Affordable business-in-a-box for informal traders and SMEs

An affordable business-in-a-box is set to help informal traders and SMEs access services, opportunities and information to help them achieve the same growth trajectory as a formalised business.

Their smaller size should actually mean less red tape, more agility and faster development, says Zunaid Miya, managing director of local fintech Hello Pay.

A World Bank study shows the average informal enterprise in developing economies is only one quarter as productive as the average enterprise operating in the formal sector. Besides obvious challenges, such as lack of capital, small businesses are often held back by struggles in their day-to-day operations too.

“These issues include challenges such as attracting a customer base, marketing and critically, managing cashflow. New start-ups usually have to deal with all aspects of the business, from sales and marketing to staff and HR, distribution and logistics to accounting and procurement. They often find it overwhelming.”

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How informal small businesses start

Miya says this is compounded by the fact that informal businesses are often started by migrants and individuals faced with long-term unemployment. “A large proportion of immigrants come to South Africa as economic migrants, wanting to find a livelihood to send money back home. Many of them have challenges in finding gainful employment and resort to opening their own business.

“Others start their own businesses after losing their jobs and facing extended financial hardship, exacerbated by the pandemic. Whether a local or a migrant, most do it as a last resort to support their families and have little to no background in running a business. These enterprises are usually started with minimal start-up capital and the focus is on day-to-day fast-moving consumer goods such as groceries, clothing and electronics.”

To help informal businesses and SMEs, Hello Pay created a business-in-a-box solution to assist them and improve their chances of success. “There is support on offer to small businesses, but many simply do not know that it is available. At Hello Pay, our aim has always been to improve financial inclusion and that means assisting these entrepreneurs on their journeys,” Miya says.

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What is in the box

The complete solution of business-in-a-box starts with a bank account which is the nucleus of financial inclusion, as well as mobile point-of-sale (mPOS) devices to enable merchants to receive card payments and e-commerce payment solutions.

This ensures that they have access to growth funding once the business has six months of transaction history with Hello Pay. Their approved funding depends on the number of payments they process and can range from R30 000 to R250 000, which can be paid off over a period of up to 12 months at commercially attractive rates.

“Our sister company, Hello Paisa, also offers armed response, basic insurance, immediate remittance transactions and other key elements a small business need.”

Miya says there is a misconception that complete and competitive solutions such as business-in-a-box do not exist for the informal and small business economies, but that is not the case anymore. “In addition, many entrepreneurs simply do not realise they need these solutions until a few months down the line. Most assume they will just collect money in cash, but then realise they need digital payment options too.”

This is the case no matter the customer base. Miya says one recent study showed that although rural and township residents use cards for 60% of their transactions at formal retailers, only 4% of transactions at informal retailers were card-based. This is very likely because these options are not available although there is a clear need for them.

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What new small businesses need

“New business owners need to understand who their target market is, what they need and make it easy and convenient for them to shop. This means adopting multiple payment options as most vendors adopt two to three options even in the informal space today.”

Miya says at a minimum, new businesses need a bank account and must ensure that they can accept cash and card payments. A QR code or EFT payment functionality is the next step, before creating an online site and accepting payments there.

“It might be a little intimidating at first and there will be a learning curve, but it will be worth it. Adopting different payment solutions and technology will not only grow your business faster but give you other advantages, such as leverage to negotiate better rates. Remember that there is help available to you to make this journey easier.”