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FA Global, Shujaaz Inc, and the Financial Sector Deepening Kenya (FSD Kenya) are launching a new innovative project that aims to help financial service providers identify informal entrepreneurs who qualify as high potential candidates for credit and loans.
By tracking the candidate’s experiences, the prosperity of entrepreneurs can be predicted.The aim of the project will help connect 1 500 young micro-entrepreneurs with financial support that will accelerate their business post-Covid-19.
New research project collects alternative data to help Kenya’s SMEs reboot after Covid-19
The project is in its second phase of the process, which is a two-year programme. The first phase was a study that was developed to identify high potential young entrepreneurs that would succeed in the economy.
The study used alternative data sources to make accurate predictions, reporting 63% of businesses were doing better after one year as their average reported sales increased by 70% as well as 140% higher gross profit levels.
In an official press release, Amolo Ng’weno, CEO of BFA Global, commented on its aim to guide investors to high potential candidates which are young entrepreneurs being classified as unbankable because of the lack of data financial service providers have on them.
“The results of our first study demonstrated that it is possible to discern varying entrepreneurial abilities, based on alternative data. This group of young entrepreneurs would benefit greatly from both financial and non-financial support, but right now they are considered ‘unbankable’ by most financial service providers due to lack of data. What we aim to prove in our upcoming study is whether a micro-entrepreneur’s propensity to succeed in their business in fact also correlates with their propensity to successfully pay back working capital loans and recover from the impact of Covid-19. This data has the potential to offer financial services institutions, development organizations, and governments new insights into which individuals they should be investing in to build economic opportunity and growth.”
Young entrepreneurs will be provided financial support adapted to their needs throughout the year, in addition Shujaaz Inc will give 1 500 young entrepreneurs the opportunity to receive peer to peer training which allows them to network and connect with other young entrepreneurs on an online platform.
BFA Global, FSD Kenya, and Shujaaz Inc want to use the follow-up study to develop innovations that are based on using alternative data to have young entrepreneurs prove they are able to repay loans.
Three million of Kenya’s young informal sector micro-entrepreneurs are excluded from the formal financial sector because they are unable to access finances to accelerate their businesses. Financial services that will be customised for businesses will be implemented through Shujaaz Inc.’s innovative beta-phase venture.
This innovative venture is one of many social ventures that reach 7.5 million young people across East Africa, including East Africa’s biggest youth brand, Shujaaz which is a multimedia youth platform.
The question “How does one differentiate between future successful entrepreneurs and those who lack the ability or desire to seek growth and scale?” was the basis for the study that BFA Global, Shujaaz Inc, and FSD Kenya was developed to answer. The multimedia youth platform, Shujaaz was used to receive informal skills and ideas via SMS surveys from users to help create an innovative methodology to predict high potential candidates.
The results collected from the study were justified as in-person visits with the entrepreneurs were had as well as a follow-up survey that, for a year, tracked their progress.
The role of financial institutions
Financial institutions have a role to play in helping young entrepreneurs expand their businesses as they do not receive sufficient external funding.
Due to Covid-19 businesses have been hit with funding constraints and the inability to grow. The study developed by BFA Global, Shujaaz Inc, and FSD Kenya opens doors for young entrepreneurs to receive funding via networking in order to recover and rebuild their business post-pandemic.
FSD Kenya develops financial solutions for low-income households, enterprises, women, and youth. BFA Global is a firm focused on research, advisory, data analytics, and product innovation.
FDS Kenya builds solutions that will contribute to a more sustainable and inclusive economy by working with tech innovators, development organizations, policymakers, financial service providers (FSPs).
Featured image: Danique via Unsplash