From independents to local shops and restaurants that are the cornerstones of so many communities, small businesses in Africa’s emerging markets need to maintain enough cash to take advantage of growth opportunities or meet challenges.
And in the absence of cash, these traders often resort to alternative credit options and business loans to fill the working capital gap and keep business operations running smoothly.
Read more: FinTechs think big to help African SMEs find working capital
But these solutions are not always optimal, which is why a new wave of African startups are pioneering the provision of innovative lending platforms across the region to help small and medium-sized enterprises (SMEs) and individual entrepreneurs maintain sufficient cash.
Sector credit for gig workers
In a region with high unemployment rates, where many people struggle to generate stable incomes, the gig economy framework is reshaping African labor markets. And as it matures, technologies are being developed to build on the core gig ecosystem to better serve the needs of independent entrepreneurs.
One such technology is ImaliPay, a working capital solution for gig workers that allows them to pay for the things they need to stay in business using a buy now, pay later (BNPL) credit model. ).
For example, a gig worker in the transport sector could use the ImaliPay app to finance the purchase of fuel or spare parts by spreading the cost over several installments, instead of having to make full payment up front. ‘advance.
Tatenda Furusa, co-founder and CEO of the company, recently told PYMNTS that the gig economy is “the future of work globally” and that ImaliPay is positioning itself as “the financial sidekick of facto and social safety net partner for gig workers around the world”. continent.”
And as workers around the world adapt to an ever-changing gig economy, so does the technology they use. Among the new gig toolbox, solutions to address the working capital gap will be critical to the financial well-being of African gig workers and are essential if the sector is to thrive.
Digitization of community loans
Besides the gig economy, a related but slightly different version of Africa’s micro-entrepreneurship spirit can be seen in the millions of mobile money agents facilitating the flow of hard currency between hard cash. and the mainland’s mobile money wallets.
Sometimes operating in rural areas where most people have a mobile money wallet but are unbanked, agents do not always have access to institutional lines of credit, leading some traders to turn to their friends and their family when needed.
Related: Community Loans Fill Funding Gap for Mobile Money Agents in Africa
For Femi Iromini, founder and CEO of Nigerian startup Moni, this sparked a desire to bring the community lending model into the digital age. Starting out as a WhatsApp group for mobile money agents connecting borrowers with lenders, Moni has grown and expanded beyond the initial targeted local community to now provide small loans to mobile money agents at across Nigeria.
While banks traditionally view the microloan market as a high-risk market for very little gain, Moni leverages social trust and group responsibility to mitigate default risk. In fact, as Iromini recently told PYMNTS, the company has been able to achieve an impressive 99% refund rate since launching in 2021.
BNPL for SMEs
As ImaliPay demonstrates, the BNPL lending model can provide an alternative credit framework in the absence of a cash loan or a borrower’s inability to repay credit in full on time.
Nigerian FinTech Duplo is one of the business-to-business (B2B) startups driving growth in the BNPL space.
Read more: BNPL is the working capital bridge for African SMEs
Instead of giving companies money, Duplo co-founder and CEO Yele Oyekola told PYMNTS that their BNPL B2B solution can fund payment of a supplier invoice on behalf of a company, after which the merchant will reimburse according to the proposed conditions.
Duplo has established relationships with several Nigerian wholesalers and built a network of retailers who can then buy from the wholesalers, with Duplo acting as a credit intermediary. This way, retailers can keep their cash and maintain liquidity, and wholesalers can offer BNPL without assuming any risk themselves.
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