearing to be a democratic country with comprehensible institutions. Plus, there were already some Russians there that we knew. Ultimately, we chose Kenya, and we’ve never regretted it. To date, it’s the main market for mass financial services in the region.
Your MFIs in Africa specialize in providing microloans to local entrepreneurs by offering money at high interest rates. This type of business is often viewed ambiguously from a reputational standpoint. What have you to say about that?
There is, indeed, frequently a negative perception of microfinance institutions both in Russia and elsewhere, as being borderline moral entities. Even so, those who hold such views lack critical thinking. They are unable to put themselves in the shoes of someone who desperately needs cash now but lacks access to traditional banking channels. Unlike in Russia, where bank financing is available to 90–92% of the population, in poorer countries, MFIs act as alternatives to criminal rather than bank loans.
In Africa, local banks either fail to fulfil their retail lending function or fulfil it poorly. With unemployment rates ranging from 60 to 80%, a significant proportion of the population remains unemployed, so are unable to obtain loans from formal banking institutions. Yet many of these individuals do actually have income sources and sometimes work harder than Europeans or Russians. Someone must lend them money. That’s exactly what we’ve been doing. We began catering to borrowers known locally as hustlers.
Who are these people?
A hustler is someone who always has multiple income streams. For example, during the day, they might be a pastor, in the evening a lawyer and, on Sundays, a teacher at a rural school or festival organizer. One person I know organizes weddings and funerals during the week and works as a bookkeeper at weekends.
These people are constantly looking for money. They’re hardworking. While traditional banks might find them difficult to work with, we’ve developed effective methods.
Our target audience consists of micro-entrepreneurs. They don’t spend money betting on sports, on alcohol or taking their wives to local resorts. Instead, they need funds primarily for repairing production tools, such as taxis, dental equipment or laptops, or for buying sausages to sell as hot dogs on the street.
From 2017 to 2023, in Kenya and Tanzania, our mobile app was downloaded by about 6.5 million people. This is a substantial number in relation to the local population. I’ve personally come across taxi drivers using our app on their smartphones. It’s gratifying to see the results of one’s labor reflected in another person’s device when people recognize your brand.
In 2023, we focused on providing affordable loans for smartphone purchases, making a significant contribution to society’s development. Not only did this achieve a low default rate despite the high average loan amounts, it also opened up new opportunities for growth and self-realization. Given the rapid increase in demand for smartphones in the region (in Kenya, for example, with a population of 55 million, about 35 million devices are sold each year), our initiative helps people gain access to knowledge, education, and new revenue streams. For many Africans, a smartphone is more than just a communication tool: it’s a means for achieving a better quality of life and building a better future.
Besides the microfinance business, you are engaged in gathering together around yourself a community of Russian-speaking entrepreneurs. Why is this important?
When we arrived in Kenya and began working there, we discovered that Russian-speakers were largely fragmented. This partly stems from the presence of numerous scammers from the CIS, who emerged during the 1990s and early 2000s, and continue to operate using outdated practices. They promise newcomers help, knowing full well that they know little about the place, then exploit or defraud them in a variety of ways.
We wanted to change this and bring Russian-speaking entrepreneurs together, limiting membership to trustworthy individuals through a rigorous selection process. So, in the autumn of 2023, my partner, Egor Podvorny, and I established the Ministry of Africa, a community of Russian-speaking entrepreneurs and professionals working in Africa. Today, the community has 240 members, representing every one of Africa’s 54 countries. Although we have received over 4,000 applications, we had to implement strict admission criteria, rejecting applicants if other members identified them as fraudsters or sympathizers.
Is your association about ideology or about business?
The Ministry of Africa is not a politicized organization but, rather, an international commercial community. We help those who speak Russian in Africa — not only people from CIS countries but also Africans who have learned and mastered the Russian language. Within the community, deals worth USD 22 million were made over the first year, largely owing to mutual trust among the participants and the opportunities provided for information exchange.
Every two or three weeks, we hold closed lectures on specific topics of interest to specialists in various fields. Some recent discussions included the cocoa market, logistics and management of African workers. Our lectures and gatherings are occasionally attended by officials from relevant ministries in Russia and other CIS countries. In addition, The Ministry of Africa regularly arranges meetings with government leaders, ministers and corporate executives from different African countries. For example, in 2023, we managed to organize a meeting with the President of Senegal. This unique opportunity allows businesspeople to understand how they can develop their businesses in the given country.
We see that, recently, there has been a step-up in the competition for Africa from leading nations. What do you consider the main reasons for this trend within the continent?
First, Africa is a source of labour for developed countries experiencing acute demographic crises, falling birth rates and declining populations. Currently, Africa provides 15% of the global workforce, and this figure will increase to 25% by 2050. This cheap labor force is highly trainable.
Second, Africa’s population is expected to grow significantly, reaching 2.5 billion by 2050. All these people are open to consuming diverse products even under new, unfamiliar brand names. Big multinational companies have long ignored the region, creating opportunities for smaller firms to enter the market successfully. The increasing demand for resources translates into greater political influence.
Third, Africa represents a potentially vast, yet still unregulated market. Weak legislative frameworks and local governments’ low fiscal capabilities make doing business in the region more profitable and faster-paced.
Fourth, Africa possesses an incredible quantity of valuable natural resources, including minerals.
Finally, though less obviously, Africa may be one of the few remaining underdeveloped regions in terms of venture capital investment. While Latin America, the Middle East, Southeast Asia, etc., attract billions of dollars annually, Africa receives only around USD 1.5–4 billion a year. Countries like Kenya, Rwanda, Egypt, South Africa and Morocco already possess advanced technological capabilities and potential, as well as experienced technical and managerial teams.
To sum up, Africa offers a great, yet underexplored market. It remains the last frontier in the world. So, the battle for Africa will continue.
Who are the major players here? What are their strengths?
When it comes to business, the United States dominates local markets. They come not just with money but also serious corporate expertise, extensive commercial experience and a unique ability to sell. Nor can their cultural influence, particularly through Hollywood, cannot be overlooked. France is similarly strong, relying on organizations such as Alliance Française, which promotes French language and culture. With its significant budget, this institution plays a key role in maintaining France’s presence.
What makes non-Western countries successful in Africa?
China excels at investment and infrastructure projects. Where no multi-lane highway existed before, China built one, instantly boosting GDP by 0.5-2%. These projects often provide special benefits to China and Chinese companies, or serve as collateral for loans to African governments.
India has a substantial presence in East Africa, especially Kenya, where approximately 90,000 Indians live. Additionally, Indians have been present in South Africa for over a century, giving them time to acquire large landholdings and establish themselves in retail and manufacturing. Today, wealthy Indian families own factories not only in East Africa but also in parts of West Africa and the southern part of the continent.
In recent times, there has been a noticeable increase in the presence of Middle Eastern countries in Africa. For example, the UAE is very strong in establishing logistics infrastructure and owns local ports. At the same time, some Saudi Arabians have begun to appear in South Africa, including ones interested in buying local real estate. This constitutes a significant, affluent audience. Saudis are willing to work with everyone: Muslims, Christians or anyone else. This is important for Africans, who do not like being told how to live and pray, and who reject values imposed from outside.
Turkey has also strengthened its position, traditionally excelling in light industry and agricultural product supplies.
What about Russia?
Russia maintains a strong foothold in Africa in security matters and mining. One promising area is energy: companies like Rosatom are highly sought after. Additionally, grain and inorganic fertilizer exports remain important.
Could the BRICS multilateral format assist Russia and other member states in promoting their interests in the region? Which areas are most relevant?
The BRICS format will likely be in demand when a regional automated payment system is created for the region as a possible alternative to SWIFT or the single European SEPA system. Africa is in great need of such an alternative system. The region suffers from a dollar liquidity shortages, while settlements between Africa and the rest of the world take place mainly in US dollars and euros. Although, in the last 3–4 years, there has been growing mass use of cryptocurrencies by African businessmen as an alternative to fiat money for paying for foreign supplies.
Old-fashioned, conservative government regulation processes of former metropolitan countries slow down economic development in the developing region, which, owing to the compact nature of the government apparatus and flexibility, is required to achieve goals faster than a big bureaucratic structure in a developed country. By implementing modern technological solutions in money transfers and payments, trade turnover between African countries and other parts of the world, as well as between themselves within the continent, can be accelerated substantially. Creating such a payment system, with the support of BRICS, for example, would bring significant benefits to the region.