How Pezesha’s Alternative Credit Scoring is Paving Way for MSME Working Capital in East Africa

Hilda Moraa, the Founder and CEO of Pezesha

Pezesha, a holistic digital financial technology company, is enabling micro, small and medium businesses in East Africa to access affordable working capital, financial literacy tips, credit scores and debt counseling. The fintech analyses a customer’s credit history from over 200 lenders and gathers thousands of data points on income, capital, sales, utility payments, and savings behavior among other wider data sets to build a credit profile through its credit scoring as a service platform, Patascore and from their use their matching technology to define the loan offer an SME can get as either working capital or float financing for their business.

If an applicant’s loan is rejected, Pezesha offers financial literacy courses and debt counseling to improve their credit scoring. Additionally, it provides innovative tools to small businesses to enhance their business value and credit score growth to access wider financial opportunities by helping them efficiently track their inventory, sales and cash flows.

In the following interview with StartUp Magazine, Hilda Moraa, the Founder and CEO of Pezesha shares how her firm taps on alternative credit scoring models that unlocks the potential of small businesses.

What were your expectations when you set up Pezesha in 2016. Have they changed over time? 

Pezesha means financial empowerment, this is our ultimate mission and nothing has changed since I started this journey.

We set up Pezesha to serve the financially excluded people and SMEs in Africa which is estimated to be a USD 19 billion financing gap in Kenya alone as our primary market. The mainstream lenders are only reaching less than 20 per cent of this market segment. These SMEs have no collateral or organized businesses with real time data to build and monitor their credit scores.

Over time we have continued to learn what our targeted segment needs and improved our value proposition and technology to scale and impact more underserved MSMEs to be included in the financial system. 

How is your business model unique? 

We take a holistic approach for credit deployment where we match qualified borrowers with the right credit from institutional lenders on our marketplace by matching them in line with their needs and affordability. This reduces our cost of funds and risk throughout the value chain that starts with financial education and ends with financial empowerment.  

What can you term has been the greatest impact by your financial solutions? 

Providing working capital to more than 10,000 micro and small businesses who have exponentially grown to at least 20% on average on their income levels and creating jobs for other people in their businesses.

Can you expound on Patascore? 

Patascore is our financial education and credit scoring as a service platform that forms a division in our business to help borrowers both individuals and SMEs achieve financial health and financial wealth at the end of the value chain leading to sustainable and productive lending. Over time, Pezesha builds up transactional data that develops a strong credit score for SMEs thus unlocking higher credit limits and business growth.

As our data from more than 40 million transactions processed in the last 3 years continued to show us that over-indebtedness, purposeless use of credit or lack of a quality holistic credit score were the key reasons why borrowers defaulted reducing their financial health and leading to them not graduating up the formal financial system. So, we responded to solving this problem with Patascore otherwise it was going to be a dream to reach our vision of impacting millions of underserved to be eventually part of the financial system.

From your experience, what would you say has been the greatest impediment to the success of local MSMEs? What can be done to avert this? 

Working capital is the greatest one as banks would not lend to the majority of them due to the lack of collateral and structures. Access to affordable capital and tools that boost their business efficiency and visibility to then build credit scores that lead to access to affordable credit will help them grow.

What challenges have you faced over time? Any possible intervention? 

It is pretty hard to find the right talent especially in finance and data science as the needed skills as we continue to grow. We have solved this by adopting strategic partnerships and raising financial resources to hire and train people with the right mindset and positive attitude. Getting more quality MSMEs is also challenging as their data rarely exists so we have empowered them with the right tools and tech to build their digital profile that helps them grow positive credit histories over time. 

What have you learned about running a fintech firm as a woman? 

It is not a walk in the park. However, with the right mindset, team and thinking through the right approaches and collaborations to ensure equal access for both men and women are included in the financial system, then it is possible to achieve long term success.

What are Pezesha’s future prospects? 

Going forward, we are looking to grow to more than 100,000 MSMEs across Kenya by going deep and wide and empowering them financial services via a one stop shop value chain where they can also get connected to other services beyond working capital in order to unlock their growth potential and scale to create millions of jobs. In the long term, allowing other local investors in the public to participate in this growth once these MSMEs have proved to be less risky and grow in wealth. We are excited about our partnership with Capital Markets Authority and banks as it creates this possibility at scale for us as a business and the economy at large.