The use of alternative data and new technology is changing the way small businesses in Africa access financing.

IBM’s research lab in Kenya is collaborating with Twiga Foods, a company which distributes bananas, tomatoes, onions and potatoes to 2,600 kiosks across Kenya, on a concept for disbursing microfinancing to businesses using a blockchain-enabled platform.

Over an eight-week pilot last year, IBM and Twiga worked with 220 small food retailers across the country to execute loans via their mobile phone. When a retailer had an order delivered from Twiga, they would receive an SMS with options for financing that order – either for four or eight days with an interest rate of 1 or 2% respectively. The retailer would then respond, confirming which loan option they preferred.

“If an SME was to go to a bank to get a loan, the bank would request things like collateral or audited accounts, and most of these SMEs don’t have those things,” explains Andrew Kinai, the lead research engineer on the project at IBM Research, speaking at GTR East Africa 2019 in Nairobi.

Instead, IBM’s platform leverages alternative data such as purchase history and repayment data to better predict the creditworthiness of an SME and provide it with the working capital it often can’t access elsewhere.

In this video, filmed at the event in Nairobi, Kinai talks about the new solution, the impact of the pilot and the long-term goal.