Deepening financial access for Kenyans, mainly driven by the explosion of mobile-money usage, is an indicator that efforts to reach Kenya’s unbanked, have received significant and merited attention.
Financial inclusion or access is a component of financial development, which is important for economic growth. Financial inclusion, in particular, has a bearing on equity as well.
Generally, financial inclusion is defined as providing access to an adequate range of safe, convenient and affordable financial services to everyone, including low-income, rural and undocumented persons, who have been under-served or excluded from the formal financial sector.
Access to a transaction account is a first step towards broader financial inclusion, as it serves as a gateway to other financial services like loans or insurance and eases financial transactions in daily economic activities.
As much as Kenya is currently ranking well on this front, still more can be done to ensure cash accessed through credit is used for the right reasons, and sustainably.
Responsible borrowing
Consumer goods company Unilever, KCB Bank Kenya and Mastercard have partnered in a project that does not only fill this hole by encouraging responsible borrowing, but is also helping tens of thousands of small and medium-sized businesses to stock and sell Unilever’s products across Kenya.
This project was born from a strategic partnership agreement signed in 2017 between Ajay Banga, President and CEO of Mastercard, and Paul Polman, Chief Executive of Unilever, to advance financial inclusion efforts by empowering small and micro businesses in emerging markets.
The project dubbed Jaza Duka, Swahili for "fill the shops", is an innovative solution enabling thousands of retailers access goods on credit, interest free for up to 17 days, highlighting a different model in the quest to improve financial inclusion in the informal sector.
Accessing stock
In order to identify the stores that have a reliable trading history, the initiative combines distribution data from Unilever and analysis by Mastercard on how much inventory a retailer has bought from Unilever over time. The results from the analysis are used to provide a micro-credit eligibility recommendation to Kenya Commercial Bank (KCB) before a credit line is offered for ordering Unilever stock.
When a micro-credit line from KCB is approved, the store owners are able to increase their purchases of products from what they can afford to buy with cash on hand, to what they can actually sell. The credit line from KCB is provided through a secure Mastercard digital payment solution.
The aim is to provide 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.
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This solves the problem where banks usually require a formal credit history or collateral that may not be readily available and often results in entrepreneurs borrowing from informal lenders at high interest rates, potentially trapping them in a cycle of debt.
Through our work on the ground in emerging markets, we know that increasing access to finance alone is just one step to growing prosperity. While providing access to credit is an important enabler of growth for micro retailers, they also require a range of other tools and skills to grow their businesses.
The immediate need is to ensure that retailers understand the importance of using credit responsibly, which is why Mastercard’s philanthropic arm - the Centre for Inclusive Growth - has been engaged to support with -retailer training across Kenya.
The training is also accessible to Jaza Duka retailers. Over time, the training will extend to equip retailers with a range of skills to help them grow their businesses, such as financial accounting, merchandising and marketing.
We have learnt that there is significant potential to engage retailers through credit mechanisms that support business growth and ultimately lead to financial inclusion. By leveraging innovative payment technologies and know how, we can ensure that crucial financial tools necessities are affordable and accessible to Kenya’s unbanked.
This partnership supports the company’s commitment to connect 500 million people globally and 100 million people living across the Middle East and Africa to formal financial tools by 2020.
Mr Jones is the Vice President and Area Business Head, Mastercard Middle East and Africa
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