OPINION: Digital payments ignite a new era of hope for SMEs in Kenya

It’s no secret that the pandemic was especially tough on small and medium enterprises (SMEs),in particular the many small cash-based businesses that operate in the informal sector.

These businesses are the lifeblood of economies, and the fact that they couldn’t generate incomes or apply for micro loans to stay afloat, had a knock-on effect on everything from employment to general community wellbeing.

In Kenya, SMEs account for 80 percent of jobs; in 2021 alone, an estimated 22 million jobs in Africa were lost, and with each loss of a stable income, it means more people are pushed into extreme poverty.

It’s a devastating cycle that can only be broken with multiple actions – technology and partnerships chief among them - as this challenge cannot be tackled alone. 

This challenging period did not have many silver linings, but one outcome that will have a positive impact on SMEs going forward is the increased rate of digitization.

During times of limited mobility, more small businesses realized the necessity of selling online, and getting paid digitally.

This helps to boost cash flow, without having to exclusively depend on the much harder and more arduous journey that cash entails to change hands. 

When I think about the economic strife experienced by so many cash-based SMEs during the pandemic, but also the fortunate acceleration of digitization, it reminds me of the old Kanga saying: “The value of light is noticed when night falls.”

By now, the case for digital transformation is well established. Access to digital tools, associated training, credit, and resources are key not only to the growth of SMEs, but is integral to their survival. 

Ensuring that these smaller businesses have access to, and benefit from the digital economy, is something that Mastercard is very passionate about.

SMEs are recognizing the practical benefits of digitization in day-to-day operations, as opposed to viewing it as a long-term project for the future. Data shows that 41 percent of SMEs that implemented digitalization initiatives had stronger revenue growth in 2020 than non-adopters.

That’s not the only benefit. Going digital better insulates SMEs against economic shocks as they can tap into the global economy, reach a wider audience, and accept cross-border payments. 

Furthermore, as more consumers adopt and use a variety of electronic payments, this two-way digital adoption offers increased benefits for both the business and customers.

People do not want to be stuck in a cash economy, which effectively leaves them locked out of many economic activities. They want access to a variety of financial services, and more retail choices.

A digital economy that continues to expand

With every passing day, the digital economy is increasingly becoming the economy. That is why digital inclusion is so critical and why we all benefit when more people are connected to the digital economy.

At Mastercard, we’ve made it both our business strategy and our social responsibility to ensure that people and organizations have access to networks, tools and solutions that could help them reach their full potential and achieve financial security.

We have pledged to bring 1 billion people and 50 million micro and small businesses into the digital economy by 2025, with a direct focus on providing 25 million women entrepreneurs with the solutions they need to grow their business. So how do we do it?

Solutions that support small business resiliency 

Access to credit is one way – and it’s something we do with data. Digitalization of SME operations brings the benefit of generating this helpful data.

This same data enables financial institutions to make more informed decisions about extending credit – one of the key challenges for small businesses.

A digitized record of transactions enables more small businesses to be brought into the financial mainstream, with access to finance solutions that can support their growth.

A great example of Mastercard’s Track Micro Credit Program,fueled by digital transaction data from the beneficiaries themselves, can be seen in Kenya’s Jaza Duka.

Designed for micro merchants, this inclusive credit ecosystem gives small shop owners short-term credit and digital payment capabilities to help them build their creditworthiness and stock their shelves without having to rely solely on cash.

Digitization is empowering these small businesses to reach their true potential.

Collaboration brings scale – and wider inclusion 

Partnerships are also crucial to ensure scale and impact. Just like Jaza Duka was originally launched with the help of Unilever, KCB and Mastercard, it was further scaled in partnership with Kasha this year.

Another 5,000 MSMEs now have access to Jaza Duka through Kasha, a purpose-driven digital retail and distribution platform focused on providingwomen with affordable health and wellbeing products.

In addition, many of these newly included small businesses are run by women entrepreneurs – who are among Africa’s most formidable, but also most marginalized business owners.

So, this is truly inclusion in action – on two key fronts. Kasha has a long legacy of collaboration with Mastercard, having joined our Start Path engagement program for start-ups in 2019. We’ve also invested in the ecommerce platform, and it’s great to see this new chapter making such a positive impact on even more businesses. 

The journey continues. At Mastercard, we’re leveraging our technology, innovation, and solutions beyond payments to help small and medium enterprises get paid, get capital and get digital – safely and securely – wherever they are.

We are dedicated to enabling businesses to survive and thrive stronger than before. This is how we are Empowering Every Business. Everywhere.

The author, Shehryar Ali, is Mastercard's East Africa Country Manager.