Mastercard and Unilever are rolling out an interesting initiative that promises to propel the growth of micro retailers across the African continent by opening up access to low cost loans, sometimes interest free loans, to finance stock.
A pilot titled Jaza Duka, meaning fill up your store, has been activated in Kenya. Mastercard and Unilever announced that they will expand the Kenyan initiative to help micro entrepreneurs in Africa and other regions overcome the cash constraints that limit their ability to buy and sell more products and ultimately grow their businesses.
The initiative feeds into the idea of forming symbiotic existence between large corporations and emerging small enterprises in the the developing world. In South Africa, retailing giant Pick n Pay is drumming up its initiative to link up with the spaza shop market.
The Kenyan initiative combines distribution data from Unilever and analysis by Mastercard, on how much inventory a store has bought from Unilever over time. The results from the analysis are used to provide a micro-credit eligibility recommendation to KCB Bank Kenya (KCB).
This addresses the obstacles faced by many micro entrepreneurs when approaching banks for funding. Banks usually require formal credit history or collateral, resulting in entrepreneurs borrowing from informal lenders at high interest rates and trapping them in a cycle of debt.
If the micro-credit line from KCB 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. For example, if a store is consistently showing weekly purchases of $50 from Unilever, they could qualify for an interest-free credit line of $120 to stock their inventory. The credit line from KCB is provided through a secure Mastercard digital payment solution.
As part of the micro-credit, the partners are providing the store owners with training to help them manage their finances, inventory and forward planning for supply against demand. The entrepreneurs are also being trained on marketing tools and techniques to help sell their products and subsequently increase their opportunity to grow faster.
By the end of April, more than 5,000 kiosk owners in the wider Nairobi area had applied to join the program – all are expected to be fully enrolled by mid-May. Stores that fully moved to the new platform have grown their sales of Unilever products by up to 20%.
Ajay Banga, president and CEO of Mastercard, said micro and small businesses are the economic backbone of communities around the world . “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.”
Paul Polman, Unilever CE, said “by broadening our collaboration with Mastercard, working across sectors and including additional private and public partners, we are further expanding the positive impact of financial and economic inclusion”
Over time, the payment history from shopkeepers’ participation in Jaza Duka can pave the way for these business owners to access other financial services, including small business loans.
Mastercard and Unilever have committed scale up the initiative. They have set a target to provide 20,000 kiosks in Kenya with a digitally managed credit solution by end of the year. They will then expand the initiative to across Africa and Asia Pacific.
KCB Group CEO and MD Joshua Oigara said “We see this partnership as a big plus in boosting our role as catalysts of trade and doing business in East Africa. The retailers can now access their credit using their mobile phones without the need to issue physical plastic cards.”
Parties to this initiative are inviting other financial institutions consumer goods suppliers to join the initiative.