Can you incentivise better service and safety in motorcycle taxis?
Wherever you are in Kampala, Uganda, you can’t miss the swarms of motorcycle taxis. All across the city, you can hear the double-horn beeps as drivers weave through traffic jams and you see clusters of motorcycle taxis waiting idle on street corners as drivers jostle for trade.
This chaotic form of transport is commonly known as a ‘boda boda’ – and they are a vital part of keeping people and goods moving in the city. But less well-known is that 1.6 million people (7% of Uganda’s population) depend on the industry as part of their livelihood. It is a sector that has seen little change since the 1960s, when Boda Bodas were used to transport people between the Kenyan and Ugandan border (and hence gained the term ‘boda boda’ from people saying ‘border-border’).
In Uganda alone, an estimated $31 million was spent in 2013 on motorcycle imports. But boda bodas are also viewed as a double-edged sword. Even though they fill a gap in public transport provisions, create many jobs and fulfil important activities such as transporting goods within their communities, they do so at a high risk to drivers, passengers and other road users.
A recent study in a Kampala hospital identified 40% of trauma cases were caused by boda boda accidents – and it’s getting worse. In 2013, it was estimated motorcycle deaths increased by 12.3%, while deaths among other road users decreased.
The sector is ripe for innovation, with great potential to significantly benefit millions of people across Africa every day. Recently, Shell Foundation has started working with two pioneering Ugandan start-ups – SafeBoda and Tugende – as part of its wider focus to improve affordable, safer and sustainable transport in emerging markets.
SafeBoda is the ‘Uber equivalent’ for motorcycle taxis – but with a twist. Using a combination of a mobile app, call centres and hailing, they are connecting passengers at all income levels to a trusted network of safer motorcycle taxi drivers. Tugende is a new financier that exclusively serves boda drivers. They offer affordable leases to drivers, who earn ownership of a motorcycle in 19 months or less, instead of renting them indefinitely. Within a few months, both enterprises have shown promising signs of disrupting a fast growing sector.
Incentivising road safety
It easy to see why being a boda driver is an attractive opportunity for unskilled workers. Research published in 2014 estimated that on average drivers earn an annual income of $2,804, which is high compared to Uganda’s GDP of $572. Unlike other jobs* this level of income is enough to support an average family with six dependents. Yet drivers face a multitude of issues: careless driving, low helmet usage, poor road safety and no formal training.
To address this, SafeBoda and SF are testing whether it is possible to incentivise better service and road safety for drivers and passengers.
SafeBoda aims to create a network of safer and trusted drivers that customers can conveniently book either through a mobile app or call centre. For drivers the prospect of generating more income from accessing more customers and spending less time idle is a very attractive value proposition. As a result many are willing to pay a membership fee, and a percentage of the value of the journey.
Starting with 100 drivers in January, SafeBoda’s network has grown quickly to 1,000 drivers actively using the platform and is experiencing 9% growth each week. They also value being part of an organised community and having more formal working terms.
To be part of the network, drivers must undergo an interview process, complete SafeBoda’s road safety training course, learn basic first aid and wear a helmet that is provided. This helps maintain a high quality of committed drivers.
With demand for SafeBoda’s service increasing, drivers are completing up to 50% more trips a day which has meant more income for the drivers and their families. In just 18 months SafeBoda has demonstrated it is possible to incentivise safety; 100% drivers wear helmets all the time compared to the 37% average in Kampala, and 57% of SafeBoda passengers wear the additional helmet provided compared to the 2% average in Kampala.
Improving access to generate income
Almost 400,000 drivers can only afford to rent a motorcycle without a contract. Why is this the case? Motorcycles cost approximately $1,100, and it is extremely difficult for drivers to access credit to purchase a bike. SF is working with Tugende to test a new ‘lease to own’ approach that doesn’t require collateral.
Owning a motorcycle encourages far greater road safety. Drivers earn more income from owning their bike instead of renting. Also, protecting their bike is paramount and they therefore take more care of their bikes, feel less pressure to rush around for jobs and show more pride in their work. However, banks see boda drivers as un-creditworthy and MFIs require collateral which typically includes high down payments of between 20-40% which makes it difficult to purchase a motorcycle outright.
Tugende’s new solution allows credit scoring to be undertaken on perceived ‘high risk’ customers. By developing new methods to assess drivers, Tugende is able to provide affordable leases so that drivers can own a bike within 19 months. Drivers only provide a $120 deposit (ca.11% of the bike’s value) followed by repayments at around 15-20% more than the market rental. Tugende manages their client risk through using tracking software that lets them know where their bikes are at all times. So far the results have been promising. Once the lease payments have been completed, some drivers decide to sell their bike to buy other life-improving assets like livestock, land or a small house. Also for the first time these drivers have a credit history, that ‘de-risks’ them and allows them to access credit from other financial institutions.
To date over 900 drivers have fully paid off, a Tugende lease, 2,100 are currently on the path to ownership and weekly on time repayments have been at a steady 85%repayment rate. Due to word of mouth being so strong, demand for Tugende’s motorcycles keeps growing – and they now have over 400 approved drivers waiting for bikes.
This year, SafeBoda aims to expand their pilot to other African countries, and with SF’s support they are working with road safety experts to test and innovate training approaches. Tugende is working to expand their service to rural areas, where access to finance is more limited. By 2017, they aim to serve 15,000 customers.
In 2016 SF’s long-term partner EMBARQ’s launched their first ‘Mobility Accelerator’ programme. This competition invited innovative mobility start-ups in India and Mexico to present their business to a panel of judges and win a spot on a six-month accelerator programme. Twelve businesses were identified, and SF will be reviewing the progress they make to identify which promising solutions to support beyond the programme.
See information about SF’s sustainable mobility programme.