- The Buy Now Pay Later (BNPL) product aims to benefit SMEs in Nairobi, Kenya
- The Smaller retailers and vendors, meanwhile, remain underserved by logistics and FMCGs
- Some of the targeted SMEs include small food vendors across Kenya.
Mercy Corps Ventures (MCV), the impact investing arm of Mercy Corps, announced its piloting phase of BNPL. The BNPL product leverages DeFi technology.
The Buy Now Pay Later (BNPL) product aims to benefit SMEs in Nairobi, Kenya. The targeted SMEs include small food vendors across Kenya.
The humanitarian aid NGO arm will test the provision of cheaper and short-term capital to MSMEs.
Partners in the DeFi Project
The micro SMEs include informal food vendors, micro retailers and gig economy drivers. By unlocking a global liquidity pool on the Symplifi platform, users will have access to credit. Symplifi, a cross-border digital lending platform facilitates access to affordable credit.
Consequently, affordable credit will serve micro SMEs in emerging markets. The partners involved in the project include UTU, Symplifi, Kotani Pay and Kwanza Tukule Foods Limited.
Smaller retailers and food vendors, serve many locals in their areas of operation. However, they remain underserved by logistics and FMCGs (Fast Moving Consumer Goods)
Mercy Corps Ventures claimed that 73% of Nairobi’s street food vendors cited high costs of goods that stem from suppliers. The humanitarian aid NGO arm also claimed that 33% cited a lack of access to credit.
Challenges Faced by Vendors
For MSMEs, exclusion from credit singles out a lack of collateral and credit history. Therefore, a lack of collateral and credit history rules out many traditional lending options.
Ultimately, prohibitively high-interest rates on uncollateralized loans also provide an affordability challenge. Few lenders in the market offer short-term products such as 1, 3 or 7-day loans. Most MSMEs require such short-term loans in order to reach their full potential.
Meanwhile, Kenyan migrants living overseas cite limited options to support their businesses back home. The limited options affecting their businesses and communities originate from high transfer fees of capital.
How BNPL Works
Liquidity providers across the world will now deposit fiat currency into the Symplifi platform. Symplifi remains bridged to a USD stablecoin and onwards into Kenyan shillings.
Finally, the funds reach their intended users through withdrawals from Kotani Pay, a local off ramp that facilitates the withdrawal of the deposits. UTU scores the vendors and the qualified vendors automatically receive the BNPL offer.
UTU serves as a blockchain protocol that uses ordering history, demographics and MPESA data. The data builds the creditworthiness of vendors.
The BNPL offer acts as a weekly average order via the existing sales agent network. Hence, the data helps vendors to increase their BNPL limit over time by 25-50%. For the BNPL limit to increase, the repayment behavior sets the tone for the move.
Kwanza Tukule’s network hosts several merchants with 15 merchants receiving loan confirmation messages. The network aims to expand to 185 more merchants once repayments are made.
The BNPL product expects to increase access to flexible payment solutions and enable the growth of MSMEs’ profits and revenues.
