Kenya-based food supply platform Twiga Foods has developed a blockchain-based finance lending solution in its efforts to add financial services for its clients.

The company collaborated with tech giant IBM to build and test the blockchain solution. Grant Brooke, Twiga Foods co-founder, explained that access to working capital would help farmers sell even more produce.

The key issue that needed to be addressed was assigning credit score to the vendors. Isaac Markus, a researcher on the inclusive financial services group at IBM Research in Kenya, explained that they applied machine learning algorithms to predict credit worthiness of the vendors. This, in turn, gave 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,” Markus added.

In late 2017, Twiga Foods and IBM ran a pilot with 220 small food kiosks across Kenya. During the 8-week pilot, over 220 loans were processed with the average loan around $30. All of the loans were executed via mobile phone and went directly toward working capital for the businesses.

“We 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,” said Andrew Kinai, the lead software engineer on the project at IBM Research.

Depending on the pilot’s success, the companies plan to roll out the platform to more SMEs across Africa by the end of the year and expand into new sectors.