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P2P lending takes hold in Africa

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Africa has caught the attention of those in the ever-evolving peer-to-peer (P2P) lending sector. A recent report published by the University of Cambridge Judge Business School analyses the current position of Africa on the world’s alternative finance stage.

The Africa and Middle East Alternative Finance Benchmarking Report, published in February, is the first comprehensive study of the size and growth of crowdfunding and P2P lending markets in Africa and the Middle East. The report includes additional chapters on the regulatory landscapes in Africa.

The report comments that the United Kingdom has long led the way in the P2P lending sphere. It explains that the public’s dissatisfaction with the banks and the increase in the number of new crowdfunding and peer-to-peer lending platforms have combined to pique the interest of the British people in the available alternatives to traditional finance.

An inspiring technological revolution has been supported by laws, tax breaks and government initiatives. The industry has catapulted, leaping from an estimated valuation of $880 million in 2010 to $34 billion just five years later, in 2015.

Other countries are beginning to follow the UK’s lead and, if the trajectory of the UK is anything to go by, the P2P lending scene will soon be coming to life all over the world.

The report explains that crowdfunding in Africa is just beginning to gain publicity and garner attention. As detailed in the document, the third-largest model in Africa is P2P business lending, which totalled $16 million in volume over a two-year period between 2014 and 2015.

This model experienced rapid growth, starting at a modest $2 million, and reaching a sizeable $14 million in 2015. Some 90% of online alternative finance originated from platforms headquartered outside Africa, evidencing the potential for home-grown platforms.

Kenya and South Africa are the market leaders, raising $16.7 million and $15 million respectively from online channels in 2015. P2P business lending had a lower average deal size, of $41,000, with an average of 24 lenders each.

The market is relatively evenly distributed across 10 core countries. South Africa had the largest number of online alternative finance platforms, with eight surveyed respondents. Egypt and Morocco followed, with three domestically-based platforms each, and then Ghana and Nigeria, with two per country. Senegal, Uganda, and Zimbabwe had one surveyed platform each.

South Africa’s FinTech specialist and White Label Crowdfunding (WLCF) partner, Khonology, says crowdfunding will provide establishing African businesses with funding alternatives. It believes that the high barriers to business loans faced by SMEs will no longer be a hurdle for innovative, grass root solution providers.

“With many township entrepreneurs depending on their small businesses and business plans to acquire funds, crowdfunding reduces barriers of entries, such as collateral or healthy balance sheets,” says Khonology CEO Michael Roberts.

“Crowdfunding offers access to cash that will empower the misunderstood, determined and small township businesses,” he adds.

According to the report, the East Africa region has the largest market share of the alternative finance market. In 2015, East Africa accounted for 41% of total African market share, while West Africa accounted for 24% and Southern Africa accounted for 19%.

The make-up of the South African market differs markedly from the rest of Africa. In 2015, the vast majority of market activity – $13.8 million – came from P2P consumer and business lending, with the remaining $1.2 million spread across microfinance, donation-based and reward-based crowdfunding.

The rapid growth and emergence of online P2P lending models in South Africa suggests that this model will likely dominate the national market, and could potentially propel South Africa forward as the emerging market leader for both online consumer and business peer-to-peer lending in Africa.

Regulation and policy for alternative finance are at the very earliest of stages of development for many financial regulators globally, and this is the case in Africa. Nevertheless, several positive steps have been taken towards developing a specific regulatory response to this emergent industry that provides additional and vital channels of financing for individuals, start-ups and SMEs.

What is clear is that there is no customised, tailor-made alternative finance regulation regime that has been enacted in Africa, as has been the case in other more established markets, such as the UK, Italy, the USA or Malaysia. Existing, generic financial services regulations are still likely to apply to firms seeking to provide services that fall within the remit of these existing laws.

Many risk-adverse corporates will wait for the implementation of the regulatory framework before acting on this opportunity. However, WLCF has repeatedly witnessed that the regulatory risks are lower than many expect.

Having recently partnered with the local value added reseller Khonology, WLCF is looking to collaborate with the founders of new African platforms and is keen to support the shaping of the market.

“Africa is based on Ubuntu and community spirit; amazingly, crowdfunding looks to leverage this community engagement,” says Roberts. “Africa currently has a need for alternative solutions to the current legacy service offerings.

“Khonology loves the fact that crowdfunding leverages technology to provide a solution that is community driven and requires active participation and engagement. The collaboration that Khonology has embarked on with WLCF is testament to our business offering; we provide knowledge, collaborate and drive transformation.”

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Cons exploit Telegram ICO

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Kaspersky Lab researchers have uncovered dozens of highly convincing fake websites claiming to be investment sites for an initial coin offering (ICO) by the Telegram messaging service. Many of these websites appear to belong to the same group. In one case alone, tens of thousands of US dollars’ worth of cryptocurrency were stolen from victims believing they were investing in ‘Grams’, Telegram’s rumoured new currency. Telegram has not officially confirmed an ICO and has warned people about fraudulent investor sites.

In late 2017, stories started to circulate that the Telegram messaging service was launching an initial coin offering (ICO) to finance a blockchain platform based on its TON (Telegram Open Network) technology. Unverified technical documentation was posted online, but there appears to have been no confirmation from Telegram itself. The resulting confusion seems to have allowed fraudsters to capitalise on investor interest by creating fake sites and stealing vast sums of money.

Kaspersky Lab researchers have discovered dozens of such sites, possibly belonging to the same group, claiming to sell tokens for ‘Grams’ and inviting investors to pay with cryptocurrencies including Bitcoin, Ethereum, lice litecoin, dash and Bitcoin dash. A record of transactions on one site revealed that the scammers were able to steal at least $35,000 US dollars’ worth of Ethereum from investors.

The researchers found that some of the websites were so convincing that even after Telegram and others began to issue warnings, they were still able to recruit potential investors. Most use a secure connection, require registration and generate a unique online wallet for each new victim, making it harder to track the money.

Judging by the content of the fake websites, it appears they may have common ownership. For example, several have the exactly the same ‘Our Team’ section.

“ICOs are a fairly risky investment and many people don’t yet fully understand how they work, so it is not surprising that high quality fake websites, with seemingly reassuring features such as a secure connection and registration are successful at luring people in. People wishing to invest in an ICO would do well to check with the company behind it and make sure they know exactly who they are giving their money to, or they may never see it again,” said Nadezhda Demidova, Lead Web-Content Analyst, Kaspersky Lab.

Kaspersky Lab offers the following advice for users considering investing in an ICO:

  • Check for warning signs: for example, some of the fake Telegram ICO websites had the same wrong image next to the name of Telegram’s Chief Product Officer.
  • Do your homework: always check with the brand’s official site to verify the legitimacy of the investment site and, if necessary contact the company’s ICO teams before investing any money or currency.
  • Use reliable security solutions such as Kaspersky Internet Security and Kaspersky Internet Security for Android, which will warn you if you try to visit fake internet pages.

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Crouching Yeti strikes

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Kaspersky Lab has uncovered infrastructure used by the Russian-speaking APT group Crouching Yeti, also known as Energetic Bear, which includes compromised servers across the world.

According to the research, numerous servers in different countries were hit since 2016, sometimes in order to gain access to other resources. Others, including those hosting Russian websites, were used as watering holes.

Crouching Yeti is a Russian-speaking advanced persistent threat (APT) group that Kaspersky Lab has been tracking since 2010. It is best known for targeting industrial sectors around the world, with a primary focus on energy facilities, for the main purpose of stealing valuable data from victim systems. One of the techniques the group has been widely using is through watering hole attacks: the attackers injected websites with a link redirecting visitors to a malicious server.

Recently Kaspersky Lab has discovered a number of servers, compromised by the group, belonging to different organisations based in Russia, the U.S., Turkey and European countries, and not limited to industrial companies. According to researchers, they were hit in 2016 and 2017 with different purposes. Thus, besides watering hole, in some cases they were used as intermediaries to conduct attacks on other resources.

In the process of analysing infected servers, researchers identified numerous websites and servers used by organisations in Russia, U.S., Europe, Asia and Latin America that the attackers had scanned with various tools, possibly to find a server that could be used to establish a foothold for hosting the attackers’ tools and to subsequently develop an attack. Some of the sites scanned may have been of interest to the attackers as candidates for waterhole. The range of websites and servers that captured the attention of the intruders is extensive. Kaspersky Lab researchers found that the attackers had scanned numerous websites of different types, including online stores and services, public organisations, NGOs, manufacturing, etc.

Also, experts found that the group used publicly available malicious tools, designed for analyzing servers, and for seeking out and collecting information. In addition, a modified sshd file with a preinstalled backdoor was discovered. This was used to replace the original file and could be authorised with a ‘master password’.

“Crouching Yeti is a notorious Russian-speaking group that has been active for many years and is still successfully targeting industrial organisations through watering hole attacks, among other techniques. Our findings show that the group compromised servers not only for establishing watering holes, but also for further scanning, and they actively used open-sourced tools that made it much harder to identify them afterwards,” said Vladimir Dashchenko, Head of Vulnerability Research Group at Kaspersky Lab ICS CERT.

“The group’s activities, such as initial data collection, the theft of authentication data, and the scanning of resources, are used to launch further attacks. The diversity of infected servers and scanned resources suggests the group may operate in the interests of the third parties,” he added.

Kaspersky Lab recommends that organisations implement a comprehensive framework against advanced threats comprising of dedicated security solutions for targeted attack detection and incident response, along with expert services and threat intelligence. As a part of Kaspersky Threat Management and Defense, our anti-targeted attack platform detects an attack at early stages by analysing suspicious network activity, while Kaspersky EDR brings improved endpoint visibility, investigation capabilities and response automation. These are enhanced with global threat intelligence and Kaspersky Lab’s expert services with specialisation in threat hunting and incident response.

More details on this recent Crouching Yeti activity can be found on the Kaspersky Lab ICS CERT website.

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