Joyce Wafukho, a mother of five, lives in a rural area of western Kenya. As she noticed the lack of retail hardware stores in her town, she decided to invest her savings in launching her business with a small amount of stock. She always wanted to have a fully-stocked hardware store. However, the lack of capital hampers her plans to expand her business
In the pursuit to achieve her dream, Joyce tried to borrow from lenders in which she was only frowned upon and rejected due to her lack of credit history. Fortunately, she was introduced to Kenya Women’s Finance Trust, which is one of the largest microfinance institutions in Kenya which helped her secure a loan of 50,000 Kenya Shillings, about $680 and enabled her to increase her stocks, expand her business and diversify. After diligently building her credit reputation by promptly paying all her loans, she was able to get larger loans to grow her business. Now, she is also a contractor and winning contracts to build classrooms and dispensaries.
Like Joyce, many microentrepreneurs always need to have access to funds for their operating costs or expansion, especially for small and medium enterprises. These businesses would sometimes need immediate cash when an opportunity or emergency arises. Unfortunately, many micro businesses are deprived of credit access to traditional financial institutions which only leads them to loan sharks as their only financing option.
In a report by Biz2Credit last November 2018, the approval rate by big banks is 26.9 percent. Financial institutions including banks require a verifiable credit history and collateral to take out a loan which most small businesses do not have.
SMEs are facing various problems due to the lack of large capital
Most small businesses operate under a sole proprietorship model and its capital is only limited to how much its owner has. Banks find these businesses risky because of its nature as it’s a startup and that there is no solid credit history yet to prove its profitability.
How microbusinesses would find funding before microfinance
Before the concept of microfinance was created, poor business owners fell prey to private money lenders or loan sharks who would charge them at exorbitant rates.
Now that microfinance has been widely accepted as a model to help the poor, thanks to the Grameen Bank project, it has evolved into different models which are now spread worldwide.
One of the innovations in microfinancing is mobile money technology. Just by using the mobile phone or other devices, the unbanked can now access credit without going through the hassle of bank requirements and its tedious processes.
New ways for businesses to get a much-needed loan without banks
Mobile devices and innovations aren’t only things that take part in the development of microfinancing. Tapping on technology to deliver microcredit services on a wider scope and at a faster rate, AssetStream has combined the distributed ledger technology (DLT) otherwise known as the blockchain in order to help the unbanked access credit and lenders to earn a modest return on their investment.
With the integration of the current microfinance technology with blockchain technology, AssetStream delivers a sustainable microfinance platform where lenders and borrowers meet. AssetStream is the microfinance of the future.
Ready to experience innovative microfinance?
Future is now, and it’s up to us to grow the opportunities and enter new eras. Cases like Joyce Wafukho’s story will soon be in the past, and we’ll all have the right to obtain a loan as Muhammad Yunus had planned. Grow the awareness of blockchain-based platform AssetStream and educate yourself about the possibilities it carries.