Mercy Corps Ventures (MCV), the impact investing arm of Mercy Corps, a humanitarian aid NGO operating across the world, announced it is piloting a Buy Now Pay Later (BNPL) product for MSMEs, such as food vendors, in Nairobi, Kenya.
The pilot, in partnership with Kwanza Tukule, a company that helps small food vendors across Kenya get their supplies, will test the provision of cheaper and short-term capital to MSMEs in Nairobi (including informal food vendors, micro-retailers, and gig economy drivers).
The credit is unlocked by tapping into a global liquidity pool on the SympliFi Platform, a cross-border digital lending platform that facilitates access to affordable credit for MSMEs in emerging markets.
The partners here include:
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The Problems
According to MSV:
‘Smaller retailers and food vendors, who many locals depend on for their basic needs, have traditionally been underserved by logistics and e-commerce fast moving consumer goods (FMCG) startups, as most focus on larger shops and formal restaurants.
When asked what their most significant operational challenges were, 73% of Nairobi’s street food vendors cited the high cost of goods from suppliers, and 33% cited lack of access to credit.”
– Mercy Corps Ventures
For these MSMEs, this exclusion from credit is partly due to their lack of collateral and credit history, which rules out many traditional lending options, combined with prohibitively high interest rates on uncollateralized loans which present an affordability challenge.
Few lenders in the market offer the short-term products (such as 1, 3, or 7-day loans) required by these MSMEs to reach their full potential.
At the same time, Kenyan migrants living overseas often have limited options to support their communities and local businesses back home made harder by high transfer fees for those who wish to transfer capital.
How the Pilot is Being Implemented
Liquidity providers across the world will be able to deposit fiat currency into the SympliFi platform, which is bridged to a USD stablecoin and onwards into Kenyan shillings, and withdrawable via the local off-ramp, Kotani Pay.
Vendors are scored by UTU, a blockchain protocol that uses ordering history, demographics, and M-PESA data to build creditworthiness scores. This allows the vendors to obtain an alternative credit score outside of traditional credit bureau processes.
Qualified vendors will automatically receive the BNPL offer based on their weekly average order via the existing sales agent network to use on inventory for their businesses and will be able to increase their BNPL limit over time by 25 – 50% based on repayment behavior.
15 Merchants on Kwanza Tukule’s network have already received SMS messages confirming that they will receive their loans, with the idea being, to expand to 185 more merchants as repayments are made.
The key expectation is that the product under trial will reduce transaction costs for MSMEs and increase access to flexible payment solutions, enabling growth of revenues and profits.
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