Kenya is awash with exciting economic opportunities, amazing people and a bright future. Looking forward, at this point, one cannot fail to wow at the determination of Kenya, its young people and how they are committed to participate in changing the narrative about Africa through innovation, creativity and bravery to venture in new frontiers.
Like any growing economy, the responsibility to lubricate the economies falls on players, ranging from the government, the private sector and foreigners who bring foreign direct capital to the country. The capital injections from Foreign Direct Investment go a long way in fueling the financing of start-ups and new innovations, cushioning SMEs from working capital uncertainties or giving fintech and mobile-lending start-ups a much-needed capital boost to lend to small companies and individuals. Looking at the Kenyan situation in 2020, it is easy to appreciate a positive business environment that is expected to support individual and business activity.
For instance, where Kenyans borrowed money to supplement their recurrent budgets, they will borrow to purchase harvest preservatives in 2020. Also, as the rains continue in some parts of the country, farmers will seek credit to purchase seeds and fertilisers, making most of the borrowing in 2020 to be focused on production, as opposed to consumption.
As SMEs regain their forte of serving populations in the grassroots, they should anticipate working capital challenges that may emanate from overconfidence on the part of proprietors or expanded demand from customers due to enhanced purchasing power. That means short-term loans from digital lenders will come handy for individuals and small businesses, a factor that requires a change of tack and new innovations for lenders in the traditional and digital space.
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One thing that strong economies do is to lubricate the financial system to open the pipes for businesses to access credit, and this is an area where Kenya is doing well.
As evidenced in other places, like India where KIVA loans have helped thousands of women to start small businesses, the opportunity to access credit goes down to the under-banked and the un-banked. Thus, the prevailing availability of personal credit from alternative lenders in Kenya is a good thing for the people. The same can be witnessed in Kenya, as some of the consistent borrowers are people in SMES, whose businesses routinely need a shot in the arm in form of quick credit in order to capitalise on opportunities that avail to them.
Initially, the mobile lenders existed independently, and regulation was a challenge. But as mobile lending becomes established, we are seeing a more robust drive for self-regulation through the Digital Lenders Association of Kenya (DLAK) that was formed last year. This has brought stability and certainty in the industry.
Among the benefits of having an association is that Kenyans can easily tell the genuine lenders among dozens of companies with android applications as well as analyse the terms and conditions by different market players using information from DLAK website.
The entry of new players such as Zenka, is a welcome move to competitiveness in the industry, as the lending firms and their fintech partners explore new opportunities to capture market share. Healthy competition triggers business efficacy on the side of lenders as they try to appeal to their customers and create long-term partnerships.
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On the other hand, customers may profit from the customised offers, available through different channels, depending on their needs and preferences.
Such a pioneering approach has already been introduced by Zenka, that challenged the industry by implementing an omni-channel strategy to answer clients’ needs more comprehensively. Zenka’ strategy couples up a smartphone application with a USSD service and traditional brick-and-mortar outlets that give customers a tangible experience. Other niche services from the lender include payroll-linked loans that help employees to cover mid-month budget deficits. Hopefully, other lenders will follow Zenka in the pursuit to predict and answer the customer needs, and the financial inclusion in Kenya will keep growing dynamically.
- The writer is the Country Manager for Zenka Finance, a mobile lending firm