NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

In Kawangware, an informal settlement in Nairobi, Edi Mbaiga oversees a small shop, no bigger than two square meters, which she took over from her father around seven years ago. She keeps it stocked with everything from fruits, vegetables, flour, and dried fish to soap and laundry detergent. Business was consistent, but Mbaiga wanted to expand the shop. To do that, she’d need a loan, which, for a shop run entirely on an analog, cash-based system, was next to impossible to secure.

A new digital platform for micromerchants–retailers that transact generally in very small sums and, because they mostly use cash, are excluded from form economies–in Nairobi is helping her to secure the extra funds to grow the shop. Called Kionect (a mashup between “kiosk” and “connect”), and launched by Mastercard and a handful of on-the-ground partners in Kenya, the platform enables merchants to place and pay for an order from a partner wholesaler, Kaskazi, via text–either an SMS from a feature phone or a message from a smartphone will work. Kaskazi acts as something of a wholesale aggregator from the region, sourcing products from various large retailers and delivering them on-demand to merchants. An East African financial institution, Diamond Trust Bank, facilitates mobile payments between the shop owners and Kaskazi, and all of the transactions are recorded and managed on the Kionect platform. The digital trail that builds up over a series of placed orders and payments equips the merchants with a credit history they can use to secure business loans from Musoni, a Kenyan microfinance provider.