YBI and Somo Revolving Loan Fund

The YBI and Somo Revolving Loan Fund operates as a financial empowerment initiative targeting young, low-income female entrepreneurs in sub-Saharan Africa. The primary mechanism involves providing low-interest loans to these entrepreneurs, enabling them to expand their informal businesses into sustainable, commercially viable enterprises. They are provided with loans between US$1,000 and US$25,000 at a five per cent interest rate per annum.

Repaid capital is made available in subsequent rounds as a revolving fund, which will be used to support more young female entrepreneurs. Somo has also created an alternative credit scoring system called the Somo Scorecard, which uses data and social connections to allocate financing. By integrating program participation, relationships, business insights, and social impact, the Somo Scorecard gathers advisory and peer data, along with financial and impact data, from DigiKua, Somo’s reporting tool accessible via USSD, WhatsApp, and the web. This process automatically produces a weighted score that acts as a filtering mechanism for financing decisions.

Entrepreneurs and the Somo team can access scores in real time, using them as an alert for challenges entrepreneurs encounter and as a means to better comprehend operating results, benefiting both the business owner and Somo. In marginalized communities, businesses often lack collateral and previous credit histories. This tool fosters a more equitable and accessible form of financing, allowing for more transparent risk assessment by financing partners.

In addition to financial assistance, the fund offers comprehensive training programs in financial literacy and business management. This dual approach ensures that entrepreneurs not only receive the capital needed to grow their businesses but also gain the skills necessary to manage and sustain that growth effectively. The training covers essential aspects such as financial literacy support, including coaching and advisory support on financial management, legalisation and standardisation, and access to markets. 

This model enables young entrepreneurs working in the informal sector, who are typically excluded from the financial system, to access capital and expand their businesses into commercially viable and investable models. Moreover, the package of support enables them to maintain financial and asset records, develop a positive credit history, establish creditworthiness, and legally register their businesses. This, in turn, paves the way for them to access more traditional financial support from formal financial institutions.

A key feature of the fund is its revolving nature. As entrepreneurs repay their loans, the funds are reinvested to support additional entrepreneurs, creating a self-sustaining cycle of empowerment. This model not only amplifies the impact of the initial investment but also ensures the long-term viability of the program. By continuously reinvesting in new entrepreneurs, the fund fosters ongoing economic development and job creation within the communities it serves, contributing to broader societal benefits.