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IBM and Twiga Foods Introduce Blockchain Based Micro financing in Nairobi

Twiga Foods, a business-to-business logistics platform for kiosks and food stalls in Africa, formed a collaboration with IBM scientists in Nairobi to build and test a blockchain-based micro finance lending platform. But how can you provide loans when most of the vendors lack a credit score?

Grant Brooke, co-founder the $13 million start-up explains:

Previously, we were focused on helping farmers distribute bananas, tomatoes, onions and potatoes to 2,600 kiosks across Kenya, but we soon realized that we could help them sell even more if they could access working capital. It’s simple, if the food vendors can sell more, we can distribute more, growing both of our businesses.

The IBM scientists already had knowhow on machine learning and mobile data and how to apply both towards developing credit scores from a previous project with an African bank and mobile operator, in which more than $3 million in loans were distributed.

All of the loans were managed by blockchain and executed via mobile phone SMS.

We analyze purchase records from a mobile device and then apply machine learning algorithms to predict credit worthiness, in turn giving lenders the confidence they need to provide microloans to small businesses. Once the credit score is determined, we use a blockchain, based on the Hyperledger Fabric, to manage the entire lending process from application to receiving offers to accepting the terms to repayment,

said Isaac Markus, a researcher on the inclusive financial services group at IBM Research in Kenya.
With blockchain, the lending process becomes transparent to all parties involved – from the lending bank to the borrower’s bank and the loan applicant themselves. Blockchains are immutable, helping to reduce fraud, since no single party can append the blockchain without consensus from the entire network. Finally, blockchains employ a series of “smart contracts” which can be executed in real time, having the potential to significantly reduce the time it takes to manually process and issue a loan.

Blockchain Based Micro financing Twinga IBM

From left to right: Abdigani Diriye, manager, microfinance team, IBM Research – Africa; Grant Brooke, CEO and co-founder, Twiga Foods; Kevin Gakuru, small business owner and Andrew Kinai, software engineer, IBM Research – Africa

To test the new platform Twiga Foods and IBM ran a pilot at the end of last year with 220 small food kiosks, known locally as “mama mbogas” in Swahili, across Kenya.

Author: Tim Cole
Image Credit: Twiga/IBM

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