Tokyo Financial Award:
Using Tech to Finance Taxi and Delivery Drivers in Nairobi

Providing microfinance loans in Kenya won HAKKI AFRICA INC. the Governor's Special Prize for Green Finance in the ESG category at the Tokyo Financial Award 2022, organized by the Tokyo Metropolitan Government (TMG).
Photo: Miaron Billy/

Fear of failure and making mistakes has been often cited as one of the cultural impediments to entrepreneurial ventures and startups in Japan in recent decades. Such anxieties are certainly not something that Kobayashi Reiji and his co-founder Tokida Koji at HAKKI AFRICA INC could be accused of harboring. 

After establishing the company in Nairobi, Kenya in 2018 (with a holding company in Japan added the following year), the pair set about exploring the local market and what kinds of ventures might work. The company name is a riff on both 'haki,' a Swahili word for fairness, and part of a Japanese expression 'shichi-ten-hakki,' which translates as 'fall over seven times, get up eight,' and embodies not giving up. 

"Actually, we started six businesses here in one year. Only using two months for each business," says Kobayashi with a smile, talking via video call from Nairobi. Some succeeded, some failed.

Their interest in Kenya was sparked by Tokida having been born in the country when his father worked there, and Kobayashi visiting on his way backpacking across the continent aged 20.

The Hakki Africa team at their office in Nairobi.

In 2019, they began offering microfinance loans to small and medium enterprises. However, the pandemic struck three months later and the Kenyan government ordered finance companies to offer a grace period on repayments to loanees. After their loan portfolio lost almost 60 percent of its value due to non-payment, the Hakki Africa team began the search for new business ideas. 

New Routes to Profitability 

"There is a bus system here using Toyota HiAce, which have an eight-passenger capacity, but they customize them to take 13 or 15. So you're very close to other passengers. In the pandemic, people wanted to avoid those risks, and that is why demand for taxis increased a lot during that time," explains Kobayashi. 

Noticing this rise in demand, the company saw an opportunity in lending money to taxi drivers to finance the purchase of their vehicles. The business model is predicated on leveraging the gap between the very low interest rates at which the company can borrow in Japan and the much higher rates that finance firms charge borrowers in developing Kenya. Hakki Africa can offer loans at rates 25 to 35 percentage points lower than some of their rivals and still be viable. 

A customer with his newly financed car (90 percent of the vehicles are used cars imported from Japan).

The other critical aspect of the business is the technology it uses to assess credit worthiness, detect fraud, monitor payments and even track the actual cars. Central to the financial operations is collaboration with M-Pesa, a mobile payment platform through which around 40 percent of Kenya's GDP is said to flow.

With the drivers' permission, the company analyzes their M-Pesa account statements. "This has a lot of data which we use to check for financial stability, gambling addiction (sports betting, especially on the English Premier League, is big in Kenya) and signs of fraudulent funds." 

Beyond Borders, but Not by Car

"Then there is the geo fence system. This is a GPS terminal on the vehicle that is connected to the battery. If the car gets near the border area, it can be automatically stopped. This is in case someone is trying to cross the border to another country with the car. Though it's not happened yet in the three years since we started," he adds with a laugh. 

Operations became profitable from the first year thanks to a tiny default rate, low operating costs and healthy margins, along with a dedicated and conscientious local staff of more than 30. 

Both the co-founders have software backgrounds and created the apps for the car financing business and other ventures the company has attempted. 

E-Bikes and Prizes

In July 2022, the company launched e-bike financing for delivery workers, helping to reduce CO2 emissions in Kenya. It has partnered with eBee—a Nairobi-headquartered e-bike manufacturer—for the business, which landed it the ESG award in Tokyo.

One of the issues the company faced early on was convincing financial institutions in Japan to lend money, particularly as they could not travel to Kenya to inspect business operations due to the pandemic. Winning the Tokyo Financial Award provided a welcome boost. 

"I travelled to Japan for the award ceremony, and having a picture taken with the governor of Tokyo was very valuable when negotiating with the commercial banks for loans. Hokkoku Bank and one of Japan's megabanks both came to Nairobi to see our business and agreed to provide financing."

With more than 1,200 taxi drivers now on their books and 1.58 billion yen (11.2 million dollars) in new series B funding raised in October, the Hakki team has ambitions to expand into other African markets, such as Egypt, South Africa, Tanzania, Uganda and Nigeria, and then perhaps beyond the continent.

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Co-founder and director Reiji Kobayashi.

Tokyo Financial Award

The TMG's Tokyo Financial Award consists of Financial Innovation and ESG Investment categories. The ESG Investment category recognizes businesses that are implementing outstanding initiatives in ESG investment and SDGs management.
Interview and writing by Gavin Blair
Photos: courtesy of HAKKI AFRICA