SokoWatch, a trusted last-mile distribution and logistics African company, has partnered with FinX, to offer informal merchants in Kigali, Rwanda, access to Decentralized Finance (DeFi) services.
The initiative seeks to help unbanked and underbanked informal shops in Kigali:
- Digitize their transactions
- Manage their cash flows
- Plan for their businesses
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SokoWatch has over 20, 000 registered MSMEs and seeks to re-invent informal retail by offering last-mile distribution services whre MSMEs:
- Order inventory via SMS or mobile app
- Enjoy same-day delivery
- Offers inventory via credit
With over 10 million informal shops or ‘dukas’ trading over $180 billion in goods every year, FinX, a Merchy Cops initiative, seeks to offer solutions that increase efficiency, profitability, and resiliece to such shops, which form a signifcant portion of MSMEs that employ 70% of Africa’s working population.
With an estimated 70% of the merchants being unbanked and unable to tap into formal credit, FinX hypothesis is to incentivize merchants shift their behavior from managing their working capital in cash to using a combination of mobile money and prepayments for inventory powered by DeFi yields.
Below are the benefits of this model to both merchants and SokoWatch.
- Reliable stock supply – no failed orders due to lack of cash
- Access to inventory discounts
- Prizes for consistent pre-payments
- Support form SokoWatch fro stock management
- Less failed orders
- More consistent orders and ability to help merchants plan orders in advance
- Ability to offer better payment terms to merchants by leveraging DeFi yields
- Ability to better access merchant creditworthiness, and offer more sophisticated services with a larger pool of inventory capital to merchants over time
During the pilot phase, FinX seeks to track KPIs that includes:
- Prepayments made
- Discounts earned
- Order frequency
In order to scale the pilot to thousands of it merchants, SokoWatch seeks to unlock efficient pools of capital by leveraging deposits in Luna, an algorithmic stablecoin pegged to the US Dollar while leveraging DeFi as a treasury tool.
The FinX pilot aims to address key ambitious impact and learning goals below:
- How do merchants currently manage their money and what barriers keep them from planning and managing their cash flows effectively?
- Can we shift behavior and encourage digital cash use while incentivizing merchants got grow their working capital over time?
- How can this product be used to offer more services and credit to a larger pool of merchants in the long-run?
- Can DeFi yields help offset costs, especially in tight margin businesses?
So far, the pilot has seen overwhelming reception with more than a third who have been offered the service having signed up with more than half the pilot participants being onboarded so far.
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