Pezesha

As a financial analyst, I have observed Kenya's digital lending landscape evolve rapidly, offering crucial access to credit for individuals and businesses. Among the significant players is Pezesha, a company that has carved a niche by focusing on the often-underserved micro, small, and medium-sized enterprises (MSMEs). Unlike many direct-to-consumer lenders, Pezesha operates as a business-to-business (B2B) embedded finance platform, providing the technological infrastructure that connects MSMEs with affordable working capital through various partners.

Understanding Pezesha: Company Overview and Background

Pezesha Africa Limited, a limited liability company registered in Kenya since 2016, stands as a prominent fintech innovator. Headquartered in Nairobi, the company commenced its operations in 2017 under the visionary leadership of its founder and CEO, Hilda Moraa. Moraa, a seasoned fintech entrepreneur, previously founded WezaTele, which was successfully acquired in 2015, demonstrating her deep understanding of the market.

Pezesha’s core business model revolves around acting as a digital lending infrastructure provider. This means it does not typically lend directly from its own balance sheet but instead powers embedded finance solutions for other platforms. Its primary target market includes MSMEs across Sub-Saharan Africa, with a particular focus on the retail trade and supply chain sectors in Kenya, Uganda, and Ghana. The company also partners with financial institutions seeking to expand their lending capabilities and technology platforms that require integrated credit solutions for their merchant networks.

Pezesha's Financial Offerings: Loans, Rates, and Terms

Pezesha's platform offers a range of loan products tailored to the needs of small businesses, accessed primarily through its partner integrations.

Loan Products and Services

• Business Loans: These provide working capital and inventory financing, essential for the day-to-day operations and growth of MSMEs.
• Supply Chain Finance: Credit solutions designed to help businesses purchase stock through partner platforms, ensuring smooth supply chain operations.
• Embedded Credit Solutions: Loans seamlessly integrated into partner applications and platforms, making credit readily available at the point of need for merchants.
• Marketplace Lending: A peer-to-peer model that connects investors with borrowers, expanding the pool of available capital for businesses.

Loan Amounts and Terms

Pezesha facilitates loans ranging from a minimum of KES 10,000 to a maximum of KES 5,000,000. Loan terms are flexible, extending from as short as 7 days up to 12 months, depending on the product and the borrower's credit assessment.

• Mkopo wa Pochi (Safaricom Partnership): Offers 7-day terms with an option for a 7-day extension.
• DPO Easy Credit: Provides KES 10,000 to KES 5,000,000 with 30-day terms.

Interest Rates, Fees, and Collateral

Understanding the costs associated with borrowing is paramount for any business. Pezesha's general interest rates range from 2% to 7% per month, with the exact rate depending on the borrower's credit score and the specific loan product.

• DPO Easy Credit: Features a fixed rate of 3.41% per month.
• Mkopo wa Pochi: Involves a one-time access fee of 2.76% for 7-day loans and 3.85% for 14-day extensions.
• Marketplace Rates: Typically, 7-day loans are at 2%, 14-day loans at 3.5%, and loans exceeding 30 days at 6%.

Regarding fees, a 3% one-off processing fee may apply, for instance, with DPO Easy Credit. An access fee is also deducted upfront before loan disbursement. Late payment penalties are set at 1% per day, applied after a grace period of 2 days past the due date.

Crucially, Pezesha operates primarily on a no collateral basis. This is a significant advantage for MSMEs that often lack traditional collateral. Instead, the platform leverages alternative credit scoring methods, analyzing digital transaction history, mobile money statements, credit bureau checks, and business transaction patterns from partner platforms.

Applying for a Pezesha Loan: Process and Requirements

The application process for a Pezesha loan is streamlined and digitally focused, reflecting its embedded finance model.

Application Channels

• Mobile App: The Pezesha Marketplace app is available on Android, allowing direct applications.
• Website: Borrowers can apply through the official Pezesha website.
• Partner Integration: Many loans are accessed directly through the platforms of Pezesha's partners, such as Jumia, Twiga Foods, and MarketForce, where the credit offering is embedded.

KYC and Eligibility

To ensure compliance and assess eligibility, Pezesha requires standard Know Your Customer (KYC) documentation:

• Personal Information: National ID, date of birth, and contact details.
• Business Details: Business name, type, number of employees, and registration documents.
• Financial Documents: M-PESA statements, bank statements, and business permits.
• Identity Verification: Utilizes the Integrated Population Registration System (IPRS).
• Credit Bureau Check: Authorization for checking credit history.

Credit Scoring and Disbursement

Pezesha employs its proprietary AI-driven credit scoring technology called Patascore. This system boasts an 85% predictive accuracy and processes over 100 million transactions from more than 200,000 users. It analyzes alternative data such as mobile money transactions, bank statements, and behavioral patterns to provide real-time credit assessments and loan limit determinations. The system also includes AI-powered fraud detection, flagging a significant percentage of suspicious applications.

Once approved, loan disbursement is efficient. Amounts up to KES 150,000 are typically sent to an M-PESA wallet, while larger amounts are transferred directly to a bank account. Pezesha aims for same-day processing, with applications often approved within 24 hours.

Repayment and Collections

Repayment processes are digitally managed, utilizing automated reminders. In cases of default, Pezesha reports negative credit information to credit bureaus after a 7-day notice period. For persistent defaults, the company is authorized to engage third-party debt collection agencies. A 2-day grace period is provided before penalties for late payment are applied.

Pezesha in the Kenyan Market: Regulation, Competition, and User Experience

Pezesha operates within a highly regulated and competitive digital lending environment in Kenya, yet it maintains a strong position through its unique approach and commitment to compliance.

Regulatory Status and Compliance

In Kenya, Pezesha Africa Limited holds a Digital Credit Provider (DCP) License, approved by the Central Bank of Kenya (CBK) in January 2023, signifying its adherence to the country's stringent financial regulations. It has also received Data Controller Approval from the Office of Data Protection Commissioner and was the first company to successfully exit the Capital Markets Authority's (CMA) regulatory sandbox. Beyond Kenya, Pezesha is fully licensed in Uganda by the Uganda Microfinance Regulatory Authority (UMRA) and the National Information Technology Authority-Uganda (NITA).

The company is fully compliant with the Central Bank of Kenya (Digital Credit Providers) Regulations, 2022, the Data Protection Act (2019), and adheres to Anti-Money Laundering (AML) and Counter-Terrorism Financing (CFT) requirements. For consumer protection, Pezesha emphasizes transparent pricing with a "no hidden charges" policy, offers financial education through its Elimiza platform, and provides a 2-day grace period for repayments. Customer support is available via email and app-based channels.

Mobile App Features and User Experience

The Pezesha Marketplace Android app, with over 50,000 downloads, allows users to apply for loans, check their credit score, access financial education modules, and manage payments. Users frequently praise the app's easy navigation, user-friendly interface, competitive interest rates for business loans, responsive customer support, and fast loan processing and disbursement. The absence of hidden charges is also a common point of positive feedback.

Numerous customer success stories highlight the impact of Pezesha's services. For example, Njogu, a metalwork entrepreneur in Kenya, expanded from being unable to access bank loans to owning three stalls and employing over ten youth. Nakirema in Uganda saw her FMCG business double in size after her first Pezesha loan, resolving critical stock shortage issues. These testimonials underscore the tangible benefits for MSMEs.

Market Position and Competitor Comparison

While Kenya's digital lending market is largely dominated by Safaricom products like M-Shwari (34% market share) and Fuliza (25%), alongside other major players such as KCB M-Pesa, Tala, and Branch, Pezesha occupies a distinct position within the "others" segment, accounting for approximately 4% of the market. Its differentiation lies in its B2B focus, an API-first approach, and deep supply chain integration, serving as an infrastructure provider rather than a direct-to-consumer lender.

Pezesha's proprietary Patascore technology provides a significant competitive edge in alternative credit scoring. The company's growth trajectory is strong, with a 2,000% increase in disbursement value over two years and plans for expansion into Nigeria, Rwanda, and Francophone Africa. Its key partnerships with entities like Safaricom (for Mkopo wa Pochi), DPO Group (for Easy Credit), Twiga Foods, Jumia, and MarketForce are central to its strategy and reach, enabling embedded credit solutions across various ecosystems.

Practical Advice for Potential Borrowers

For any micro, small, or medium enterprise considering Pezesha for its financing needs, here is some practical advice:

1. Assess Your Needs: Clearly evaluate your business's financial requirements and repayment capacity before applying for any loan. Borrow only what you can comfortably repay.
2. Understand Terms and Conditions: Carefully review the interest rates, fees (such as processing and access fees), and specific repayment terms associated with the particular Pezesha product you are interested in. Pay attention to late payment penalties and the grace period.
3. Maintain Good Financial Records: Since Pezesha relies heavily on alternative data like mobile money and bank statements, consistently maintaining good transaction history and clear financial records can improve your credit score and loan eligibility.
4. Prepare Documentation: Ensure all necessary KYC documents, including your national ID, business registration, and financial statements, are readily available and up-to-date to expedite the application process.
5. Plan Repayment Diligently: To avoid penalties and negative credit bureau reports, plan your loan repayment meticulously. Utilize the 2-day grace period if absolutely necessary, but aim to pay on time.
6. Utilize Financial Education: Take advantage of Pezesha's financial education resources, such as the Elimiza platform. These tools can offer valuable insights into managing your business finances more effectively.
7. Leverage Partner Ecosystems: If your business operates within the ecosystem of a Pezesha partner (e.g., Jumia, Twiga Foods), explore the embedded credit solutions available through those platforms, as they may offer seamless access to financing tailored to your trade.
8. Compare Wisely: While Pezesha specializes in B2B embedded finance, it is always wise for MSMEs to compare its offerings with other reputable digital lenders or financial institutions that cater to businesses in Kenya, ensuring you choose the most suitable and affordable option for your specific circumstances.

Pezesha stands as a significant enabler of financial inclusion for MSMEs in Kenya and across East Africa. Its innovative B2B model, advanced credit scoring technology, and commitment to regulatory compliance make it a robust and reliable option for businesses seeking digital working capital solutions.