Musoni Microfinance

Musoni’s Mobile Technology driving financial inclusion to Kenya’s smallholder farmers

Grameen Foundation was established in 1997 to help the world’s poorest break the cycle of poverty and reach their full potential by getting access to the right tools and information. We work with private sector companies, NGO’s, government agencies and others to ensure our projects are sustainable in the long term and have a lasting impact.

Together with our partners, we provide access to essential financial services and information on agriculture and health, leveraging technology to have a wider impact in the regions we operate. Grameen is a leading advocate for assessing how well organizations are achieving their goal of improving poor people’s lives and to this end, we use the Progress Out of poverty Index® to help poverty focused organizations more accurately track the poverty levels of their clients over time thus enabling them to adjust their programs to more effectively serve the poor.

Musoni Kenya is a fast-growing microfinance institution (MFI) that has created a fully automated, mobile -based banking platform to service its clients. Musoni is derived from “M-usoni” where “M” stands for mobile and “Usoni” is Swahili for future, hence “Mobile Future”. Musoni has integrated technology to its end-to-end loan process resulting in a cashless, paperless solution that is both cost and time effective for the institution and its target customers, 90% of whom are rural small scale farmers and micro entrepreneurs. To date, Musoni has disbursed over 110,000 loans valued at $260million and this is expected to grow exponentially in the next years.

The Musoni business model takes a two pronged approach where they target either individuals within a group- to co-guarantee each other, thus eliminating the need for traditional collateral, or individuals who are more established and are in a position to provide tangible collateral as security. Most small holder farmers will fall in the group category, an option that has enabled a vast majority access credit that would typically be out of reach.

In 2013, through collaboration with Grameen Foundation and support from MasterCard Worldwide, Kilimo Booster was developed and introduced to the Market by Musoni. Kilimo Booster is a mobile-based agricultural loan product with customizable flexible repayment terms that covers asset finance, working capital, farm expansion and start-up ventures for small holder farmers. Loan amounts range from as low as $50, repayable over 12months and while there are similar offerings in the market, Kilimo has differentiated itself because of;

  1. Customizable repayment terms that are linked to the farmers income which gives farmers a grace period of up to 6 months, thereby enabling them to repay the loan directly from proceeds of their agricultural enterprise
  2. Use of mobile technology to create and process loan applications, ensuring farmers receive funding within 72 hours of application to procure time-critical materials. In repeat cases, farmers get funding in as few as 24hrs from the time of application.

Loan officers use Digital Field Application (DFA) technology, which operates on a tablet, to process loan applications. The DFA technology was developed for Musoni Kenya and is a loan application work flow solution that enables:

  1. Client registration, which includes the collection of Know-Your-Customer (KYC) information required to open accounts and verify transactions over time. DFA captures a photo of each client, copy of their National IDs, and digital signatures for remote identity verification and risk management.
  2. Group registration, which collects group KYC information, including certificate number, date of establishment, and meeting dates, location, and time.
  3. Collection of data on households and livelihoods, gathered during home visits, to document critical baseline information such as financial capability, income, and assets/collateral. Musoni uses the Progress out of Poverty Index® (PPI®) to score customers and measure changes in their poverty likelihood over time.
  4. Loan application to initiate loan requests, including the amount, purpose, length, etc.

The entire loan application process is conducted at the farmer’s home/farm and all loan disbursements and repayments are in turn done via the globally acclaimed M-pesa platform.

Through the use of technology, Kilimo Booster has brought about cost savings to its customers by eliminating costly paperwork and trips to and from the MFI that a farmer would otherwise make to apply for the loan, follow up on its progress, withdraw money advanced and make loan repayments. Given the time sensitive nature of most farming enterprises, Musoni’s technology has significantly improved the process and reduced the loan processing time, ensuring that farmers get money when they need it. Moreover, farmers do not have to look for alternative sources of income to service their loans as they wait for their enterprises to mature. The grace period enables them to service their loans directly from their farm proceeds.

Through support from Partnering for Innovation, the next step for Kilimo Booster is to enhance the DFA technology to enable more complex financial analysis, drive faster credit approval from a maximum of 72hrs to 24hrs for new and repeat customers, enable more flexibility on loan repayment and provide better data for Musoni’s strategic development. Farmers will also be provided with a mobile application/USSD solution that will give them access to their loan accounts directly from their mobile phones thus empowering them to keep track of their loans and repayments and make better informed financial decisions.

As a result of Partnering for Innovation’s support, Musoni aims to reach an additional 3,500 Kilimo Booster customers by March 2017, equipping them with the much needed financial support to increase their income, grow their resilience and eventually improve their livelihoods.

Adapted from: FeedTheFuture

© 2022 Musoni Microfinance Ltd.