Since I published the article laying out the initial idea and vision for Kukuza, I had many great and insightful conversations that helped to shape Kukuza from a rough idea into a concrete project. In case you missed the initial article, you can read it here.
Kukuza is a mobile-first micro-investing and loans community for small, local groups in emerging markets. It is structured as a DAO — a Decentralized Autonomuous Organization built on the Celo blockchain — and it is owned by its community members.
Kukuza starts with a pilot in Kenya and will then expand to other countries and continents. The ubiquity of M-Pesa, Kenya's mobile money service, makes Kenya the perfect place to start Kukuza.
In this article I want to lay out the way forward for Kukuza for the rest of the year. This is meant to serve as an update as well as a way to create accountabililty and have someting to measure progress against.
We will approach building Kukuza in two phases. I start with describing phase 1, which will focus on Proof of Concept, and then continue with phase 2, which will focus on Growth. I conclude the article with challenges that I foresee and further resources for people who would like to get involved.
Phase 1: Proof of Concept (August – Mid-November)
Building Kukuza v1
Platform: Android and Mobile Web
We will build for Android and mobile web. While the Android app will be Kukuza's flagship, it is critical to have some of the functionality available on mobile web as well. Due to mobile data and device storage constraints, our future members are hesitant to download new apps. Therefore we need to create a positive experience with Kukuza for new members before they consider downloading the app. This experience needs to happen on mobile web.
Feature 1: Start a Circle
Circles are groups of up to 5 people and they are at the core of Kukuza. Members will have the ability to start a Kukuza circle and invite up to 4 other members to join. These circles are a central element for each financial product on Kukuza.
Feature 2 Circle-Based Investment Plan
The investment plan is Kukuza's first financial product. Kukuza aims to encourage regular investing through a combination of positive financial incentives, social accountability between circle members, and flexibility. Circle members can chose to step in for each other.
An example: A circle with 5 members commits to invest 5 cUSD per member per week, which results in a monthly investment target of 100 cUSD for that circle (5 cUSD x 5 members x 4 weeks = 100 cUSD).
When the circle hits its monthly target of 100 cUSD, it gets a reward in Kuza, Kukuza's native token. Social accountability between group members encourages regular investing. And in case a member cannot make a weekly payment, the circle can decide to step in and cover that payment in order to get the monthly reward. This is entirely up to the circle and not mandatory.
Relative investing returns will be unaffected by the actual savings rate. People can always chose to invest less or more, but they will only get the reward if their circle hits its monthly target. There are no penalities, Kukuza only works only with positive incentives.
To generate a return, investments will at first be staked on Celo. Staking is a way of earning a reward, a kind of interest, for holding certain cryptocurrencies. Cryptocurrencies that allow staking use a consensus mechanism called Proof of Stake. If you chose to stake, your crypto is being put to work and helps to verify transactions and secure the network.
Staking on Celo will already give us a return of more than 10% per year. In a second step we will optimize returns through diversification and investing outside of Celo.
Feature 3: Member Onboarding
Our members will not have the Valora app or a Celo wallet in general, yet. Therefore we will build an onboarding feature that creates a Celo wallet inside Kukuza for each new member. The Valora app will serve as guideline and inspiration for this feature and we will probably reuse some of its open source code.
Feature 4: M-Pesa-to-cUSD Onramp
It is critical that our members can easily convert Kenyan shillings from their M-Pesa accounts into cUSD. Teams like Kotani Pay and Pesabase already did a lot of pioneering work here. Since our members are highly unlikely to download and use several apps, we will build an M-Pesa-to-cUSD onramp directly into Kukuza.
Feature 5: Sending and Requesting cUSD
Sending money to other people is a basic function of every financial system. Members will be able to send cUSD to other Kukuza members as well as to everyone with a Celo wallet. We will probably reuse some of Valora's open source code for building this feature.
The main goal of the Kukuza website is to build trust with interested new members and to explain relevant concepts, since our members are not crypto-natives.
The idea for Kukuza can be translated into several hypotheses that we need to test. Each of the following 4 hypotheses lists a corresponding numeric target. If we hit the target, we consider the hypothesis verified and can then double down in the next phase and focus on growing Kukuza. In case we fail to verify the hypotheses, we will have to get back to the drawing board.
Hypothesis 1: Members trust Kukuza, Celo, and cUSD with their money.
Number of users that signed up and converted money from KSh into cUSD: 100
Hypothesis 2: Members create circles on Kukuza.
Number of circles created: 20
Hypothesis 3: Members are willing to invest through Kukuza circles.
Number of circles that started an investment plan and made at least 1 payment: 10
Hypothesis 4: Members use Kukuza to send cUSD to each other.
Number of peer-to-peer transactions in cUSD on Kukuza: 30
In August we will apply for Celo Camp, an 8-week accelerator program for projects built on Celo. While Celo Camp is not mission-critical for Kukuza, it would certainly be helpful. Besides the learning experience it can help us to position ourselves for investors and make valuable connections.
Phase 2: Growth (From Mid-November)
Our growth strategy will be a combination of:
- Growth Product Management: Building growth into the product
- Field work: Working directly with existing local groups
Our specific growth framework depends on the results of phase 1. Therefore I will publish an article at the end of phase 2 covering the specifics of our growth strategy. Besides the goal metrics from phase 1 it will also include metrics around churn, virality/net promoter score, etc. Depending on our state of funding we might also be able to start experimenting with proposals and initiatives from the community to drive growth.
Feature 1: Peer-to-Peer Onramp
If we want to achieve high growth, the M-Pesa-to-cUSD onramp cannot be a centralized entitiy. First, Kukuza is not an exchange and has no intention to become one. Second, a centralized market maker would require a lot of liquidity.
That's why Kukuza members themselves will facilitate the conversions between KSh and cUSD, which will also give them an additional income stream. In this peer-to-peer onramp a member can request a conversion from M-Pepsa to cUSD from the Kukuza app. Other Kukuza members will then get notified and can decide whether they want to facilitate that conversion to receive a small transaction fee in Kuza.
Transaction fees can also be dynamic, e.g. to incentivize faster conversions. Members will further give and receive on-chain ratings for each transaction to create trust.
M-Pesa already has an existing agent network to facilitate conversions between cash and M-Pesa. Those agents have the necessary liquidity to faciliate M-Pesa-to-cUSD conversions. And in contrast to M-Pesa we can stake their float (the balance that each agent is holding) to create another income stream for them.
Feature 2: Circle-Based Uncollateralized Loans
Uncollateralized loans will be the second financial product on Kukuza. While this might take longer to develop, we will start development in phase 2.
It is in Kukuza's interest to provide loans to its members, because members can use loans to fund businesses and become more successful, which will create a positive feedback loop and make Kukuza more successful in return.
Every member of Kukuza can apply for a loan, but in order to get the loan approved, he needs the support of his circle. No circle, no loan.
Circle members are in the best position to vet the loan and the member requesting it, because they know each other well. To approve the loan, the circle needs to supply a small portion of the total loan amount to have skin in the game. If the member defaults on the loan, the circle will lose the loan amount it provided. But it is also in the circle members' interest to approve loans. They will receive interest payments and someday they might need a loan themselves.
If a loan gets approved by a circle, Kukuza will top up the rest of the loan amount. To contain the default risk, members will only be able to apply for small loans at first. By paying back loans on time, they can build up their credit score and qualify for larger loans over time. Interest rates will be reasonable. The goal here is not to maximize returns on the loan, but to strenghten Kukuza and its members as a whole.
Loans are a risky feature with many pitfalls that are beyond the scope of this article. I will write more about those in subsequent articles.
Raise Funding and Hire a Full-Time Team
After our initial launch we will raise funding for the Kukuza DAO. If you are an investor and/or have a group of investors and are interested in participating in the private round, please reach out.
Currently, Kukuza is being developed by a motivated team of contributors. To further develop and improve Kukuza on an ongoing basis, we want to use some of the funds to employ a full-time core team.
There are two main challenges that I forsee so far. The first is not a technical one. It is to build trust.
The fact that Kukuza provides better returns and is more secure is a necessary condition, but not a sufficient one. If members do not trust Kukuza, nothing else will mater. That's why it is critical that we ducate our future members and build trust with them. This is not as trivial as writing up some documentation.
Our future members are not crypto-natives. They don't know anything about crypto, blockchain, or DeFi. And they do not care. And the few people who have heard about crypto before usually have bad associations. Scams, pyramid schemes,pump-and-dumps. In addition to that there is a long history of other financial organizations (microfinance, fintech, cooperatives, etc.) that promised riches, but ended up stealing people's funds.
People are sceptical. We can't just claim the same things that those that came before us promised, but failed to deliver.
If Kukuza is intuitive enough so that people can use it without knowing anything about crypto, then there will be no need to explain many concepts around blockchain and crypto, and we can focus on educating our members about the potential and benefits of a DAO.
Building trust has to be a gradual process. Trust needs to spread from person to person. Not from "us" to "them".
The second challenge is liquidity for the intial M-Pesa-to-cUSD onramp. Even with a small number of members, the required liquidity to enable the conversions between M-Pesa and cUSD can be significant.
I can think of a few potential solutions, but none of these is ideal:
- Provide the initial liquidity myself
- Partner with 1-2 existing businesses in Kenya
- Bootstrap with a handful of agents
- Raise an early round to get liquidity
If you have ideas to address these challenges, please let me know.
How to Get Involved
We are always looking for motivated people who would like to contribute to Kukuza. From software developers to community workers on the ground and everything in between. Everybody is welcome!
If you would like to get involved, please reach out to me or to the community.
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