Jumia co-founder and CEO Sacha Poignonnec was this week in Nairobi to announce the launch of a new scheme by the online retailer through which suppliers will be given loans to purchase items and later sell through the platform.
We managed to speak with Sacha during the TechCruch Startup Battlefield Africa event – where the announcement was made – to share his insights about e-commerce industry and the Vendor Lending program in particular. Below are the excerpts from our interview with Sacha Poignonnec:
(TOP: Sacha Poignonnec, the Jumia CEO at TechCruch Startup Battlefield Africa).
QUESTION: Give us a brief instruction about yourself
SACHA: My name is Sacha. I’m the founder and CEO of Jumia. We started Jumia with my friend about 6 years ago. And since then it’s been a great ride, bringing e-commerce to Africa and bringing all the online services to Africa. During this period, I’ve travelled to Kenya and come to love the country, this is my 20th trip to Kenya. I love the energy in the country.
Q: Give us an overview of the e-commerce industry over the past years
SACHA: When we started out one of our major questions was: Can this work? A basic question of whether we could actually deliver products anywhere in the country, can we bring the trust to people so that they can start buying online, can we do this cash-on-delivery system where people do not have to prepay because they don’t trust online etc. The first phase was basically setting up the operation and getting it right. That was the ‘make it happen’ phase and now I call the ‘evolvement phase’ as people now know about e-commerce, have been exposed to it and generally understand that they can pay later and it’s something they can trust. Now it’s really about serving their needs, bringing about more services, more products so that everyone’s needs are catered for through the availability of relevant products and services and the right price. And relevant products and relevant services at the right price so I think it’s really about the phase where we’re trying to bring more products to the platform so that people have more choice and better price. So it’s that phase where we’re trying to fulfill everyone’s everyday’s needs.
Q: What informed the decision behind the Vendor Lending scheme? Did you seek suppliers’ feedback while developing the scheme?
SACHA: We work with vendors and we’ve been working with vendors from the outset. When we started, our mission as Jumia was to bring consumers to businesses and businesses to consumers so we work with those businesses. We know the vendors as they are our partners. So by just talking to them we realized that those businesses have a very tough time accessing credit and other financial services. A lot of them are small entrepreneurs or SMEs and it is thus very challenging for them to get good and flexible financing products and services and when thy access any form of financing, it’s generally offered at very unfavorable terms – very expensive and not tailored to their needs. We observed this for a long time and at some point we realized that we’ve something special about these people – these being the data about their business operations. We know the business they do on Jumia so we can provide or share these data with financial institutions to enable them develop better financing products for the vendors. And for us this is key as SMEs are the heart of Jumia and even the economy and enabling them to access better financing packages is thus very important for us as it will make them better, make Jumia better and also make economies better.
Q: Who provides the financing, is it solely Jumia or Jumia and its partner financial institutions?
SACHA: Our goal is to work with financial institutions with our target being to bring data to the financial institutions to help them do better scoring, and then this better scoring helps them do better financing. Now, we’re also OK to do a bit or provide financing ourselves in order to kickstart the vendor lending scheme and also prove to the financial institutions that the scheme can work.
Q: Does Jumia have any budgets allocated to lending scheme?
SACHA: We don’t want to allocate a certain budget as we don’t know what we don’t know. I always say that when we start something like this we don’t know what we don’t know and we don’t how successful it’s going to be. Generally, we don’t want to create a limit or budget associated with it but we want it to give the first loans to the vendors then we see what happens from there.
Q: The scheme targets 200 SMEs in Africa. How many of these are expected to come from Kenya?
SACHA: I don’t have the figures about the Kenyan vendors off-head but you can make a folowup with the Kenya office. But the general answer from me is that there’s no target, we can even expand the target to 5,000 SMEs. What we want to achieve is to extend the loans to at least 100 SMEs from in Kenya because that’s a good number that can help to learn as it’s not too large or too small.
Q: For vendors, what are the requirements to access the loans or what kind of scoring do they need to participate in the scheme?
SACHA: Of course there is a very advanced analytics system behind the scoring and of course the more history we have with the vendor, the more business we have from the vendor among other things, the easier it will be to be considered or to qualify for financing. So it’s really about history, consistency, and about the size or volume of business you do on Jumia.
Q: How will you deal with vendors who access loans from the Jumia then use the funds to supply and sell their products on other platforms?
SACHA: We’re fine with that. Let me just say that we don’t want to control what vendors do with the funding. We believe that the funding scheme will make our partners better and Jumia and other online retailers will also benefit from it. It’s part of the game, I think if it makes our SMEs to become better than it will benefit everyone in the end. Of course we hope that they will remember that Jumia had them but it’s really their choice to do what they want as vendors so if it benefits our competitor then it will definitely benefit the consumers in the end.
The Vendor Lending program will enable Jumia suppliers to access loans at 12 per cent interest.
Jumia is already in talks with major financial institutions in the country to develop and launch the products for SMEs.
To participate, a vendor has to be with Jumia for at leats 6 months and have active social media pages – Facebook, Twitter, LinkedIn etc – as such data will be used during the scoring exercise.