The Potential of Defi Lending for African MSMEs: Pilot insights on stablecoin “buy now pay later” products for informal vendors

Informal food vendors in Nairobi and similar businesses across emerging markets face financial challenges due to limited access to traditional banking services, resulting in a significant financing gap of $421 billion for small businesses in Africa. To bridge this gap, innovative financing solutions like stablecoin-enabled DeFi lending have emerged, leveraging blockchain technology to facilitate efficient cross-border transactions.

In a July 2022 pilot project with SympliFi, Kwanza Tukule, UTU, and Kotani Pay, we aimed to provide Nairobi’s vendors with a Buy-Now-Pay-Later solution for inventory financing.

From a user perspective, this product was hugely impactful. 78% of vendors saw an increase in purchasing power, enabling them to increase their stock on hand and keep their businesses open during challenging times. 20% used this increased purchasing power to diversify their product range, often leading to a knock-on effect in terms of increased customers and/or larger basket size per customer.

This report is the last of a three-part series. The first blog outlined the pilot launch and our learning questions, and the second blog shared insights from the first phase of the pilot. This final report takes a step back and looks at the potential of DeFi-enabled lending as a route to financial resilience and growth for MSMEs in emerging markets.

Written by Hebe Foster, Platform Associate and Pilot Manager, Mercy Corps Ventures.

Stay tuned for updates, evidence, and insights on our other Mercy Corps Ventures pilots, responsibly testing Web3 solutions for unbanked and underbanked populations in emerging markets.