Pezesha.com has launched in Kenya with plans to become Africa’s largest peer to business lending market place, after members of the team realized from an earlier experience at Pesa Zetu that peer to peer micro lending was too risky and nearly impracticable.
Founded late last year by Hilda Moraa, an entrepreneur popularly known for founding and exiting WezaTele to Jumo, Pezesha, aims to disrupt the largely ignored peer to business micro lending segment and fuel growth among SMEs which provide 80 percent of employment in Africa. Pezesha works on the same model like off-grid energy marketplace Trine.
By entering the SME financing market, Pezesha puts itself at the center of the world’s development agenda fighting both unemployment and SME financing as well providing individuals with avenues to invest their money and earn returns on it better than having it in saving accounts which only earn some 7 percent return annually.
According to a report by the World Bank, “Small and Medium Enterprises (SMEs) play a major role in most economies, particularly in developing countries. Formal SMEs contribute up to 45 percent of total employment and up to 33 percent of national income (GDP) in emerging economies.”
The same report also adds that in the next 15 years, over 600 million jobs will be needed in Africa and Asia to absorb the growing global workforce where formal jobs are with SMEs. SMEs also create 4 out of 5 new positions.
However, access to finance is a key constraint to SME growth; without it, many SMEs languish and stagnate. That’s where Pezesha comes in.
The World Bank adds that SMEs in these markets are less likely to be able to secure bank loans than large firms and an estimated fifty percent of formal SMEs have no access to formal credit. Estimates show that some 70 percent of all MSMEs in emerging markets lack access to credit and the current credit gap for formal SMEs is estimated to be US$1.2 trillion; while the total credit gap for both formal and informal SMEs stands at US$2.6 trillion.
According to estimates, there are over 400 million micro, small and medium enterprises (MSMEs) in both Africa and Asia. Of these, around 30 million are formal SMEs, 70 million fall under formal micro enterprises; and over 300 million are informal enterprises. If Pezesha can serve 1 percent of SMEs in Africa and Asia, the SME survival rate is likely to go high translating to more jobs, more revenue for governments through tax, more cash flow in the market and improved lives; and even more return on investment for individual investors.
The biggest advantage to Pezesha is that there are firms doing micro lending to individuals and the market is already aware hence acquiring SME clients is a no-brainer. However, Pezesha is not the only player in these SME financing market as banks are increasingly working to close the SME finance gap.
Another study by the World Bank found that there is an increasing involvement of Kenyan banks in the SME segment. The report says the total SME lending portfolio in December 2013 stood at3.84 billion, representing 23.4% of the banks’ total loan portfolios.
Pezesha therefore has an uphill task ahead to attract local peer to SME investors and institutional investors to see it grow and expand into all these markets in Africa and Asia. Apart form finances, discipline and integrity matters a lot in building and growing such an enterprise and Pezesha should not associate itself with PesaZetu where Moraa was a country manager lest PesaZetu’s ghosts come to haunt it.