Adam Jones
Central Bank
East Africa Region
G Capital
Google Maps
Gor Mahia
Hassan Oktay
Jaza Duka
KCB Bank
Luck Ochieng
Mastercard Head
Nairobi CBD
Procter & Gamble
Sarah Macharia
Sarah Sh9
The Financial Times
Unilever Customer Development

Why Unilever wants to fill your duka on credit

Locating Sarah Macharia’s shop in the maze of buildings in Nairobi’s Umoja estate is no easy task.

The easiest option is using a location pin off Google Maps to make the numerous turns off unnamed roads.

And when you finally get to Sarah’s shop, the name of its previous owner is fading into the paint and it requires deliberate effort to spot ‘Shalom General Shop’ over the door beam.

Sarah is one of the beneficiaries of an initiative being run by the British-Dutch firm Unilever.

The consumer goods multinational has lent Sarah Sh9,000 worth of stock. She’s one of 8,500 retailers across the country in the initiative that has cost Unilever Sh245 million.

But how does a global conglomerate reach customers in such difficult-to-locate addresses and go so far as to risk lending them its products?

Mobile banking

It’s definitely not goodwill; it’s the result of a meeting in Davos, Switzerland, in 2017, that sought to leverage on the model of mobile phone lending that’s taken root in Kenya.

The model taps into the potential of clients who lack access to the loans market because they lack a credit history.

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“Two years ago, the CEOs of Mastercard and Unilever met in Davos and looked at how they could expand businesses at the bottom of the pyramid. They chose Kenya because of the adoption of technology and mobile banking,” Unilever Customer Development Director Luck Ochieng told Hustle.

Unilever, the makers of products like Vaseline, Sunlight, Omo and Lifebuoy, had data on its 41 distribution points, and Mastercard could offer credit windows. What was needed was the buy-in from retailers who, according to Luck, are 400,000 across the country.

And they didn’t struggle to convert the willing. Sarah says the stock in her shop was limited to the amount of money she could raise, but that changed when she signed up for the programme, dubbed Jaza Duka.

She needed at least Sh5,000 a week to restock her shop, but soon after she enrolled, she got a credit limit of Sh9,000 and could use the Sh5,000 to buy other brands.

Her shop has now been transformed into a mini-pick market, where you walk in and shop rather than buy goods dispensed through a pigeonhole.

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Grace period

Traders under Jaza Duka can get up to 35 per cent of their stock on credit, and are charged 3.5 per cent for the facility.

They also get a grace period of up to 17 days within which no interest is charged if the trader pays back.

Luck says up to 10,000 small traders have accessed the facility, with 8,500 being active users. The firm is after 38,000 stores.

The project targets small-scale traders and uses big data to allow them to borrow and repay over short stints of time, creating a credit history that allows for increasing the amount of credit that can be borrowed.

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The consumer goods firm says the programme, which is in collaboration with Mastercard and KCB Bank Kenya, has been launched in 29 of its 41 distribution points across the country.

“The initiative combines distribution data from Unilever and analysis by KCB on how much inventory a store has bought from Unilever over time. The results from the analysis are used to provide micro-credit eligibility by KCB,” Denis Njau, KCB’s head of channels, said.

Mastercard Head of East Africa Region Adam Jones said the stores must have at least 12 months of trading history with Unilever and three months of regular transactions to enable an assessment of the longevity and sustainability of their business.

Unilever distributes up to 60 per cent of its stock through wholesale and small retail shops, with 40 per cent going through traders like supermarkets.

This is a unique offering at a time when loans to small traders are limited following the introduction of interest rate caps.

A recent Central Bank of Kenya survey polled financial institutions, and 51 per cent of them indicated that interest rate capping has negatively affected their lending to SMEs.

A credit history helps banks de-risk their clients, allowing for gradual increases in amounts disbursed, with stock providing relative collateral.

The Jaza Duka model, however, is not unique to Unilever; other conglomerates are catching up.

According to The Financial Times, multinationals like Procter & Gamble and East African Breweries have started similar, but smaller, initiatives with 4G Capital, a Nairobi-based microfinance institution.

Mastercard wants to get other brands onto its platform, as well as other lenders to increase the products and credit available.

“We’re talking to a number of FMCG (fast-moving consumer goods) companies that can see value in participating, but we’re not at a contractual stage. We do, however, plan to introduce at least one new FMCG partner during 2019,” Adam said.

Debt binge

Such a move will require a model that tracks the cashflow of the businesses since there’s the risk of a debt binge that could sink small businesses.

To prevent the chances of this happening, the programme trains traders on basic accounting and managing their books.

But this hasn’t got rid of the risk of default or late payments.

According to Luck, nine per cent of the businesses default, though is smaller than the industry default average among bigger outlets that’s at 12 per cent.

“It’s not actually defaulting. It usually depends on the month and is mainly late payments, which attract a heavier interest fee of 10 per cent,” Luck said.

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