Customer Updates

What does it really mean for your business to be opaque? …..Story Time.

In 2005 when I was in grade 6, we had tuition during the holidays organized by one of the teachers at a small fee. After a week, I was sent home because I had not paid the tuition fee and had to go and hustle for some funds (hustling then meant weeding at a farm or burning charcoal to sell). When I came back, I found out that a lot had been taught and one of them in Science were the concepts of transparent, translucent and opaque materials. That was the first time I heard those 3 words; opaque materials were simply defined as things we can’t see through such as our classroom wall – of course we later learned in engineering school that these were materials that absorbed all the wavelengths of light (and that’s the reason why we couldn’t see through them).

Fast forward to last year when I visited my parents and my mum literally forced me to accompany her to the shop, see how it operates and help out a little bit. I’m overly observant and so I couldn’t help but notice a lot of opaqueness in the business. She didn’t know a lot of things I inquired about: what their profits were, what the value of stock was, whether they were eating into capital meant for restocking or not. The worst of all was when she was struggling to tell whether “min L”  (name withheld) had cleared their debt. She had been selling to a lot of people with the promise of being paid later but she didn’t keep proper tabs on them and didn’t know how much was still held outside. I realized the magnitude of the effect of this problem when she said the supplier was to come back in 3 days time but she didn’t have enough money to pay for the restocking. “How can you not have enough money yet you’re restocking for what you’ve already sold – at a profit?” Well, turns out when you haven’t collected much of what your customers owe you when you’re operating on margins as thin as 5%, then it not only wipes out your margins but also capital to an extent that you can’t even restock. 

“So bad has the loss of funds been at the neighbor’s minimart that he recently closed down.” Mum told me. That was the eureka moment, the moment of awakening, the opaqueness we are talking about. The problem with small business opaqueness is that you not only lose funds but when you need to get a loan to resuscitate the business from banks, you hardly qualify because, again, your business is opaque and they can’t even do credit rating for you. You’re left in a fix and no option but to close down the only source of the family’s livelihoods.

Thanks to eureka moments such as this, Patika now comes to remove this opaqueness by focusing on the biggest problem of managing pending payments. To ensure that every small business, at any given point, knows which customer has pending payments, their payment history and balances as well as helping them get paid 3x faster. By doing this, small businesses like my mum’s will no longer struggle with cash flow constraints caused by delayed and non payments. The name Patika itself means to be findable which basically means we are removing the opaqueness that’s making small businesses not to be seen and found. 

To all the small business owners in Africa, I just wanna conclude by saying “Sawabona” – We see you, we respect you, we value you, you are important and are the backbone of Africa’s economy.  

Nakuru is a small burgeoning town in Kenya with a rising economy thanks to the entrepreneurial spirit of the likes of Philbert, who embodies what our forefathers said in the last line of our national anthem: “(let) the fruit of our labour fill every heart with thanksgiving.” His journey has, however, not been a bed of roses all through. 

As a young father, Philbert is self employed and relies on his small business to fend for his young family and educate his kids. He does computer repairs and sells accessories to his customers. To have a competitive edge, he has to sell on credit to his customers hoping that they will come back to pay so that he can not only have cash for his family but also sustain and grow his business. 

2 years ago, his business faced a threat and imminent closure. Covid had hit every corner of the world and interfered with the supply chain. The cost of his computer accessories had skyrocketed and due to lock down, his customers rarely came back to the shop which provided a breeding ground for defaulting on their pending payments. 

This changed when he found Patika, as he tells us. By recording these pending payments on Patika app, Philbert started seeing increased payments from the customers he thought had defaulted. “I’d wake up in the morning to an sms notification that so and so, who had defaulted for months, has paid.” He tells us. With Patika, his customers no longer needed to come back to the shop to pay in cash and also those who thought they didn’t have to pay because they didn’t have to be seen by Philbert now felt seen through the reminders and immediately made their payments through Patika. “Biz ikiwa mbaya ama on a go slow we go back to records and try skuma watu walipe tudeni  ndio we restock ata kidogo ya ku run business so that mteja next asikose kitu ya kubuy (When the business is on a go slow, we rely on the records and reminders to have customers pay so we can get money to restock and prevent stock outs for the next customers).” Philbert says. 

What makes Philbert stand out is how he has managed to bounce back from Covid19, making his business have even more cash flow than it did before the pandemic. He noticed that most of his customers were now working from home but didn’t have internet access and that gave him an opportunity to expand his business into offering WiFi access services to them, with the help of Patika to bill and collect payments from these clients on a weekly basis. “I did set up a wifi network where people pay weekly, and every Monday was due date. You’d find someone hasn’t paid by Wednesday. So with patika I used the recurring debt and now even if they delay payments, the records all exist. They don’t know it’s automated and think I’m on their case….and that helped to minimise lots of losses.” He happily narrates to us.

The story of Philbert tells us how MSMEs in Africa are at the forefront of resilience and building back better and stronger economies from the effects of Covid19 as embodied in SDG8: “Promote sustained, inclusive and sustainable economic growth, full and productive employment and decent work for all.” We at Patika couldn’t be more proud that we are continuing to help Philbert and thousands of other small businesses across Africa build sustainable and resilient businesses that’ll create more jobs and reduce poverty in our economies.

230 MILLION YEARS. That’s how long dinosaurs had dominion over our planet. As a comparison, the first human beings arose on earth just a mere 300,000 years ago. If anybody could be cocky about ruling the planet, the dinosaurs would be but all that changed about 65 million years ago when that ill-fated asteroid hit the earth and not even T-Rex could survive. What if someone told the dinosaurs to look up? What if there is something the dinosaurs could have done to save the planet? These are the questions we are grappling with and luckily for us, we know exactly what we need to do. 

One of the people who have gotten into the action arena is Brian Onyango. He noticed that whereas the global stage was talking about how to reduce emissions that are affecting our ozone, the marginalised communities in rural Kenya were left behind – struggling with their day to day lives so much that they didn’t even know what climate action was. At Kakuma area in Kenya, one of the refugee sites in the country, Brian noted that they were still using the traditional 3-stone hearth and firewood which meant our greenlife was in danger as trees got cut to make for firewood. Some of them relied on the traditional charcoal stoves which were inefficient, emitted a lot of carbon into the atmosphere and led to fuel wastage and destruction of our greenlife. As an environmentalist, this didn’t auger well with him and he had to take action. 

Usafi Green Energy was born. Brian tells me that they manufacture clean energy cookstoves under the brand names: silver Bora and Briquettes. They then distribute them to marginalised settlements and refugee camps, one of them being Kakuma in Kenya. Their model is simple but with complex operations. Brian has a team of sales persons who distribute these cookstoves to little mom and pop shops in these marginalised areas to then sell to the residents. Considering these distribution agents – the mom and pop shops –  are themselves struggling with cash flow, Usafi Green Energy’s genius is in setting flexible payment plans that see some of these agents get the products on credit and then pay back on a daily basis, based on their sales over time. These flexible payment terms – colloquially called “lipa pole pole” or “lipa mos mos” quickly saw Usafi Green Energy onboarding over 200 agents in no time, a number that’s growing daily.  

With growth comes operational headaches. When they were serving just a few agents, the sales ladies would go to their shops and physically collect their daily payments and record them in a physical book. But how do you scale that to over 200 agents all in remote marginalised areas? How do you even reconcile their payments and balances? So hectic was it that Brian had to count huge losses from time to time, until one day, he stumbled upon Patika.

“With Patika, we have been able to not only reduce the time of collections that we were doing in-person but now, we no longer have to go through books from every agent to figure out how much we have collected and our customers’ balances.” 

Brian, Usafi Green Energy

With Patika at the core of his day to day operations, Brian sees only the sky as the limit as he plans on rapid expansion to not only get his product to more people across all marginalised areas in Kenya and beyond but to also save the planet. “Moving to cleaner energy demonstrates a life saved from dirty emissions and environmental conservation. Climate is all about reducing our carbon footprint. The more we emit dirty fuel the more we are at risk hence we need to adopt cleaner energy solutions.” Brian says and I can’t agree more with him. Indeed, a 2020 climate action report indicates that 2.4B people still use inefficient and polluting cooking systems. It also laments that the impressive progress we once had on electrification has slowed due to the challenge of reaching marginalised communities. A whooping 733 million people still live without electricity. That’s why entrepreneurs like Brian are playing a pivotal role of not only getting the 2.4B people to move from inefficient polluting cooking systems but he also does it to the hardest to reach marginalised communities. 

“Our long term mission and vision is to provide clean and affordable energy solutions to the most marginalised communities and make it accessible to all.” He tells me as we complete our conversation. SDG7: Affordable and Clean Energy pushes us to a world where we have affordable, reliable, sustainable, and modern energy for all. Our annual energy intensity improvement rate has only been ~1.9% in the last decade but there is room to do better because we do not want the same fate T-Rex had. 

We at Patika are proud to be powering the payment plans and collections operations of Usafi Green Energy as we aim to hit that target 3.2% annual energy intensity improvement rate by 2030.

What would you do if you went to your bank and applied for a loan to expand your business but they started asking for unfair terms, high interest rates and security, like your car, despite your cash flow being high enough to sufficiently afford the installment payments without burden? 

In the calm streets of one of the residential estates of the city, Willy’s phone is buzzing with calls. Most of them are customers who are in need of his services and products. Within just 2 years, he has built a brand – Scott Trading – as one of the most trusted car windscreen sellers in Nairobi and has clients both within and outside the city. He quickly welcomes us and we get to have a chat for the next hour or so where he tells us about his business, his clients, how he found out about Patika and what impact it has had on his business. 

“Most of my customers are garages and insurance companies but I also have walk-in customers. When your car’s windscreen is broken and you go to claim the insurance, they’ll get the windscreens from us, we install it for you and then wait for 90 days on average for the insurance company to pay us.” He narrates. In some instances, a person may take a car directly to a garage for windscreen replacement but doesn’t have money to pay. The garage will then go to Willy and get a windscreen on credit and when the garage gets paid by the car owner, they’ll then pay Willy for the cost of the windscreen. We wonder and ask how he decides on which garage to sell to on credit to minimize his risk considering all this is informal debt and there is no collateral or formal agreement signed. “It’s all about relationships,” He says. “I must have known you and you must have been my client for quite some time, sometimes even at least a year. It also depends on how you’ve been paying back credit sales in the past.” 

This may seem foreign to people from other countries; while we were in San Francisco, one of the surprising things other founders struggled to understand is how one can just sell their product and rely on trust to get paid later on. Why not use credit cards? We don’t do credit cards in Kenya, and maybe Africa in general. Informal credit is powered by relationships and the trust that holds those relationships together. Even so, once in a while, such relationships are strained and the trust broken when either party fails to meet their end of the bargain. “Some of my clients have failed to pay me for over a year now and I just had to write off their debts.” Willy tells us, an experience that 90% of small businesses in Africa are familiar with and one of the things that motivated us to found Patika. 

At Scott Trading, Willy and his business partner are so held up with their customers that they simply don’t have enough time to follow up on their pending payments. The records were held in physical books that made reconciliations and knowing real time customer balances a real headache and the lack of consistent follow ups led to low collections which impacted their cash flow. “When you haven’t collected pending payments in time, you find it hard to also sell to more customers on credit which means losing some of those customers.” He tells us, “And that’s why when I saw Patika, it was like a Eureka moment to us.” Willy says that with Patika, it’s now a lot easier for them to track part payments because not everyone pays their full balance at once, it’s also easier to track real time customer balances, collect payments and generally, his cash flow has significantly improved. 

Nothing makes us happier than hearing that a business has reduced their losses from non payments or that their cash flow has increased. This is because cash flow constraint is the number one reason for closure of small businesses in Africa. In fact, as high as 400,000 new businesses in Kenya alone close down within just 2 years of operation mostly due to cash flow constraints. That’s over a million individuals affected and potentially drawn back to poverty. “How can you help us improve our receivable collection processes? Sometimes we just fail because we don’t have enough knowledge.” Willy asks in a curious tone. Indeed, capacity building is one of the things we can do to eradicate poverty under SDG1: No Poverty. Based on questions like these, Patika has improved its product offering to empower the businesses to collect more but the work is still not over as we have a number of items lined up to help our businesses have more cash.

What happens when you need extra capital injection into the business but can’t get it because the banks just won’t give it to you or if they do, the terms are unfavorable or the interest too expensive? Willy has had a brush with this harsh reality when his bank couldn’t give him a loan and another bank demanded that he moves his account to bank with them. As a result, he had to abandon his plans of expanding the business. He is not alone; the SME Forum estimates that as high as 53% of the MSMEs in Africa are financially constrained – which means that they can’t easily get loans from financial institutions when they need it – with the finance gap standing at $331B. 

Nairobi is known as the Silicon Savannah with a booming tech startup scene and cool international tech companies like Google but it is the stories of people like Willy that warm my heart the most. They represent 80% of the employment opportunities in the region and are the backbone of the African economy. We are pleased to serve Willy and and all the other small business owners like him and to help relieve the pain of cash flow constraints that threaten to kill their businesses.