Mastercard has announced the availability of their digital ordering system that will likely empower small kiosk owners in Nairobi to order and pay for products from wholesalers via SMS. The digital ordering system known as Kionect will also allow orders to be submitted via a feature phone.
Kionect is currently being piloted with over 1,000 micro-businesses in three of Nairobi’s informal settlements – Kibera, Kawangware and Kariobangi – in partnership with Kaskazi, a for-profit wholesaler and distributor.
“Kiosk owners are the heartbeat of their communities – they source the supplies needed to get by. We have worked hand-in-hand with micro-merchants to truly understand their daily hurdles. Learning that product sourcing, tracking inventory and access to flexible, short-term credit are major pain points, we set out to develop Kionect. This Mastercard technology opens up a new avenue for micro-retailers to grow their business, increase consumer demand and ultimately contribute to economic development in Africa.”
One of Kionect's benefits is that it helps create a digital record for kiosk owners in Kenya to get access to micro-loans to stock inventory and grow their business.
“For kiosk owners, access to basic financial services holds the potential to expand their business and contribute to the vibrancy of their communities. This product heavily relies on the micro-entrepreneurs’ transactional data for credit assessment therefore making it accessible to micro-entrepreneurs who lack conventional collateral to secure their loans,” said Juliet Ongwae, Chief Innovation Officer at Musoni Kenya.
Diamond Trust Bank (DTB), a financial institution with operations in Kenya, Uganda, Tanzania and Burundi, will be facilitating digital payments between the kiosk owners and the wholesaler as part of Kionect's system. The bank will also act as a re-seller of Kionect to its wholesale business clients.
“We are seeing an increased need for supply-chain financing in the micro-merchant and small and medium enterprise space. If wholesalers can provide financial help to their merchants, it can help bring income stability, grow their business, create new employment opportunities and contribute to economic growth for Africa," said Farouk Khimji, Head of Products & Innovations at DTB.
According to Mastercard, with every Kionect loan that is paid on time, the kiosk owner has an opportunity to take out a larger loan for a longer term.
Kiosk owners being somewhat informal traders, struggle to get finance to sustain and grow their businesses. This is largely due to the fact that these businesses run on cash, which means they have no financial track record. In addition, there is no mechanism for kiosk owners to place stock orders directly with the wholesaler, which makes it challenging to stock fast moving inventory.
Kionect is one of several broad-based collaborations Mastercard has launched with public and private sector entities to bring the benefits and security of electronic payments to Africa and around the globe. It developed from a direct collaboration with Mastercard Labs for Financial Inclusion and micro-businesses in Kenya. After the initial pilot, Mastercard will embed the most successful services and features of Kionect into solutions designed for scale in partnerships with global Fast Moving Consumer Goods (FMCG) companies in emerging markets.