Cash flow is the lifeblood of any business and there is nothing as crippling for an entrepreneur, especially so if you are lumped into the small and medium enterprise segment as being invoice rich but cash poor. For over 750,000 SME’s in Kenya the gap between service or product fulfillment and payday presents the biggest survival challenge yet, driving owners and executives to seek expensive sources to meet operating expenditure. The cost of these facilities is driven up by the lack of risk data and visibility into the contractual innards of what would be a diverse service and product pool.
As an SME, you may have an LPO worth millions from a client but since the client is “not known” to the bank or financer unlocking a simple overdraft will call for a security which on many occasions cannot be sourced. The problem is exacerbated by the fact that even well-known companies on many occasions fail to adhere to their contractual payment obligations to SME status suppliers and the domino effect kicks in.
I am eagerly awaiting for the national public key infrastructure project to go live from beta as it would usher in the era of smart business that when coupled with distributed ledger platforms provides both trust and assurance to any entities in a buyer and seller relationship not to mention interested third parties such as financiers who would then drop or at the very least minimize their requirements when it comes to unlocking capital for business continuity.
Public key infrastructure is representative of an ecosystem of authorities who issue and manage digital certificates and play a verification role to parties engaged in a transaction. Distributed ledgers on the other hand make it possible to effect smart contracts that can see payments for services rendered or product delivered automated based on a set of rules agreed upon at the onset with a maker checker model to for an additional layer of verifications. Additional meta data can also be appended to the ledger to enrich the information and provide more clarity for either party adding transparency to the equation, creating a near perfect business environment that would be applicable to government, big business and SME’s alike.
Fintech is currently hot attracting lots of capital, but I feel that it is top heavy on P2P lending models. Those that have ventured in the B2B space are operating in distinct and siloed verticals offering either invoice discounting on purchase orders from vetted companies or working capital loans based on transaction history riding off the uptake of mobile money for commerce.
The creation of an open platform that integrates the national public key infrastructure to distributed ledgers will reduce the cost of business on due diligence and create more affordable finance options for entrepreneurs.
SME’s are after all the backbone of any economy.