Micro and small businesses often cite access to capital as one of their biggest barriers to growth when asked about business challenges. This doesn’t come as much of a surprise, particularly in emerging economies, where these businesses rely heavily on cash to make and receive payments. Cash-based small retailers often lack collateral and a digital financial footprint, which keep most financial institutions from taking on the risk of extending credit to them. With a limited ability to access capital from formal lenders, small retailers often end up turning to informal ones who offer less favorable terms, which can trap them in a cycle of debt.
Over the past year, Mastercard and Unilever have joined forces to pilot ‘Jaza Duka’ – an innovative solution in Kenya that addresses this key barrier to small business growth. By using shops’ historic purchasing data that Unilever’s distributor network has been recording digitally, Kenya Commercial Bank is able to assess a retailer’s credit worthiness and extend low-interest credit to them, which is disbursed electronically using Mastercard payment technology.
Shopkeepers like Jane Wanja say they have been able to move from ordering only what they could pay for in cash to buying what they can sell. “In the past, I often did not have enough money to re-stock my store. Through Jaza Duka, I can stock bigger packages. Now my customers find what they are looking for,” said Jane.
As a part of the initiative, the Mastercard Center for Inclusive Growth has partnered with TechnoServe, a nonprofit international development organization, to support shopkeepers with the know-how to use their new credit responsibly and effectively, and to equip them with the skills to grow their businesses. Experience in the field has shown that many shopkeepers often lack visibility into the inner workings of their businesses, including cash flow, inventory tracking, merchandising and supply-chain management. By leveraging combined global experience and testing new methods of training delivery – such as peer-supported learning and use of digital tools – TechnoServe and the Mastercard Center are working to unlock insights on how to effectively scale training efforts for micro and small retailers.
The Center for Inclusive Growth is also working with researchers from the Haas School of Business at the University of California, Berkley to study the impact of the access to credit and skills training on their enterprises.
Following positive initial feedback, Mastercard and Unilever announced last week that they aim to further scale this strategic partnership to fuel inclusive growth across other emerging markets in Africa and globally.
“Micro and small businesses are the economic backbone of communities around the world,” commented Ajay Banga, president and CEO, Mastercard. “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.”
Natasha Jamal leads the Center’s programs and partnerships in the Middle East and Africa region.
Hear more about Jaza Duka from the Center’s Executive Director Parag Mehta in episode 24, How to Kill Your Bad Ideas, of the award-winning podcast Masters of Scale. Hosted by Reid Hoffman, co-founder of LinkedIn. Click here to listen.
Mastercard Center for Inclusive Growth is the proud sponsor of Masters of Scale Season 3.