Asilimia CEO on how to unlock access to finance for informal traders

Small and medium-sized enterprises (SMEs) face a myriad of challenges when it comes to running and growing their businesses, particularly in terms of revenue generation and securing inventory and other necessary inputs. These difficulties have been magnified by the ongoing COVID-19 pandemic, which has disrupted supply chains and shifted consumer habits. In a recent interview with CNBC Africa, Tekwane Mwendwa, CEO and Co-Founder at Asilimia, shed light on the impact of the pandemic on informal traders and the role of technology in addressing these challenges. Mwendwa highlighted the significant drop in transaction volumes among current users and in the market overall following the lockdown measures implemented at the beginning of the year. This led to a drastic reduction in sales for informal traders, with logistics disruptions impeding their ability to access goods on time. Moreover, changes in consumer behavior, such as opting to avoid crowded markets, have further dampened sales for these businesses. As a result, approximately 90% of informal enterprises have experienced a 40% decline in business, underscoring the severe impact of the pandemic on this sector. The adoption of payment technology (PayTech) has emerged as a crucial strategy to digitize payments and mitigate the challenges faced by SMEs. Mwendwa noted a significant uptick in customers using mobile money for transactions, spurred by government initiatives such as waiving mobile money and banking fees. This shift towards digital payments has not only provided a safer and more convenient option for customers but has also enabled informal traders to better manage their finances and cash flow. In terms of support needed by SMEs during these challenging times, Mwendwa emphasized the importance of access to affordable capital. He highlighted the need for "patient capital," which offers high-value loans at lower interest rates to sustain businesses during periods of reduced revenue. Additionally, there is a call for financial institutions to enhance their infrastructure to cater to the unique needs of informal traders, or for intermediary organizations to bridge the gap between banks and SMEs. As part of their efforts to address these challenges, Asilimia recently launched a digital ledger to help informal traders streamline their day-to-day operations and access financial services. This innovation is particularly crucial as many traders still rely on manual sales recording methods, making it difficult to secure loans or demonstrate financial history to lenders. The digital ledger not only simplifies record-keeping but also facilitates access to credit, thereby empowering traders to expand and sustain their businesses. With 10,000 subscribers and $17 million in transaction volume to date, Asilimia has demonstrated the potential impact of their solution in the Kenyan MSME market. Mwendwa highlighted the vast untapped opportunity, estimating that $14 billion in transactions is currently not captured by formal financial institutions or digital payment providers. By leveraging technology and innovative payment solutions, there is a significant opportunity to bridge this gap and drive financial inclusion for informal traders. In conclusion, the intersection of technology and finance presents a promising path towards unlocking access to finance for informal traders, enabling them to navigate the challenges of the current economic landscape and thrive in the post-pandemic era.