Denis Opudo
The Central bank of Kenya imposed new interest rate regulations in 2016. The policy made the commercial banks to change their lending strategies. In the last quarter of 2017, the Central bank of Kenya carried out a survey to determine the lending pattern. The study indicated that they preferred lending the corporate debt and corporate bonds. Most of the small and medium level businesses were sidelined in accessing these loans.
The situation made the IBM launch pilot project of financing the local vendors in Kenya. The pilot program uses blockchain technology to develop the loan applications. The company uses a mobile device to access the lender’s sale records. Therefore, the initiative has allowed the company to gain the confidence of the vendors. The pilot program provided micro-loans to the medium and small-sized (SMS) businesses.
Currently, the company has 220 beneficiaries comprising of small food kiosk enterprises. They are also known as the “mama mbogas” in Kenya. The beneficiaries received the loans through their mobile phones. They also used their phones to confirm the loan status via SMS.
The pilot program took 2 months where each vendor received a loan worth $30 USD. The initiative helped the vendors to increase the size of their business by 30%. The vendors also made profits of 6% with the least loan interest rate of 1 to 2 percent. The loan repayment period was between 4 to 8 days.
The company plans to expand the microloan project in other parts of Africa. The Ethiopian government has also signed an MOU with the IOHK. The agreement will allow the company to implement the blockchain technology in the Ethiopian’s Coffee industry.
The use of blockchain-driven programs is gaining wide applications in Kenya. The technology helps entrepreneurs to source funds from the local and international institution. For instance, the Twiga Foods project allows SMS businesses to acquire capital. The Twiga Foods is based in Nairobi city. It uses the blockchain applications to provide financial services for its clients.
According to the founder, Grant Brooks, the company started by connecting farmers with retailers. He noted that the company distributed the farm produce to 2,600 kiosks. Mr. Brooks added the deal is a win-win principle. The farmers and the company all gain from the business.
