The payments technology company said this week that it will begin the initiative with consumer goods company Unilever in Kenya, which uses distribution data from Unilever and analysis from Mastercard to analyze inventory trends of businesses that procure from Unilever. That analysis will then be used to provide an eligibility recommendation to Kenya Commercial Bank to offer micro-financing to those businesses in the form of credit lines, the firms explained.
According to Mastercard and Unilever, the initiative addresses a key challenge for banks that traditionally need formal credit history or collateral in order to extend credit; micro-businesses often lack these qualifications, forcing them into the shadow lending industry, high interest rates and a “cycle of debt,” the companies said.
Approved micro-credit lines will allow small businesses (SMBs) in Kenya to procure more products without limitations of cash-on-hand.
“Micro- and small businesses are the economic backbone of communities around the world,” said Mastercard President and CEO Ajay Banga in a statement. “There’s an opportunity to set these businesses up for long-term growth by bringing together the tools and data from different industries to change the model of small business financing. We invite other companies and private sector leaders to join us in this collaborative approach and create a true network effect that will bring down barriers and trigger change.”
The firms also noted that they will provide store owners with financial management, inventory and supply-and-demand training, plus marketing support to continue to grow their businesses.
More than 5,000 kiosk owners in the Nairobi area reportedly applied for the program as of the end of last month, with Mastercard and Unilever noting that all of these businesses are expected to be fully enrolled in the program by mid-May. Stories that have already used the credit line solution have increased product sales by 20 percent, the firms added.
Mastercard and Unilever first announced their partnership last year, which will result in additional initiatives to help SMBs around the world.