Safaricom and Pezesha launch innovative loan service for small businesses in Kenya

In a new development for East Africa’s financial ecosystem, Safaricom, the region’s leading mobile network operator, has partnered with Pezesha, a digital lender, to launch Mkopo wa Pochi, a new loan service tailored for small business owners. This signifies another strategic expansion of Safaricom’s already extensive loan portfolio, which includes the highly successful M-Shwari and Fuliza products.

A thriving digital lending market

Kenya’s digital lending market has seen exponential growth, with Safaricom at the forefront. As of 2022, Fuliza, Safaricom’s overdraft service, served over 7.8 million users, facilitating daily loans amounting to KES 1.57 billion ($12 million). Also, M-Shwari caters to over 10 million customers, disbursing 50,000 loans each day. The sector’s appeal has even attracted government intervention, evidenced by the launch of the Hustlers’ Fund in 2022.

Leveraging combined strengths for financial inclusion

This collaboration capitalizes on the strengths of both Safaricom and Pezesha. Safaricom’s M-PESA platform, with its extensive reach of over 32.4 million active users, and Pezesha’s expertise in digital lending create a powerful synergy aimed at enhancing financial inclusion for small businesses.

Pochi la Biashara, which serves over 632,000 active merchants, processed transactions worth $564 million (KES 73 billion) and generated $6 million (KES 800 million) in revenue for Safaricom between March 2023 and March 2024. Pezesha, with its solid track record in credit partnerships, has worked with notable entities such as Marketforce, Kyosk App, and Rocket Health.

Introducing Mkopo wa Pochi for small business financing

Mkopo wa Pochi, the latest addition to Safaricom’s suite of financial offerings, provides small business owners with easy access to credit through their M-PESA business accounts. Integrated into the updated M-PESA super app, this new product complements Pochi la Biashara, Safaricom’s business wallet tailored for micro-entrepreneurs such as food vendors, kiosk owners, boda-boda operators, and secondhand clothes dealers.

How Mkopo wa Pochi Works

Mkopo wa Pochi offers short-term financing with a base term of 7 days. Borrowers can extend the loan for an additional 7 days, subject to a one-time fee of 3.85% for the entire 14-day period. The loan carries a one-time access fee of 2.76% on the borrowed amount, with late repayments incurring a daily penalty of 1% for up to 7 days.

Pezesha will conduct credit assessments using various tools, including credit bureaus and Safaricom’s transaction history data, to determine the creditworthiness of Pochi la Biashara customers. This rigorous assessment ensures that loans are accessible to creditworthy businesses while managing risk for lenders.

Strategic investments in financial technology

Pezesha’s dedication to enhancing its credit-scoring technology is underscored by its recent achievements. In May 2024, the company secured a $500,000 grant from the U.S. International Development Finance Corporation (DFC) to advance its credit-scoring capabilities. This followed an $11 million pre-Series A funding round in August 2022, led by Women’s World Banking Capital Partners II.

As the lending market continues to evolve, innovative partnerships like this will play a key role in driving economic growth and financial inclusion across the region.