Accessing loans for small businesses in Africa is an uphill task and in Zambia, only 8.8% of micro SMEs have access to a loan or line of credit due to high collateral requirements and an often non-existent credit history.
Small businesses in Africa’s mammoth informal economy are subject to endemic financial exclusion, largely due to being a predominantly cash economy with close to little financial records kept by the retailers. This has traditionally made it difficult for the credit-worthiness of these businesses to to be fairly calculated but technology is gradually helping to solve this huge problem.
Zambia’s InsurePay was founded in 2017 to offer working capital loans to the country’s small-holder farmers. InsurePay’s credit system calculates how much credit to provide to small scale farmers based on the business’s performance to date. This tech-enabled approach means they are able to provide much needed financing without requiring reams of paperwork and often within 24 hours.
As well as providing credit to small businesses, InsurePay helps them to get their books in order, thereby eliminating the barriers of high collateral and credit history requirements, allowing them to be eligible for larger loans in future. In the last four years, InsurePay has processed over 200 loans with a net revenue of over $150,000 and repayment rates of about 94%.
The company’s co-founder and managing director, Patton Kalunga draws from his three years of experience in the finance industry where he noticed how difficult it was for small businesses in Zambia to access finance. Kalunga holds degrees in Economics from the University of Cavendish, Zambia, Leadership in Business from Northwestern University, and has also completed the Mandela Washington Fellowship, bringing on board his expertise, grand vision and passion for ensuring that poverty alleviation and economic development is a key aspect of his work.
InsurePay is currently working on a partnership with a payment company which will help businesses assess their daily or weekly income. This will allow the businesses to better understand their profits and losses in order to make them more creditworthy and give them quicker access to loans based on this information.
Within the next 5 years, Kalunga’s plan for the company is to grow the product throughout Zambia, with a possibility of rolling it out in other countries such as Botswana and Tanzania. The company’s mission to provide a fast, simple and fair access to finance is great for Zambia’s thousands of small businesses that struggle to scale and grow due to a complex financial system that can sometimes feel rigged against them.
Connect with InsurePay on Twitter here.