In the current pandemic, crowdfunding, a form of crowdsourcing and alternative financing options which involves funding a project or venture by raising small amounts of money from a more significant number of people typically via the internet is undoubtedly a timely innovation responding to the current gaps of working capital to SMEs now more than ever before. Even though crowdfunding has been utilised for B2B businesses and marketing of existing businesses and products, a recent survey done by UNCDF shows that 63% have never used a crowdfunding platform, 33% have invested in a project in a crowdfunding platform, and 4% have raised funds as entrepreneurs on a crowdfunding platform.
A recent UNCDF webinar focused on Crowdfunding and financial inclusion in West Africa, had speakers representing Fintechs playing a pivotal role in crowdfunding models such as Pezesha, Thundafund, CrowdAfrica, shed light on how they have developed digital finance interventions that have closed the financing gap by reaching a more inclusive digital economy for the youth entrepreneurs across Africa.
Sheel Shah, Head of Strategy and Operations at Pezesha, gave an in-depth view of how the company is enabling a unique and robust infrastructure to drive SME Financial inclusion in Ghana following Kenya learnings. Watch the video here: https://www.youtube.com/watch?v=mWUT3Xs00N4&feature=youtu.be
Pezesha, a digital finance ecosystem headquartered in Kenya, has fully utilised its infrastructure and technology to serve the underserved small and medium businesses in Africa through financial inclusion. Through its marketplace, Pezesha connects lenders/Investors who may be individuals or institutions to quality small businesses that require financial support.
Pezesha’s marketplace model takes a unique, sustainable approach, given its 4 key components.
- Alternative credit scoring models: through vetting and evaluation of the small businesses by using complete transactional business data by empowering them with digital tools to draw useful insights into their business trends and cash flows. This data, combined with other mobile data, leads to a risk-based approach model iterating to be more robust over time with the continuous wider and complete data Pezesha aggregates.
- Automated Matching algorithms: to connect lenders with an opportunity to invest in quality small and medium businesses by seeking purposeful returns through Pezesha’s automated and intelligent matching engine instead of investors choosing for themselves. Pezesha ensures purposeful financing as, in the end, it leads to positive returns for lenders in the marketplace, which ultimately is Pezesha’s success factor.
- Financial education chatbots: Pezesha has developed inductive financial literacy modules via its product Patascore. Such modules include but not limited to; tips on debt management, the importance of recording transactions, cash flow management tips, and many more. Financial Education happens in the entire credit cycle and starts when MSMEs go through the acquisition process to the point they receive and repay their loan. This empowers MSMEs to make better decisions and actions to attain financial health during and post COVID-19 crisis. Financial education is one of the ways Pezesha is providing support to SMEs during this pandemic period.
- Collaborative value chain partnership approach: the SME acquisition process is largely driven through strategic partnering with suppliers and technology service providers who have a network of merchants they work with and require day to day working capital and float financing to service their customers’ demands. Pezesha provides a channel to offer credit facilities to such merchants across different sectors, creating a win-win for everyone: suppliers and merchants unlock revenue and sales growth, on the other hand, lenders capital is derisked, and in turn, Pezesha’s infrastructure value grows as it channels access to data, quality SMEs and capital.
Statistically, small and medium businesses make up to 70-80 % of Employment opportunities in Africa. With the rising youth unemployment and a desire to create jobs, small and medium enterprises need to be financially included as they form the backbone of African economies.
Pezesha launching in Ghana; Why Ghana?
According to World Bank figures, Ghana has the formal sector MSMEs funding gap of 5 billion dollars and its potential demand being of the same amount. In line with Pezesha’s collaborative approach to tackle the $328 Billion financing gap for MSMEs in sub-Saharan Africa, Ghana presents an opportunity to realize this vision following the thorough market research and local strategic collaborations Pezesha has built in the last weeks with the support of UNCDF.
Through the support of UNCDF, Pezesha aims to reach at least 10,000 businesses and connect them with local investors, diaspora community, and institutional lenders to grow their businesses to the next level, creating job opportunities for the youths and women at large especially in the underserved communities – Ashanti and Western Regions.
Pezesha has made tremendous progress and already live in Ghana https://ghana.pezesha.com/. All this has been possible because of our collaborative partnerships with local players across various spectrums helping us understand market needs and intentionally implement a long term success strategy. Including our proven and scalable digital infrastructure that enables a value chain approach creating a network effect in the end.
A practical simple example of how Pezesha works, is Joseph, a merchant who owns a retail shop. He places an order with a supplier and wishes to pay on credit. Pezesha is immediately notified electronically, and payment is made automatically by Pezesha directly to the supplier, and the goods are released.
Once Joseph completes the sale of the goods, he repays Pezesha for the credit facility. This then leads to a productive lending that results in a win-win for all at a zero-credit risk.
Pezesha’s value chain has proved to be a success in Kenya and is now looking forward to being impactful in Ghana to provide meaningful financial inclusion aiming towards its vision. This will go a long way to reduce poverty and impact job creation across Africa, as the ultimate purpose that drives Pezesha.