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Musomi: Providing Credit in Kenya

People living in Sub-Saharan Africa comprise a large proportion of unbanked people. Recently, countries such as Kenya established interest rates ceiling that has increased restrictions to credits as traditional lenders impose more rigid requirements before granting loans to the people. Over the years, many microfinance institutions have sprouted to help the citizens access financial services. Musomi Kenya, which is based in Nairobi was launched in 2010 and currently serves 40,000 clients with loans ranging between US$5 and $3,000. In revolutionizing their products and services, the company makes use of M-Pesa which is a mobile money platform where they make loan disbursements to their clients who can also use the platform to make the loan repayments. Their repayment rates are at 97. The CEO OF Musomi, Stanley Munyao spoke during the MasterCard Foundation’s 2017 Symposium whose focus was financial inclusion.
Munyao said that Microfinance institutions face the challenge of onboarding customers and maintaining the relationships but partnerships are a great solution to the problem. The firm has cooperated with different companies that provide products and services serving people whose income is low. Some of the partners include d.light which distributes off-grid solar to provide services to their clients. It has also partnered with FarmDrive that analyses know-your-customer (KYC) databases to determine the creditworthiness of clients. The company further financial training to its customers and empower their growth and the growth of communities.

Success Stories Through Inditrade Capital

All Yashoda of Periyavoor, Tamil Nadu needed was access to finances to start small businesses as an aspiring entrepreneur. The rising household expenses and overly relying on her husband’s salary worried her. She wanted to open a little provisional store in her area of residence. She knew the people around her well and had an idea of what to sell but how and where would she start?
When she learned about Inditrade, Yashoda did not hesitate to approach the company that was quick to give her access to financial services as well as education on how to manage her business. A loan of Rs 30,000 nurtured her dream of becoming a business owner in a business that gives her approximately Rs 300-Rs 800 daily, Yashoda`s husband supports her through managing the store which empowers them to send their children to good schools.
Inditrade Capital launched their micro-financing arm that operates in Maharashtra and Tamil Nadu in March 2017 to support women entrepreneurs in their endeavors. The company recognizes that it is the small businesses that form the foundation of the economy in India. The demand for credit in the unorganized sector in the country was thus bigger than the funds supplied prompting the company to launch strategies to address the demand and supply challenges. The company has improved lives through the provision of much-needed capital to establish and develop small businesses and has witnessed while being part of the numerous success stories.

Mobiloan in Rwanda

Microcredit institutions are embracing technological advancements to expand their customer reach and revolutionize their services. The KCB Bank in Rwanda, a subsidiary of the Kenya Commercial Bank (KCB) Group recently created and launched Mobiloan to enable their customers to acquire small loans for emergencies and re-stocking purposes. Mobile will empower the users to obtain funds through mobile banking which will significantly increase financial inclusion. Customers will access loans of up to USD 585 through Mobiloan which shall be required to be paid within 30 days and carry an interest of 6%. The KCB group began its operations in 1896 as a unit of the National Bank of India and has advanced and developed establishing growth in different countries inclusive of Kenya, Uganda, Tanzania, Rwanda, South Sudan, and Burundi
A customer will be able to use Mobiloan on condition that they have an account with KCB and register for KCB MOBI. John Karamuka, the National Bank of Rwanda (BNR) who is the director in charge of payments urged other banks to commit themselves to transparency and ensure the protection of consumer rights as they embrace new and improved technology. Products like Mobiloan make financial services affordable and reliable for it is an improvement of financial services in a country and advances inclusion.

Microcredit Impact in Senegal

With the continuous rise in the cost of living, many women have taken on small business to feed their families in Saint-Louis market in Senegal. The business rage from selling food out in the streets and fruits as well. Microcredit has enabled these women and other small business owners to access finances to facilitate their business as they struggle to make their way out of poverty. Microcredit has empowered entrepreneurs to put their entrepreneurial ideas into action and improve their lives and the community as well. Fatoumata Camara, director, JUMIA Nigeria described microcredit as an incredible opportunity that has developed the framework of alternative participatory financing. Feedback from the small business owners has proved that microfinance has facilitated the growth and development of their businesses because accessing credit or capital is almost impossible to people especially Africans where poverty levels are significantly high.
The alternative financing has seen the development and success of startups and growth of companies which have resulted in reduced levels of unemployment among the communities. Thiaba Camara, Chief Operating Officer, AFIG Funds, has observed the developments achieved in Africa and other developing countries through microcredit as their financial instruments. The impact of microfinance can be celebrated widely in Senegal as microcredit institutions make daily pursuits to reach a higher audience.

Re-Thinking Microfinance Institutions

In an article on devex.com, Aaron Baum explains the competency of microfinance as the distribution, networking group meetings, and the added value of organizing vulnerable populations in rural areas of from low-income countries into a platform. Microfinance is not merely a bank that ends money to groups but a platform that extends finances access to over 200 million households globally by distributing loans to them. The traditional microfinance gives loans to self-informed groups of entrepreneurs organized into credit centers with constant meetings in remote villages. The meetings promote social capital and reduce loan defaults, but their impacts on poverty reduction have remained mixed. Microfinance can explore the possibility of providing their services with a stronger evidence base apart from the loans.
According to research conducted Arnhold Institute for Global Health in collaboration with Fonkoze, the most significant MFI in Haiti, microfinance can and does provide other services apart from loans. Microfinance services have extended to heath through micronutrient supplements that fight malnutrition efficiently. Illness tends to result in poverty and poverty also results in sickness and the integration of microfinance to health care is a significant move in service provision. Microfinance can increase coverage to the existing health interventions to their clients which will grant them access to the essential health services inclusive of health delivery. Using microfinance networks to deliver health lifesaving products is a promising approach in this field.

Amazon Ventures into Microcredit

In the continued efforts to show flexibility in their business, Amazon, the E-commerce player has decided to partner with state-run lender Bank of Baroda. The partnership will enable Amazon to offer microloans to their sellers and expand their business. The loans will range from a range of Rs one lakh to Rs 25 lakh and will attract an interest of 18-30 percent annually. Amazon has approximately over 2 lakh seller base, and according to the managing director and the CEO of the bank, PS Jayakumar, the move will enable these clients to aces comprehensive baking solutions easily.
Amazon sellers will receive pre-approved indicative offers from the bank of Baroda through an invite to most eligible loan limit a client will be granted. According to Amazon India director and general manager, Gopal Pillai, the move was an opportunity to engage with the seller who will access financial resources for the growth of their small business and an opportunity for expansion ahead of the festive sales. The bank plans to venture into this program with 15 to 20 percent of Amazon sellers by the beginning of next year. The clients will have the flexibility of making a direct repayment f the loan using the sale disbursement on the Amazon marketplace.

Growth in Microfinance

Speaking to the press, chairperson of the Egyptian Financial Supervisory Authority (EFSA), Mohamed Emran explained how the value of microfinance in Egypt rose to $ 6 billion directed towards two million citizens via880 NGOs and three licensed companies. He said that companies are continually applying for licenses to operate in the microfinance sector. In his report, he mentioned 70 percent of beneficiaries from microfinance as women which amounted to 1.4 million, compared to 600,000 men. Emran explained how the non-banking financial companies (NBFCs) made significant contributions in reaching the marginalized social sectors which help in the efforts of poverty reduction and minimizing the gap between the rich and the poor.
Over the first half (H1) of 2017. Microfinance sector recorded a LE 5.5 billion ($309 million) which represents a 23 percent increase from 2016. The EFSA further stated that the beneficiaries of microfinance services rose by 10 percent registering LE 1.8 million. Compared to the male recipients, the female members outnumbered the male in numbers with their financial balance reaching 70.3 percent of the total market. Microfinance offers crowdfunding and personal lending. The first digital map for microcredit showed the licensed companies, communities and civil organizations in the microfinance business and their activities in different governorates. It goes ahead to providing the branches of micro financial bodies and their addresses with the number of clients.