Innovative solutions targeted at SMEs the way to go

With the coming into force of interest capping, many expected some level of disruption in the way credit is advanced and how business is done.

Although analysts warned that there would be negative consequences associated with the move, no one anticipated the extent to which Small and Medium Enterprises (SMEs) would later suffer.

At one point, no bank was lending to SMEs. Financial institutions put on a freeze on lending to SMEs and instead, opted for government securities and other well established corporate organizations due to what they termed as the risks associated with that market segment. The rate capping regime gave them little room to wiggle.

Unwelcome suitors

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Cash flow became a serious problem. But like they say, necessity is the mother of invention. Soon the market was adjusting to fill in the gap left by financial institutions.  Mobile money loans made their move to that segment; banks adjusted their models to also follow suit, Safaricom came in with Fuliza amid other innovative solutions from various players.

SMEs dealing in fast moving consumer goods have also not been left out. An initiative by Unilever East Africa, Mastercard and KCB Bank is revolutionising how shops and kiosks, commonly known as ‘dukas’ do business.

Known as Jaza Duka or fill the shop or kiosk, the concept combines data, supply chain management solution and technology to deliver fast moving consumer goods to shops or kiosks at the most workable credit option and at the shortest time whenever shop needs items.

Unilever East Africa provides the retailer’s purchase and sales history, and distribution network to the retail; Mastercard as the technology partners provides the necessary technology for credit allocation and payment processing as well as the programmme governance; KCB Bank Kenya performs the credit rating, recruitment into the programme, provides the credit as well as managing the risk.

The initiative combines sales history data from Unilever and analysis by KCB Bank, to provide a micro-credit eligibility recommendation by KCB Bank.

Once the micro-credit line from KCB Bank is approved, the store owner is able to increase their purchases of product from what they can buy with cash on hand to what they can actually sell. The credit line from the bank is provided through a secure Mastercard digital payment solution.

Responsible lending underpins this programme. Retailers receive training funded by Mastercard’s philanthropic arm – the Centre for Inclusive Growth, on the importance of using credit responsibly.

After an initial phase of face-to-face training, during which 5,000 stores were trained, a digitally scalable mobile-based training programme, provided by Arifu, a Nairobi based company, was released in December 2018.

Jaza Duka has enabled thousands of retailers to purchase goods on credit, interest free for up to 17 days. Since its launch in January, almost 18,000 stores in Kenya have already signed up for Jaza Duka, with a planned roll out to 30,000 stores by the end of 2019.

Apart from providing credit, Jaza Duka is doing something else: It is giving an opportunity for those shop owners at the bottom of the pyramid an opportunity to be financially included and as such, begin to enjoy the services of mainstream financial services.

Financial inclusion

Like mobile bond subscription platform M-Akiba to an array of mobile money outlets, Jaza Duka is playing its part in being an enabler to financial inclusion.

Jaza Duka initiative brings a unique combination of technology and know-how to help shop owners build a better future and serve their customers who are themselves on a path towards financial inclusion.

The involvement of KCB Bank Kenya, East Africa’s biggest lender by assets and payments technology company Mastercard are expected to provide a boost and better analysis of customer data and provide input for better underwriting.

Jaza Duka is also a true testimony to what business partnerships and the spirit of co-operation can do in coming up with value propositions to areas and sectors of the economy that were once thought unreachable.

Training for future

Jaza Duka also stands out because of our equal focus on retailer education. Understanding how to use credit responsibly is just the start. Over time such training will equip retailers with a range of skills to help them grow their businesses.

Jaza Duka aims at providing access to productive, affordable, and reliable means of accessing stock of goods for the growing number of small-scale traders in rural areas and businesses around the country. The proprietary technology platform and business model enables the financing, monetisation, and management of dispatched stock, and in the process, unlocking access to credit and expanding sales.

Such initiatives that think outside the box is the way to go.

Mr Ochieng' is Sales Director Unilever East Africa

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Small and Medium EnterprisesSMEsInterest Rate Capping