Twiga Foods together with IBM have partnered to add a blockchain based micro-financing feature to their platform for farmers in Kenya and across Africa. Launched in 2014, the Nairobi based start-up had raised USD 10.3 Mn funding in 2017 intended to expand its portfolio by increasing the number of vendors it serviced as well as diversifying its services and product range offering.
With a focus on helping small-scale farmers sell their produce to vendors across the country, starting with fruit and vegetables, the scalability and growth potential for their distribution would only be enhanced by access to capital. “Previously, we were focused on helping farmers distribute bananas, tomatoes, onions and potatoes to 2,600 kiosks across Kenya, but we soon realized that we could help them sell even more produce with access to working capital. It’s simple, if the food vendors can sell more, we can distribute more, growing both of our businesses,” explains CEO and Co-Founder, Grant Brooke.
As is expected with vendors in very informal markets, the lack of or inability to access a credit score inhibits these vendors from scaling their business and also poses a challenge for micro-financing institutions. This was a challenge that both IBM and Twiga Foods encountered when assessing the vendors on their platform. However, with IBM’s extensive experience in creating credit scores using mobile data – having previously completed a project that saw the distribution of USD 3 Mn in loans – the challenge was there for the taking.
“We analyzed purchase records from a mobile device and then apply machine learning algorithms to predict creditworthiness, in turn giving lenders the confidence they need to provide microloans to small businesses. Once the credit score is determined, we used a blockchain, based on the Hyperledger Fabric, to manage the entire lending process from application to receiving offers to accepting the terms to repayment,” said Isaac Markus, a researcher from IBM Research in Kenya.
A test run for the new microfinancing platform was run in 2017 with 220 kiosks across Kenya and the 8-week pilot was successful averaging USD 30 loans over four and eight days. The loans were facilitated with a low-interest rate of 1% and 2% respectively. The pilot was wholly mobile based with vendors receiving the loans as working capital to finance their orders. Lead software engineer of the project at IBM Andrew Kinai has stated that “We had several iterations of the platform based on feedback from the retailers. The SMS-based solution provided an effective channel for a diverse set of users, some with limited IT literacy, to access financing for their orders.”
Having completed the pilot, the final iterations to the platform are in place and through their partnership, IBM and Twiga Foods plan to roll out their new product offering to SME’s across the continent reaching a wider network of sectors beyond farming.