IBM unveils blockchain powered microfinancing

Business Daily Kenya:  Solution came after Twiga Foods sought to expand company’s logistic services by adding financial services James Moma...

Business Daily Kenya: 

Solution came after Twiga Foods sought to expand company’s logistic services by adding financial services

James Momanyi @jamomamanyi

IBM Research and Twiga Foods have announced that they have extended access to microloans to 220 small food retailers across Kenya using a blockchain-based financing system.

Twiga Foods, a logistics platform for kiosks and food stalls in Africa, has been looking to expand its logistic services into a total market ecosystem by adding the offering of financial services.

Late last year, the $13 million (Sh1.3 billion) start-up began working with IBM Research to deploy a blockchain-enabled supply lending platform to help scale its reach.

Blockchain technology is a new revolutionary innovation in the financial sector where individuals’ records of every transaction that happens are collected and stored in a network and can be verified by anyone and security is guaranteed.

It synchronises the information of every participant in the network in a record, ensuring that only network participants can see the information and only the information they are permitted to see.

This assures that once a transaction is entered it cannot be changed, deleted or altered in any way. In the case of the partnership between IBM Research and Twiga Foods, IBM scientists will use machine learning and the blockchain to determine a credit score and distribute microfinance loans for small food stands across Nairobi without a credit rating, to scale up their businesses.

The scientists at the IBM Lab in Nairobi will use mobile phones, to accurately calculate credit worthiness of those seeking loans.

According to Isaac Markus, a researcher on the inclusive financial services group at IBM Research in Kenya, after analysing purchase records from a mobile device, the firm used machine learning algorithms to predict credit worthiness, in turn giving lenders the confidence they need to provide microloans to small businesses.

“Once the credit score is determined, we used a blockchain, based on the Hyperledger Fabric, to manage the entire lending process from application to receiving offers to accepting the terms to repayment,” he said.

With blockchain, the lending process becomes transparent to all parties involved, from the lending bank to the borrower’s bank and the loan applicants themselves.

“Previously, we were focused on helping farmers distribute bananas, tomatoes, onions and potatoes to 2,600 kiosks across Kenya, but we soon realised that we could help them sell even more produce with access to working capital,” said Grant Brooke, co-founder of Twiga Foods.

Andrew Kinai, the lead research engineer on the project at IBM Research said that the firm had several iterations of the platform based on feedback from the retailers.

“The SMS-based solution provided an effective channel for a diverse set of users, some with limited IT literacy, to access financing for their orders,” he said.

The post IBM unveils blockchain powered microfinancing appeared first on Mediamax Network Limited.

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