SMEs Acquired New Loan Product as Safaricom Launched Partnership with Pezesha

• SME loan products offer a considerably low interest rate, which helps fund businesses.
• Pezesha is a financing platform for small and medium-scale enterprises (SMEs) that enables them to access affordable credit and other financial services through embedded finance infrastructure.
• Safaricom has partnered with Pezesha, a digital lender, to credit small business owners, adding to the telco’s existing loan products.

Pezesha loan products

Pezesha is a financing platform for small and medium-scale enterprises (SMEs) that enables them to access affordable credit and other financial services through embedded finance infrastructure.

Pezesha has created an integrated digital financial infrastructure whose mission is to lead platforms and marketplaces where small and medium-sized businesses work through a collaborative approach. Financial institutions or networks connect on this platform and are matched with quality SMEs, driving meaningful financial inclusion and reducing any inequalities in access to formal financial services.

In 2023, Pezesha partnered with FSD Kenya to pilot appropriate financial products for construction workers to access tools and working capital, among many other African partnerships.

Pezesha’s partnership with Safaricom

Safaricom has partnered with Pezesha, a digital lender, to credit small business owners, adding to the telco’s existing loan products.

The new product, Mkopo wa Pochi, will allow small business owners to borrow money directly through their M-Pesa business accounts.

The product is already available through an update to Safaricom’s M-Pesa super app. It will complement Pochi la Biashara, Safaricom’s business wallet for small business owners.

This partnership marks Pezesha’s debut in Kenya’s mobile money market. Partnering with Safaricom will give Pezesha access to the telco’s vast customer base of over 32.4 million active M-Pesa users.

Mkopo wa Pochi takes advantage of both company’s strengths. Safaricom’s Pochi la Biashara has over 632,000 active merchants and processed $564 million in transactions, generating $6 million in revenue for the operator between March 2023 and March 2024. Pezesha, on the other hand, is known for its credit partnerships and expertise in digital lending,  having worked with Marketforce, Kyosk App, and Rocket Health.

Mkopo wa Pochi Loan product conditions

Mkopo wa Pochi loans have a one-time access fee of 2.76 per cent on the borrowed amount. Borrowers have a 7-day term with a single and optional 7-day extension. Extending the loan incurs a one-time fee of 3.85 per cent for the entire 14-day period, and late repayments will be subject to a 1 per cent daily penalty for a maximum of 7 days.

Pezesha will assess Pochi la Biashara customers’ creditworthiness using tools like credit bureaus that list loan defaulters.

“Pezesha may make a credit assessment after considering information from various sources, including but not limited to your business transaction history with Safaricom, your mobile money account transaction history, credit information from the Credit Reference Bureau, history of use of the product and prevailing market conditions,” Safaricom says in the product’s terms and conditions page.

In May 2024, Pezesha secured a $500,000 grant from U.S. International Development Finance Corporation (DFC) to improve its credit-scoring technology. This followed a $11 million pre-Series A funding round in 2022 led by Women’s World Banking Capital Partners II.

Read Also: The fate of African SMEs in the wake of AfCTA

Benefits of small-scale loans to SMEs

Many SME loan products offer a considerably low interest rate, which helps fund businesses. These companies provide business loans at a very affordable rate with no hidden costs or processing charges, which is primarily why SME loans have become so popular.

Consequently, the loans are easily accessible. Almost all banks and other private financial institutions provide an SME loan without any collateral, making it more convenient for owners and entrepreneurs. Plus, the application is available online, so one needs to go nowhere to apply for a loan. 

Moreover, Small business loans are flexible in terms of the amount and repayment period. They range from a few thousand dollars to a million dollars, and repayment periods vary with different amounts. This flexibility allows enterprices to choose a loan product that fits their cash flow requirements.

Additionally, when you take a small business loan and make timely repayments, you can improve your enterprise credit score. A good credit score is vital when loans in the future, credit lines, or other forms of financing.

Unlike other equity financing, which requires entrepreneurs and companies to relinquish ownership in exchange for funding, small business loans do not require equity. This allows businesses to retain full ownership and control while accessing the cash they need to power up. 

Some small enterprise loans offer tax benefits in the form of interest deductions. Interest paid on loans by small businesses can be tax-deductible, which can help reduce organizations’ tax liability.

Read Also: Bridging the financing gap of SMEs in Africa

Conclusion

SMEs play a pivotal role in the economic development. They contribute largely to job creation, innovation, and overall economic growth. However, SMEs often face numerous challenges, with access to finance being a major hurdle. Structuring loans that have favourable conditions tailored for SMEs in different sectors is very essential for any economy.

SMEs are the backbone of many economies, constituting a substantial portion of businesses in the country. They operate in various sectors, including agriculture, manufacturing, services, and technology. SMEs contribute to employment generation, poverty reduction, and fostering entrepreneurship, making them integral to the achievement of national development goals.