The Ghanaian Fintech Company Using Technology To Impove Access To Finance For SMEs

In 2018 we saw an upswing in support for small businesses from the Ghanaian government, a good thing in general, but the challenge continues to be the difficulty in accessing finance for small businesses.

A collage of some small business customers at their business (Beneficiaries); Becky, Jacob, Isaac and Cassie in clock-wise fashion.

Talk to most small business owners in Ghana, and across Africa, and their major concern is limited access to finance or inability to find suitable business savings and payment accounts.

At the same time, financial service providers that serve small businesses, such as banks, Microfinance companies, Savings & Loans, etc., struggle to find qualified business customers and have low risk appetites when lending to small businesses.

To address these market constraints, there is a new Fintech startup here in Accra called Bloom Impact, stepping in to fill the void.

Bloom Impact is a social enterprise offering a digital marketplace that provides access to financial services to unbanked & underserved small business owners in Ghana.  

At the core of their mission they are working to empower small businesses to grow and offer employment by easing affordability & access to finance. Many business owners aren’t aware of the market options available to get financing for their business nor understand the complex terms and conditions of the products.  

Further, understanding the product offerings and then learning about what is needed to be eligible is a very costly and time consuming task and often contributes to the access barrier.

Using Bloom Impact’s smartphone App, which is available on the Google Play store, business owners can learn about and apply directly for financial services they are eligible for, straight from their smartphone. The platform enables a user to submit one application and through machine learning and algorithms they validate, verify and match users automatically with the financial institutions that meet their needs. Bloom’s financial institution partners access eligible leads through a customised cloud-based portal, download the applications, contact the leads and open accounts directly.

The platform also educates business owners about financial services, loan terms and requirements, credit reports and eligibility, all for free, thereby cutting the cost of running around to gather info, visiting many branches, long waiting times and hurdles associated in accessing finance.

For financial institutions they could potentially find qualified leads at their fingertips and be armed with the full set of information to make faster decisions.

According to the World Bank, there is currently a total demand of $8.9USD Trillion for financing of small businesses in emerging markets. However, only $3.7T is being met, which leaves a massive $5.2T financing gap.

“Much of this exists because traditional lenders are hesitant to lend to small businesses, due to costs, reach and risks. By using digital technology, we can overcome many of the risks, costs and reach limitation,’’ says Carol Caruso, CEO of Bloom Impact, co-founded with David Hutchful.

Accessing finance right on your smartphone

One of the main reasons for limited access to business financing in Ghana is lack of eligibility.  Some small business owners may be unable to meet the requirements of certain products or institutions.  Rather than wasting time, they should learn about the requirements first, determine if and how they can become eligible and then apply.  Using Bloom’s App they can read about these points and prepare to ensure they can be approved for a loan or open the right Savings & Current accounts for their business.  

To apply for loans, savings or current account products available on the platform, users need to fill an application, upload supporting documents like an Identification card (ID), select suitable products and submit.  

“Most importantly our App educates and guides users about financial terms, the importance of good credit history, responsible borrowing and what they need to become eligible,’’ Caruso added.

The platform pulls data from various points as well as credit history, KYC validations and others to analyse eligibility, verifications and risk reductions.

Business growth

Within 12 months of operations, the platform has already partnered with 7 banks in Ghana and has witnessed a steady rate of app downloads.

According to Caruso, 80% of applications received so far are for loans, 40% have never had any bank account before and 68% are women entrepreneurs.

This comes as no surprise as Ghana was recently named as the country with the highest percentage of women entrepreneurs worldwide according to the Mastercard Index of Women’s Entrepreneurship (MIWE).

For Bloom Impact, the goal is beyond Ghana as the team is currently diversifying into Nigeria and has plans to expand to another West African country within Q4 2019.

Caruso cites limited smartphone familiarity among small business owners and using Apps for business activities as some of the challenges but remains optimistic that it will improve with time.

“We’re happy to see smartphone penetration on the rise in Ghana especially with SMEs and we are helping contribute to that growth by offering our SME customers a discount on buying new smartphones and often have smartphone contest giveaways.”

On the part of financial service providers, the challenge has been low risk tolerance by most financial service providers, “which we are hoping to help improve with the use of a wider variety of customer data points and digital verifications to find eligible customers using new innovative machine learning technology.’’

Thus far, the highest loan size given through the platform is GH₵85,000GHC and the lowest loan size has been GH₵1,000, the minimum of their service.

Currently, users can download the android app from the Google Play Store and an iOS version is expected by the end of the year. In 2017, Engineers Without Borders Canada (EWB Ventures) announced that it had invested an undisclosed amount in the startup.

About the founders

Carol Caruso (CEO) and David Hutchful (CTO) have a combined 4 decades of experience and expertise from working in digital financial services, technology innovation, start-ups and financial inclusion in Africa. Hailing from leadership positions at organisations including Grameen Foundation, Microsoft, engageSpark, Accion International, Triple Jump and Kiva. Carol is also currently a Social Innovator-in-Residence at the Harvard Kennedy School and David is a Lecturer at Ashesi University on Human Centered Design.

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By Pamela Ofori- Boateng/ Business World Ghana 2019©