Unilever to replicate credit initiative schemes to drive revenues

Leveraging opportunities in the informal retail sector to grow its revenue across African markets, Unilever Africa may replicate its credit initiative scheme in Nigeria and Tanzania, following its launch in Kenya.

The scheme leverages big data to unlock local retailers’ capacity to access Unilever’s products on credit, and thus expand the firm’s sales.

Unilever uses its traders’ purchasing history to determine whether they qualify for loans and the maximum credit available. Traders are given 17 days to repay the loans interest free.

It has partnered with Kenya Commercial Bank, east Africa’s biggest lender by assets, and Mastercard, the payments company, to provide the finance and technology respectively.

Under Jaza Duka, the money is loaned to Unilever’s distributors which supply the traders who then repay KCB directly, usually via a mobile money platform.

Bruno Witvoet, president of Unilever Africa, said that the project, called “Jaza Duka”, or “Fill the Kiosks” in Swahili, highlighted the need to “look at different models” to succeed in sub-Saharan Africa, where most retail trade is through the informal sector.

Indeed, the year-long pilot has involved 800 traders in and around Nairobi and is expected to be rolled out to 35,000 retailers nationwide this month and then internationally.

Witvoet said Tanzania and Nigeria are among the countries being considered.

“To grow our business means developing volume,” he said. “And that means increasing coverage of traditional traders. But the cost of financing for these people is a real hurdle, it’s crippling many economies.”

Other multinationals, including Procter & Gamble and East African Breweries, majority owned by Diageo, have started similar, but smaller, initiatives with 4G Capital, a Nairobi-based microfinance institution.

Cash flow and access to credit are my crises. This has given me both because I don’t have to pay cash to increase my stock

Joshua Oigara, KCB’s chief executive, told Financial Times that the 97 per cent repayment rate among Jaza Duka traders highlighted how banks needed to adopt alternative methods of doing business.

Mohona Dey, Unilever’s manager for the project, admitted some traders are reluctant to participate, saying: “There’s a local suspicion of banks in general and some [traders] have said if it seems too good to be true then it probably is and so ‘what’s the catch?’,” she said. “And we say there isn’t one.”

Witvoet recognised it would take time for the initiative to significantly affect Unilever’s Kenyan business — where informal traders account for just over 50 per cent of retail sales — let alone the broader African business, for which it does not break out revenues.

“In Africa you’re bound to have a big vision,” he said. “But don’t believe you’re going to deliver the big vision in a couple of years; you really have to understand how you’re going to develop the various steps to get there”, he added.