Twiga Foods, a B2B food distribution company, in partnership with IBM have introduced a blockchain-based microfinancing product that aims to help food stall retailers in the country with microloans. The new product is expected to be accessible by about 220 food stall retailers.
According to Grant Brooke, co-founder of Twiga Foods, the company previously used to focus on helping farmers distribute their products to 2,600 retailers across Kenya. However, they soon realized if they could help them access a working capital then they would be able to increase their reach. “Therefore, if the food vendors could sell more, we could distribute more thus growing both of our businesses,” he added.
However, with credit access being a challenge for many SMEs in the country as a result of factors such as the high cost of loans and the lack of a credit score, the two companies saw it fit to fill this gap by creating a supply-lending program.
In order to ensure security, transparency, trust and enhance efficiency, the companies decided to adopt the blockchain technology in their product as it offers all these qualities. In addition, the use of the technology would also save time as it uses smart contracts to process and issue the loan.
Twiga Foods has already carried out an 8-week pilot that has seen over 220 loans processed. The loans were disbursed to the vendors through their mobile phones. As the loans were strictly to be used as a working capital, a retailer would only get the SMS providing loan options once they received an order. The retailer would then have the choice of choosing their loan preference to pay for the order.
The loans given come in two options; there is a 4-day loan that attracts an interest of 1% and an 8-day loan that attracts a 2% interest. So far the average loan given stands at Sh3, 000 and it enables one to increase their order size by 30% and the profit of a retailer to increase by 6%. Due to the success of the pilot, the company plans on rolling out to more businesses in the African region by the end of the year.