Biography
Kalule Guwatudde is the founder of BoraBond, a startup enabling Africans in the diaspora to invest in African government bonds.
Prior to BoraBond, Kalule founded two startups in Uganda. He also worked at McKinsey and at TA Associates, a global private equity firm. BoraBond is still in pilot mode, working with ~100 users and fostering 1,000 new ones on its waitlist.
Disclaimer:
BoraBond did not pay for its inclusion in this article, and no compensation was provided for any statements contained therein.
BoraBond is an investment adviser registered with the U.S Securities and Exchange Commission. Registration does not imply a certain level of skill or training, nor does it constitute an endorsement by the SEC or any regulatory authority. All investments involve risk, including the possible loss of capital.
You founded startups in Uganda and worked at McKinsey. What tools do both bring you?
Startups teach you to navigate an environment where you don’t know the answer. You’re constantly operating in a morass of uncertainty where there’s no easy way out. Grit and resilience are paramount. I built that thick skin while running startups in Uganda.
McKinsey, on the other hand, grants you a "credibility stamp”. There are conversations I simply couldn’t have had if I hadn’t worked there. McKinsey also teaches you to communicate in a certain way, a style they’ve honed over decades. It’s an intangible style, but it serves me when discussing with clients, partners, etc. From an objective perspective though, almost nothing I learned or saw at McKinsey is replicable in a startup.
What problem is BoraBond solving?
The African diaspora wants to invest back home.
Official remittance figures stand at around $100B, much more if we count informal channels. A sizable chunk of that amount goes towards consumer spend, but another significant fraction goes towards investments. These can be in agriculture, real estate, SMEs…
Unfortunately, these investments are often shifty. They involve family, aren’t clear-cut, and offer little ROI. This problem is true for diasporas of all African countries.
The African diaspora lacks transparent, competitive, structured investment opportunities back home. Government bonds fit that profile quite well: you lend to governments, and they pay you back with interest. Because African bonds are deemed risky, they tend to pay high interest rates.
Certain African government bonds may offer higher nominal interest rates than US investments; however, these securities carry additional risks including currency, liquidity, and sovereign default risks.
It’s nearly impossible to invest in African government bonds from the US. I tried, spoke to brokers, and the only option I had was buying South African government bonds with a minimum $100K investment. Something wasn’t right.
I dug deeper (through a Bloomberg terminal, these lists generally aren’t public) into the main investors of a Kenyan government bond: they are, in crushing majority, large Western institutions (Blackrock, Franklin Templeton, JP Morgan, Allianz…).
This is a gatekeeping play. As I would later find out, the minimum ticket to invest in many of these African government bonds isn’t $100K, it’s $25. But large institutional investors, who make juicy returns from these bonds’ high interest rates, aren’t incentivized to share.
BoraBond enables retail investors to invest in African government bonds. We’re building something similar to what RobinHood did by offering fractional shares, reducing barrier to entry for certain expensive stocks.
RO insights: African fintechs and government bonds
Government bonds can be a way for African fintechs to monetize their customers’ deposits.
Here’s how Nebras Jemel, co-founder of Tunisian neobank Flouci, explains:
“Tunisia has an 8% interest rate. We have a revenue share deal with our partner bank, which invests in government bonds with deposits, from which we split the interest (6% for us, 2% for them). We then split that 6% with our customers. The bank thus gets access to additional liquidity. Making money that way limits our regulatory burden compared to us offering credit to our customers.”
Excerpt from Flouci: Tunisia’s neobank, originally published in The Realistic Optimist
As you said, this is a gatekeeping play from powerful actors. How are you getting around it?