Pesapal have announced the launch of our new product: Pesapal Credit! Pesapal Credit is a digital lending solution that enables small and medium enterprises (SMEs) in Kenya to access working capital loans in minutes, without collateral, paperwork, or hidden fees.
Pesapal has partnered with other financial institutions to offer our merchants access to affordable and convenient credit. This partnership is in line with our vision of empowering SMEs with innovative digital financial solutions that can help them grow their businesses.
In this blog post, we will share with you why we created Pesapal Credit, how it works, and how it can benefit SMEs in Kenya.
Why Pesapal Credit?
SMEs are the backbone of the Kenyan economy, contributing to over 40% of GDP and employing over 80% of the workforce. However, SMEs face many challenges in accessing credit to grow their businesses, such as:
- High collateral requirements: Most banks and traditional lenders require SMEs to provide tangible assets, such as land, buildings, or vehicles, as security for loans. However, many SMEs do not have such assets or are reluctant to risk losing them in case of default.
- Lengthy and complex application processes: Applying for a loan from a bank or a traditional lender can be a tedious and time-consuming process, involving filling out multiple forms, submitting various documents, waiting for approval and disbursement. This can take weeks or months, which can be too long for SMEs that need urgent cash flow.
- Punitive interest rates and fees: Digital lenders often charge punitive interest rates and fees to SMEs, reflecting the perceived high risk of lending to them. This can make the loans unaffordable or unsustainable for SMEs, especially in times of economic uncertainty or volatility.
- Lack of credit history: Many SMEs do not have a formal credit history or a credit score that can demonstrate their creditworthiness to lenders. This can limit their access to credit or subject them to unfavorable terms and conditions.
These challenges have created a huge financing gap for SMEs in Kenya, estimated at over $19 billion by the World Bank. This gap hampers the growth potential and competitiveness of SMEs, as well as their ability to create jobs and reduce poverty.
That’s why we created Pesapal Credit: to bridge this gap and provide SMEs with a fast, easy, and affordable way to access credit.
How does Pesapal Credit work?
Pesapal Credit is powered by our proprietary credit scoring algorithm that analyzes the transaction data of Pesapal merchants from various sources, such as mobile money, bank accounts, e-commerce platforms and POS systems. This allows us to offer customized and affordable loans to businesses based on their cash flow and business performance.
With Pesapal Credit, SMEs can:
- Access unsecured loans based on transaction trends and analytics
- Get instant approval and disbursement
- Repay flexibly in daily, weekly, or monthly installments
- Enjoy competitive interest rates and no prepayment penalties
- Build their credit history and access higher loan limits over time
The application process is simple and straightforward:
- Sign up to use one of our digital payments solutions such as e-commerce, POS or Openfloat for your day-to-day business collections and payouts
- Our credit scoring model will automatically score and offer a maximum loan limit
- Request your preferred loan amount and choose a repayment plan that suits your needs
- Receive an instant decision and get the loan amount disbursed to your Pesapal Openfloat account
- Automatically repay the loan from your Pesapal transactions according to the agreed schedule
How can Pesapal Credit benefit SMEs in Kenya?
Pesapal Credit can benefit SMEs in Kenya in many ways, such as:
- Improving cash flow: Pesapal Credit can help SMEs overcome cash flow challenges that may arise due to seasonality, delayed payments, unexpected expenses, or emergencies. With Pesapal Credit, SMEs can access funds whenever they need them and repay them from collections.
- Boosting growth: Pesapal Credit can help SMEs seize new opportunities in the market, such as expanding their product range, increasing their inventory, upgrading their equipment, or hiring more staff. With Pesapal Credit, SMEs can invest in their businesses and increase their sales and profits.
- Enhancing financial inclusion: Pesapal Credit can help SMEs access formal financial services that they may otherwise be excluded from due to lack of collateral, credit history, or documentation. With Pesapal Credit, SMEs can build their credit profiles and access other financial products and services in the future.