After successful trials in Kenya, Mastercard and Unilever have announced an expansion of their strategic alliance to help micro-entrepreneurs in Africa and other developing regions overcome cash flow constraints. These constraints in conjunction with little to no formal credit history limit small kiosk business owners from buying and selling products in bulk and thereby stunting the growth potential of their businesses.
The pair has partnered to bring the “Jaza Duka” initiative to Kenya which combines distribution data obtained by Unilever and analyzed by Mastercard to determine the inventory history of a kiosk. The data is then presented to Kenya Central Bank (KCB) to offer small businesses owners a formal representation of credit history allowing them to qualify for micro-credit. This enables small medium enterprises to access these loans without providing formal credit histories or collateral. But an even further benefit to small business owners is that they need not rely on loan sharks as their sole providers of capital as this often entails outlandish interest rates.
KCB Group CEO and MD Joshua Oigara was excited by the announcement declaring that KCB sees the “partnership as a big plus in boosting our role as catalysts of trade and doing business in East Africa. This is part of our commitment to simplify and transform the lives of our customers to enable their progress. The retailers can now access their credit using their mobile phones without the need to issue physical plastic cards. Following a successful deployment in Kenya, we will be rolling out the same to the regional markets we are in as we support the growth of value chains, small, medium and micro enterprises.”
Philip Herrey who serves as the Vice President of Enterprise Partnerships at Mastercard laments that the people with the lowest financial penetration and access to banks are often the ones that need them most. “Two billion adults worldwide are unbanked and some of the lowest rates of financial penetration are in emerging markets. Banks are the primary way to access financial tools in developed countries, but in emerging markets, people largely depended on cash and are excluded from traditional financial services because of remote locations, limited branches and lack of literacy, he said.
Herein comes the benefits of the partnership, in a bid to give access to SMEs Mastercard and Unilever intend to provide financial institutions the guarantee they need to make these funds available. “A combination of mobile penetration and governments’ desire to boost financial inclusion and reduce the use of cash is fuelling mobile financial services and payments in emerging markets. Payment technology companies, banks and start-ups are looking at new and innovative ways to solve the issue of financial access through mobile technology, Herrey adds.
Once the line of credit is extended by KCB, the kiosk owner can access the funds and purchase the necessary stock to compensate for what he would otherwise only be able to afford through his cash on hand sales. The credit provided is a percentage increase based on what the kiosk owner is able to sell and is offered to the kiosk owner through a secure Mastercard digital payment solution.
In addition to providing SMEs with access to credit the initiative also Mastercard and Unilever also facilitate the training of these business owners to manage their finances and ability to forecast their supply and demand.
Ajay Banga, CEO of MasterCard has come out to praise the impact of small business in their communities and their potential for solving broader problems like employment if only they have access to financial tools.
“Micro and small businesses are the economic backbone of communities around the world,” remarked Ajay Banga. “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.”
This vision is shared by Paul Polman, Chief Executive of Unilever who sees this initiative as a necessary vehicle to achieve the UN’s 2030 Sustainable Development Goals. “Financial inclusion is a key enabler of the 2030 Sustainable Development Goals – lifting individuals out of poverty and supporting overall economic growth. 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” said Paul Polman.
And indeed, the project in Nairobi is bearing fruit, with stores on the platform declaring growth sales of up to 20% and a further 5000 kiosk owners applying to join the program and expected to be fully enrolled by the mid-May. Nevertheless, Kenya is not the only successful trial of the program with results in India also showing remarkable traction.
“Mastercard is taking a mobile-first approach to emerging markets like Africa and India, designing solutions that work across devices – web, smartphones and feature phones,” Mr. Herrey said. “For example, Mastercard has launched Masterpass QR in both India and Africa to make it easier for small and medium-sized merchants to transact with consumers eliminating the need for a point of sale systems and using phones to facilitate real-time payments.”
To further scale this model, Mastercard and Unilever jointly commit to some actions:
The companies have set a target to provide 20,000 kiosks in Kenya with a digitally managed credit solution by the end of the year. These efforts are expected to extend to additional markets across Africa and the Asia Pacific.
To ensure responsible use of credit, the Center for Inclusive Growth – a Mastercard philanthropic initiative – will work with TechnoServe to provide micro-entrepreneurs with training on financial and business skills.
Mastercard will join Unilever in its “Transform” partnership with the UK Department for International Development (DFID), with the aim to promote sustainable community development in emerging markets around the world.
The desire is that the successful pilot in Kenya will entice other financial institutions to join the growing initiative to fuel the growth of SME’s in East Africa and the wider development community globally.