It is tough being an entrepreneur in Kenya. Indeed, going by the experience of Joe Mwangi, being an entrepreneur in Kenya is not designed for the fainthearted. Sometime back, Mwangi applied for a tender to supply laundry equipment to a large institution. After a rigorous process and battling out with other companies and emerging the winner of the tender, the real struggle for him was securing financing from commercial banks so that he could execute the deal.
“I approached several banks but none was willing to finance me, yet I had a valid and genuine contract,” says Mwangi. But when he was just about to get to a point of giving up due to frustrations with banks and after the client issued him with a seven-day notice to show cause why the contract should not be terminated, lady luck struck. “A friend of mine introduced me to Kountable and now I am in a position to execute the contract,” he states, adding that to him Kountable was a Godsend at the opportune moment of his entrepreneurship journey.
Mwangi’s case is not unique. In Kenya, lack of access to finance is one of the major challenges that face small and medium enterprises (SMEs). A report by the Kenya National Bureau of Statistics confirms that SMEs in Kenya face challenges in raising financing to support their entrepreneurial pursuits. As a result, many SMEs are unable to expand while others are struggling to remain in operation. For most, traditional sources of financing revolve around personal savings, loans from friends and family, and other informal sources.
To unlock the full potential of SMEs, Kountable has entered the Kenyan market with the aim of offering a unique model of trade finance that enables entrepreneurs to pursue deals without the worry that banks might refuse to fund them. Unlike banks, Kountable does not offer loans. Instead, the firm partners with the SME on projects to enable entrepreneurs execute deals. Kountable purchases the goods from the supplier. In the case of Joe Mwangi, this meant Kountable paid a manufacturer and a supplier in the United States for the laundry equipment he was contracted to supply so that the goods could finally be shipped.
“Kountable helps overcome key barriers that entrepreneurs encounter in trade finance,” says Chris Hale, Kountable co-Founder and Chief Executive Officer. He adds the firm is able to process financing for entrepreneurs more quickly than a bank can generally originate a loan, thus ensuring the entrepreneur does not lose a contract that one worked hard to secure.
Kountable’s unique approach to financing SMEs by combining technology and trade finance is the brainchild of co-founders Hale and Dr. Craig Allen. Hale and Allen saw huge opportunities to finance cross border trade considering the global SME financing gap is estimated at a whopping $1.6 trillion. “We can make a large impact by addressing this opportunity at scale because trade finance does not have a lot of the complexity and regulatory friction that comes with lending,” notes Hale.
The firm, which was established in Rwanda in 2015, and has its headquarters in the United States, has a technology-based platform that builds a database of qualified, vetted entrepreneurs seeking trade finance solutions. The idea to use technology was informed by the fact that access to financing for entrepreneurs is difficult, in part, because financial markets in Africa have not yet evolved to be able to serve them, but also because foreign investors also are not able to find them.
Technology makes it easier to identify, qualify and connect with SMEs seeking financing. Entrepreneurs wanting to partner with Kountable are only required to download the application, register and start building their profile.Currently, there are over 2,000 SMEs from across the East Africa region registered on the Kountable platform.
From the profile, the firm is able to vet the entrepreneur through its kScore and a know-your-client protocol and to vet the trade through its approval process. Once Kountable ascertains the trade is a good deal with solid, reliable parties on all sides and enough profit built in to allow for all the parties to make money, it approves the deal for funding.
“Entrepreneurs use the cameras on their smartphones to securely upload deal particulars and evidence of progress as it’s executed. We can literally “see” their progress in real time as they do their part,” explains Hale. He adds that when the deal is complete, most often within a short duration of less than six months, the profits are returned to the entrepreneur, minus the cost of goods purchased by Kountable and its financing fees. This results in the SME retaining most of the profit. “We do not charge interest. We share the profit at the end of the deal,” he adds.
Kountable offers a better value proposition compared to conventional finance sources because there is no collateral required for financing, it offers fast turnaround for submitted deals and its trade financing fees are low. Other advantages include supplier sourcing, price negotiation and supply chain management support, multiple deal financing, logistics support and access to leading and reputable global manufactures, suppliers and distributors.
Kountable has secured Sh150 billion from investors in the United States to finance trade deals with SMEs. Since 2015, the firm has done 50 deals in Rwanda providing over Sh150 million funding for entrepreneurs in ICT. The firm also funds deals in other sectors like healthcare, energy, and general supplies among others.
Having build a strong base in Rwanda, the firm entered the Kenyan market two months ago not only determined to replicate its success but also to chase much bigger deals considering that Kenya’s economy is much larger. In Kenya, Kountable has also launched an online ICT Marketplace to give SMEs access to easy sourcing of first quality products from top manufacturers at highly competitive institutional pricing, all backed by Kountable’s financing to help SMEs win tenders and be able to execute deals more easily and profitably.