Access to credit remains one of the biggest hurdles small businesses and startups face in Uganda. One factor contributing to this is how informal their operations are, which makes it hard for the credit institutions to assess their level of creditworthiness.
It, therefore, becomes impossible to leverage their sales to access loans and other benefits. In most cases, they are required to present collateral assets to get loans. Yet, given most of the small business owners are young men and women, they lack such assets.
What if there was a way to empower them, to leverage their sales instead?
Swipe2Pay is a payment solutions startup looking to empower small businesses to take on payments from both mobile money and cards so that they can be easily credit scored. This, in the end, will help them to easily access loans from banks – against their sales.
Solomon Kitumba, the co-founder, believes there’s something that can be done to help these small businesses. “Because they make sales every day,” he pointed out.
“You find your Rolex guy, he makes sales every day. But most of them are still doing pen and paper record keeping. So, at the end of the day, they write things down,” he addd.
However, this data does not make sense to banks and other credit organizations. Hence the difficulty small business owners face accessing credit against their sales.
The second thing that Swipe2Pay would like to help small businesses with is tapping into card and mobile money payments.
“Many of these businesses are missing out on these electronic payments. Yes we do have the money on our mobile money accounts, but just the process of paying to the customer is too long,” Solomon Kitumba.
Currently, one can pay for goods and services using mobile money. However, the process is ridiculously long. By the time one is done with the entire payments process of a single transaction, they are tired. So, just imagine if you’re to do more than one transactions a day? Solomon calls swipe2pay “a one-step checkout.”
Solomon calls swipe2pay “a one-step checkout.”
“The merchant enters my number and I also enter my pin. Online businesses have been doing this for a long time, yet the offline people don’t know about it. They have no clue. So, we are trying to create an opportunity for them,” Solomon added.
The ideal businesses Swipe2Pay is targeting are those that employ from 1-5 people and have a smartphone. They should also be able to understand how to use that smartphone and mobile money.
To make money, Swipe2Pay plans on charging 1.5% on every transaction that’s made via mobile money. For card payments, that’s still up for discussion – they haven’t yet decided on the rates.
Swipe2Pay also aggregates payments for other startups, though not their core business.
“Since it is not our core business we are planning on doing it at 1%. People are building solutions but aggregation is not easy. Yet those offering the service are charging high rates as high as 3% or 2%,” Solomon pointed out.
Additionally, Swipe2Pay has smart card readers they sell to merchants in order for them to be able to accept card payments. Each card is manufactured at roughly $9 and sold at $13.
Lack of trust in Local Solutions
Most local solutions, especially in fintech, receive a very poor reception. This is partly because people have trust issues when it comes to money. And, when you combine it with the fact that Ugandans think only foreign solutions are genuine, the situation only gets worse.
But Solomon is hopeful that the way they’re packaging Swipe2pay could be the solution to that challenge.
“I didn’t like mobile money 5 years ago but have reached a point where I love it,” Solomon highlighted.
“If you’re promising me access to someone’s mobile wallet, then I can pay for that solution. Many people walk around with over a million in their pockets but cannot pay. How about if I can help them pay? So, if you package that well for me as a merchant, I can take on that solution,” – Solomon Kitumba added.
Secondly, he also thinks that the promise of enabling merchants to access loans from banks without having land titles or giving away their cars is a plus.
“That’s good enough for me as a merchant. I am like ok, I can make sales overtime and a bank can complement my profit,” – Solomon Kitumba
However, Swipe2Pay has not yet gone hard on the market though they are trying it out with a few people that, as Solomon said, “are really interested and helping us iterate and make changes.