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By Jade Longano, Group Head of Partnerships at JUMO

Entrepreneurs are the lifeblood of many economies, especially emerging ones. They drive development, create employment opportunities and can improve the quality of our lives. It’s therefore imperative for them to have access to the resources and tools they need to prosper. 

Starting or growing a business is impossible without reliable access to capital or credit. In emerging markets, many people who are entrepreneurs still aren’t eligible for safe lending options and have to turn to predatory lenders in challenging times. Around 1.7 billion individuals globally do not have access to financial services and 67% of adults living in sub-Saharan Africa are unbanked.

Improving access to financial services is one of the most significant ways we can create an enabling environment for business and entrepreneurship. Access to financial services promotes growth, reduces poverty and contributes to the building of sustainable economies. It also empowers people with the freedom to choose financial products that can enhance their lives or help them weather a storm.

The ability to receive credit, safely store or save money and easily make payments is essential to anyone wanting to start a business, expand their business or simply manage day to day living. 

Technology has a vital role to play in providing affordable access to financial services and creating more financially inclusive economies.

Why access to credit continues to be a challenge and how can we change it

Access to credit is restrictive for two main reasons. The first is physical access. The majority of financial institutions operate from bricks and mortar branches. In sub-Saharan Africa 58% of the population are based in rural areas making it either expensive or impossible to reach banks. 

The second reason is the limited availability of formal information. Informal traders seldom have bank accounts, proof of employment or payslips to back their credit requests. This, however, should not preclude them from access to finance.

Using alternative data points, combined with predictive analytics, JUMO is able to accurately assess a person’s propensity to repay a loan. Currently these data points can be applied to anyone who has a mobile phone and is connected to one of JUMO’s partner networks. This significantly increases the ability of previously excluded market segments to access finance.

Through experience and a growing body of data, JUMO has been able to use AI and machine learning to continually fine-tune predictive capabilities for stronger risk-adjusted returns and higher customer eligibility. In addition, positive repayment behaviour lowers the price of a loan. 

Our advanced data engine runs machine learning algorithms on millions of mobile wallet, cellphone, and transaction data signals every second. Insights gleaned from this data are used to build increasingly accurate credit profiles for people in emerging markets. 

These deep, data-driven insights have allowed JUMO to shape services and product features to suit individual entrepreneurs and their specific circumstances across countries such as Uganda, Zambia, Côte d'Ivoire, Pakistan, Tanzania, Ghana and Kenya. Capital providers and banks are then able to pass these benefits on to customers in the form of lower cost loans.

Changing the way financial service providers see risk

Improving financial access is one of the most important issues we need to address because small businesses and entrepreneurs play such a critical role. While new ways of ensuring financial inclusion are appearing every day, evidence shows that banks are, and will continue to be, the main financial contributors in enabling a more inclusive financial market, provided they can embrace the right technology and rethink credit. In this regard, JUMO’s platform connects large pools of capital from traditional retail banks to customers they would not ordinarily be able to reach.

Financial inclusion in action

Here’s a great example of how empowered entrepreneurs are creating positive social change, growth and employment.

Benny Musonda runs a small construction business which employs eight people in Lusaka, Zambia. He was unable to get a loan from his bank, even though he had been a customer for 10 years. He then received access to mobile financial services through JUMO’s platform which enabled him to purchase supplies for his construction projects and finance his education. 

“I joined my uncles in construction when I was around 11 years old, helping them mix cement,” says Benny. He made a name for himself this way and as the years went on, he started receiving calls from people who needed his assistance. Now, at 32 years old, Benny runs a small construction business and has completed more than 50 projects. 

Having access to credit has come in handy for him on a number of occasions – from purchasing supplies for construction projects to helping him take care of a medical emergency at home. “If it wasn’t for access to credit, I think my business would’ve been on hold,” says Benny.