Article by Maureen, SME Operations at Pezesha

World Bank Chief Economist Carmen Reinhart said the coronavirus pandemic is turning into a major economic crisis and warned of the possibility of a financial crisis emerging.

“This did not start as a financial crisis but it is morphing into a major economic crisis, with very serious financial consequences,” Reinhart said in an interview with Bloomberg Television. “There’s a long road ahead.” It is with no doubt that this scenario is not sustainable. 

slow business due to lockdowns and movement restrictions

A survey done by Collect Pro and the Sandbox community  showed that in the 3rd quarter of 2020, 10% of borrowers expressed non repayment, 13.6% were significantly behind and 24.9% were slightly behind. On a positive side, 5% of these improved their repayment due to decrease in monthly expenses and stable salaries as a result of lockdowns; and another a third of these people were not affected at all.

The negatively affected repayment behavior is as a result of job losses, that could sometimes supplement on businesses, low business volumes especially hospitality, education, transport among others. 

schools have been majorly affected during the pandemic

These statistics mirror what small businesses are going through, given MSMEs make 80% of the employed community in Kenya, according to the International Trade Centre survey on SME competitiveness in Kenya. Covid-19 has presented an environment that is so uncertain and so unpredictable, and the big question is,

“Is there hope for small businesses amidst the pandemic?”

Here are a few things we, at Pezesha are doing to support your business and ensure that you not only survive but thrive as well;

Moratoriums

Businesses are encouraged to speak to their financial providers and agree on a restructured form of repayments. Since we cannot give a one shoe fits all kind of a solution to this, we encourage our customers to bring up honest conversations around loan repayment challenges and we are able to come to an agreement on a realistic way to do the repayments. Being at default or even worse filing for bankruptcy has its own fair share of implications like being listed for certain periods i.e. (7 years when you file for bankruptcy) ,that may have long term negative effects on your business. Communication is always encouraged. At Pezesha, we give you that listening ear.

Financial Education

Knowledge is power. An empowered mind is always a productive mind. That is why, by realizing that we have a knowledge gap among many MSMEs, we not only give you financial solutions but also equip you with skills that will enable you to run your business smoothly, manage your debt and cash flows and survival tips among others. Enroll today to our Pezesha Finance Platform and give yourself a competitive edge in your business. But first, here are a few survival tips from us.

Value Chain Partnerships

Alongside our financing solutions, we offer Supply chain partnerships that aim to connect merchants to working capital. This in a nutshell is where a merchant places an order to their supplier, the request hits our platform, scoring for eligibility purposes is done real time and if you qualify, we remit the credit offer to the supplier to purchase inventory without the worry of float. A win-win for everyone! The supplier has no worries around credit risk and the merchant is able to keep his business afloat; by having required inventory at all times, consequently improving consumer retention which leads to growth in customer base and ultimately growth in the business.

It is without doubt that Covid-19 has rendered most MSMEs the inability to rely solely on equity for their business operations and hence affordable and realistic credit facilities like this one go a long way to leverage such constraints.

On this note, we also invite collaborations from financial institutions and other stakeholders to make this a sustainable reality.

Credit scoring.

We also offer an automated and robust credit scoring model through our technology Patascore, which drives faster, uniform and better decisions. Since financial enablement has become almost inevitable for most small businesses as a result of the constraints brought about by the pandemic, the ability to do real time self-evaluation on their creditworthiness and determine what healthy actions to take to avoid bad debt and unlocking higher credit limits could be a bonus to these businesses.  This ultimately ensures not only survival by availability of credit facilities, but also good relationships and confidence with lenders. 

There is hope after all is said and done

So yes, there is hope for small businesses amidst this pandemic and the hope is here with us. It is true we are living through tough times, but desperate times not only need tough measures but also a friend, a partner that can walk with you and help you navigate the storm. Visit us at Pezesha. We are that faithful friend that sticks closer to your business and is more than interested in your growth. When you grow, we grow as well.

we at Pezesha are working with strategic partners to strengthen the foundation of doing business in Africa

Finally,for us to strengthen this hope, we are always welcoming strategic partners. Currently we have Jumia, Twiga, I-Pay and Pesatransact (Pesapoint) among other value chain partners on board and the results are tremendously amazing. While it may be difficult to accurately declare that a certain business system will withstand further disturbances caused by Covid -19, strategic adaptability and resilience are viable solutions for guarding space in the market and remaining competitive in any economic climate.