Mastercard And Unilever’s Micro-Lending Has Macro Results For Kenyan SMBs

Building, sustaining and growing a small business isn’t easy in the best of circumstances. Even in a developed economy, margins are narrow, and tough decisions must be made daily, if not hourly.

But imagine trying to succeed in the remote, rural parts of Africa. As a shop owner, you likely know every customer who walks through your door. You know, for instance, that your neighbors wish they could buy a bigger jug of laundry detergent that would last them longer. You know how many of them have recently had babies and how many diapers you should stock to meet that demand.

That intimate level of insight could be a business advantage – if not for the fact that your entire operation runs on cash.

You may know that four cases of diapers is the right quantity to serve your community’s new parents, but you only have enough cash on hand to order three. Then, when the Unilever truck rolls up, you only have enough cash left to buy two of them, leaving Unilever with unfulfilled sales and extra inventory that now must be stored somewhere – and leaving the true needs of your market only partially met.

Mastercard saw that creating access to formal credit could mitigate the problems on both sides, and the company has spent the last year working alongside Unilever to learn as much as possible about what it would take to provide such access.

Now, Mastercard and Unilever have announced the rollout of a digital lending platform, Jaza Duka (“fill up your store”) for micro entrepreneurs.

In a recent interview with Karen Webster, Carlos Menendez, president of enterprise partnerships for Mastercard, shared how the platform will create financial inclusion and growth within Kenya, the first country where it’s being offered – and maybe one day in similar communities across Africa, Asia and Latin America.

Determining Creditworthiness

How can a lending organization feel comfortable giving money to a small or micro business with no credit history or credit record? A year ago, when Mastercard embarked on this journey, that was The Question. The key was getting somebody to provide financing and extend funds to those businesses in need, despite their lack of formal credit history.

As it turned out, said Menendez, even without a formal credit system, there was some data available that could give lenders a sense of borrowers’ creditworthiness. Unilever had records of order history from these small and micro businesses, which could be used to demonstrate what had been ordered and paid for over time.

With that data, Mastercard was able to create access to initial credit lines for individuals with its partner bank, the Kenya Commercial Bank (KCB). Unilever’s data is used to create preapproved accounts with an estimated credit line based on history with Unilever and its distributors.

What It Means for Shop Owners

With a micro-credit line from KCB, store owners can increase their product purchases from what they can afford with cash on hand to what they can actually sell, based on their intimate market knowledge.

A store that has constrained itself to ordering $50 worth of goods from Unilever each week could more than double that with an interest-free credit line of $120. The credit is provided through a secure Mastercard digital payment solution.

Compared to the former system, an informal lending community that did not create any economic advantages, access to formal credit at reasonable rates can put store owners on a path to growth, increasing financial inclusion, said Menendez.

Another piece of the Mastercard/Unilever partnership is education. Menendez said the company is conducting support and training out of its Center for Inclusive Growth to help shop owners understand credit and optimize operations at their stores.

The Long Tail of Benefits

According to a Mastercard press release, stores that had fully moved to the new platform had already grown their sales of Unilever products by as much as 20 percent.

Menendez noted that it’s too soon to say whether this is purely because shop owners can satisfy demand that they previously could not, or whether customers are taking advantage of expanded inventories to make multiple purchases at once. Only time (and data) will tell.

One thing is for sure, Menendez said: Wherever one goes in the world, people visit the stores that they believe will carry the product they want to buy, and they will not shop at stores that they know (or expect) won’t carry the right items. The ability to deliver more products, he said, can only contribute to customer loyalty – and therefore to entrepreneurial success.

What’s Next

Menendez said KCB has been able to approve lines of credit for nearly 99 percent of applicants and is already working with 5,000 shop owners in Kenya. The goal is to grow that number to 20,000 by the end of 2018, which will represent about a third of the stores that Unilever serves in that market.

Mastercard has integrated its payment tech into Unilever’s ordering system, which is a multi-country system, so there will be opportunities to expand into other markets where the partners observe similarities, including locations across Asia and Latin America.

“Our original intent was to be stable and to show that we can scale and grow,” Menendez said. “Now that we’ve proven that, our focus is on moving into other countries.”



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