In partnership with SympliFi, Kwanza Tukule, UTU, and Kotani Pay, Mercy Corps is launching a DeFi-enabled B2B product called Buy-Now-Pay-Later (BNPL).
According to Mercy Corps, the product will test the provision of cheaper and short-term capital to MSMEs in Nairobi such as informal food vendors, micro-retailers and gig economy drivers, unlocked by tapping into a global liquidity pool on the SympliFi Platform.
Mercy Corps mentions on its site that,
‘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.”
These MSMEs’ exclusion from credit is partially brought on by their lack of collateral and credit history which limits many traditional lending choices, as well as the unaffordably high-interest rates on uncollateralized loans. Few lenders on the market provide the short-term loans that small MSMEs need to grow to their full potential, such as 1, 3 or 7-day loans.
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.
Global liquidity providers will be able to deposit fiat money into the SympliFi platform which is bridged to a USD stablecoin and then into Kenyan shillings. Fiat money can be withdrawn using the Kotani Pay off-ramp in the local currency.
UTU, a blockchain technology, will assign creditworthiness rankings to vendors based on order history, demographics and M-PESA data. This enables the suppliers to receive an alternative credit score independent of the standard credit bureau procedures.
Through the current sales agent network, qualified vendors will automatically receive the BNPL offer based on their weekly average order to use on inventory for their companies. Based on their repayment behavior, qualified vendors will be able to gradually increase their BNPL limit by 25 to 50 percent.
In order to extend to 185 more businesses as repayments are made, 15 merchants on Kwanza Tukule’s network have already received SMS messages verifying that they will receive their loans.
The main hope is that the trial product will lower MSMEs’ transaction costs and expand their access to flexible payment options allowing them to increase their revenues and profitability.