Sheila Kimani: Solv Kenya's plan to help plug Sh2.3trillion SME funding gap


Solv Kenya’s first chief executive Sheila Kimani. ILLUSTRATION | JOSEPH BARASA | NMG

Standard Chartered Plc of the UK made Kenya its second market in the world for its e-commerce marketplace targeting small traders after populous India.

Solv Kenya rolled out digital loans offering to small traders recommended by large suppliers in October after months of piloting.

The loans, offered in partnership with financial institutions, are used to buy additional stocks and cash is paid directly to the supplier. Solv Kenya’s first chief executive Sheila Kimani spoke with Business Daily.

What prepared you for this job?

I love to do things that have an impact. That gives me satisfaction. There has been this news about the MSME space, the grievances and the challenges they face.

When SC Ventures offered me the opportunity to come and take this product to the market, it caused excitement and anxiety because I had previously built a business. We did business for five years, but it was a smaller business.

I have a passion for doing something that has a purpose where I can look back and say I had an impact. That for me is what excites me about the job I do. I think we will be a one-stop shop for MSMEs in Kenya.

What special skills does one need to work in the MSMEs space?

Be an entrepreneur, a risk- taker and learn how to cut your losses. In our space, we say ‘fail fast and recover even faster’. You need to be ready for failure.

There is always satisfaction in being an entrepreneur because you fail in something and pick yourself up. So when you sit on the other side after you have been able to achieve, there is always satisfaction at a very personal level.

How did you settle on stock financing as your entry product into Kenya?

We did market research to find out the main pain point for MSMEs [micro-small- and medium-sized enterprises]. It was very clear that Kenya has a $19 billion [Sh2.3 trillion] funding gap.

MSMEs are trying to close that gap, but they can’t. We asked them one thing stopping them from accessing the funds from banks. It turned out the main challenge is documentation because banks are documentation-heavy.

So we thought we can simplify this process. There are many e-commerce platforms in Kenya. The question is how do we tap into this space and meet our objectives of financial inclusion, literacy and creating sustainable MSMEs?

That is the reason we went for supply chain financing.

For a micro or small trader, how is Solv Kenya different from a commercial bank?

We are very KYC [know-your-customer]-light on financial evidence that we ask from the MSMEs. Secondly, we are a marketplace.

This means we have many financial institutions on the platform which enables us to give MSMEs optionality as opposed to where you might have to go to 10 various banks to get the right funding for the product you need.

For us, you give us one set of documentation, and we then present it to various financial institutions participating on the platform. You also get competitive pricing.

How is your pricing competitive?

If you walk into the bank, you are given an X per cent interest rate. For us, we will give you at least X per cent [interest] minus one or two.

Let’s say if they [banks] are charging 18 percent, on our platform we bring it down to 17, 16, and 15 percent. But you must also consider the financial institution’s cost of funds and the risk appetite.

That is the biggest determinant. So it [pricing] will vary, but we will always try to be below what is being offered in the market.

How different is this model from the one StanChart rolled out in India in 2020?

For Solv India, their go-to-market product was an e-commerce platform, but for Kenya, our entry point is addressing supply chain finance.

We are intentional in the way we build our products because we co-create them with the end users. Based on that we close the challenges that will ideally be in that process.

But one thing that we share with Solv India is looking for solutions for the MSMEs space.

How is the nomination process by suppliers done to qualify a trader for a loan?

One option is that a supplier can come to us directly and show interest that ‘I have 10,000 MSMEs or 200 MSMEs that I would like to participate on this platform’.

The second option is where my supplier is not yet participating on the platform, but I participate in a particular FMCG [fast-moving consumer goods] value chain and I would like to enrol on the Solv platform.

So I’ll go to my FMCG supplier and tell them I am interested to participate in the Solv platform. So they can write us an email and connect us to the supplier.

The last option is that we have people on the ground who will go to various suppliers, sell the proposition and help us to enrol them.

How long does it take a trader to get funds from the time they apply?

Onboarding takes about 10 to 15 minutes as long as you have all the documentation. Most of the time what we are asking for is within close reach. Things like your ID, photo of you and business permits.

So they get on board by uploading the KYC data. Immediately it gets to our back office, we do some verification and send them to the financial institution.

We expect to get feedback from the financial institution within the day on the limit that they are extending because this is a real-time solution.

Thereafter, you need to utilise your limit by requesting financing and within three minutes, the money is with the supplier. The supplier then gives you goods and you walk away.

What metrics do you use to determine the limit for a borrower?

The supplier will give the details on how you transact with them. Based on the ledger data, we will then see how much more we can extend to you.

We are very intentional because we want to do financial inclusion and create sustainable MSMEs.

So if, for instance, you are already transacting Sh200,000, but you have the capacity to do Sh300,000, then we will finance the Sh100,000 difference.

This ensures that MSMEs remain sustainable because then they will not do capital diversion. So what we are trying to do is support MSMEs' growth by bridging that (funding) gap.

What are your targets in two years?

We want to have 450,000 SMEs participating on the platform. We want to be the go-to marketplace for MSMEs.

How difficult is it to onboard other banks given your association with StanChart?

Solv Kenya is a wholly-owned subsidiary of Standard Chartered UK. The bank here [StanChart Kenya] is a sister company.

So Solv Kenya has its own money, board and managers separate from the bank. We must explain to them so that there is an appreciation of who we are as a brand. Once we explain that, then the conversations are easier.

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