How credit can unlock growth and contribute to the financial health of spazas in South Africa’s informal economy

Co-authored by: Jacob Winiecki and Shirley Mburu
December 2, 2022 - 8 mins read

Digital Spazas credit interventions

During the first phase of the Digital Spazas program, we quickly learned how important credit is to their businesses and to the financial health and growth potential of the spazas they serve. Moreover, all three innovators offered digital solutions that generate useful data on transactions and interactions with spazas that can be leveraged for the design and delivery of tailored credit products. 

In the second phase of the program, we focused on the credit opportunity through:

In this post, we share insights from the spaza research, highlighting why we explored credit interventions, the mechanisms we used, the results achieved, and lessons learned from the credit pilots with the three fintech innovators. 


Stock on payment terms is a high priority





The catalytic power of a small partial guarantee fund

As early-stage fintech ventures, Vuleka and Yebo Fresh are both investing heavily in building out their own field operations and technology to serve spazas, and as such started the second phase with a keen interest to pursue stock on terms for their clients, but with limited cash to dedicate toward the setup and to absorb potential losses. The Digital Spaza program designed a small facility to de-risk the stock on terms offering design and rollout for Vuleka and Yebo Fresh, with the guarantee covering 70% of defaults for a fixed period of time. The pilot was originally designed with a digital escrow model to allow for fast claims processing at a negotiated cost with G-PAY, a payments fintech.

The goal was to enable the two innovators to design and begin offering 5-7 day payment terms to qualifying candidates using internal funds; to deploy this with segments of the market that did not yet have a long track record with the company; and to give the innovator time to learn from field experience and tweak the offering as required without locking up too much in-house capital while the model was developed. By design, on a weekly or monthly basis, the innovators would submit an aged account report showing the stock on terms in default – typically measured as 14 days past the due date – to the guarantee facility for partial reimbursement. 

The stock on payment terms offerings have been a big success for both companies in terms of uptake and use of the products. The Yebo Fresh offering, under the name Stock Boost, had about 300 spazas signing up during the 5-month pilot with default rates of less than one percent (1%). The value of stock provided via the stock on terms totaled over ZAR 2,000,000 (about USD 115,000).  Post-pilot and by the beginning of November 2022, the number of spazas that had signed up grew by 50%, and the value of stock provided via the product more than doubled to ZAR 5,578,689 (USD 321,206).

Yebo Fresh noted that 50% of spazas increasingly maintained a consistent order frequency after accessing the stock boost product, which is equivalent to increased customer loyalty. Moreover, the average basket size increased by almost 20% compared to the average pre-onboarding basket size. The Stock Boost program is becoming a major sales driver for Yebo Fresh, with word-of-mouth referrals expanding the customer base and spazas feeling more comfortable increasing the total value of their weekly stock orders when they can be partially covered by a buy now pay later offering. Vuleka is also seeing encouraging uptake of up to 10% of its client base, with minimal repayment challenges. Both companies are doubling down on their stock on payment terms programs to make it available to a wider base of customers. They are in the process of formalizing their internal teams and credit processes to manage the growth. 

Access to other forms of credit can fuel spaza growth

Through our demand research, we also learned that some growth-oriented spazas have a diverse set of credit needs above and beyond stock on terms. This can include working capital, asset/equipment finance, longer-term loans for store expansion or opening a second shop, etc. We partnered with A2Pay and their Khula Nathi Financial Services company because they already offer many of these loan products to high-performing A2Pay clients and saw a need to leverage data and digital communication tools to scale the uptake of these offerings. 

Leveraging insights from the program’s demand research, we focused our collaboration on a few specific areas where we knew spazas were facing obstacles. First, we knew that many shops have a limited understanding of credit as a business tool and have a high fear of formal financial services. Interested shop owners also often lack tools for business projections and have a limited ability to understand how credit might be useful for their business, what it could be used for, and how they could repay. To cover these knowledge gaps, we helped A2Pay / Khula Nathi develop a curriculum delivered through WhatsApp, deemed the Khula Nathi Credit Wellness Program. 

The BFA team helped A2Pay develop this WhatsApp curriculum, accessible through bite-sized daily messages, that was rolled out to four cohorts of 50+ spazas during the pilot, with their engagement in the content and subsequent actions to obtain credit tracked. This has led to an increase of 200 new loans approved over the project period through a much higher application and approval rate. And there have been big operational efficiencies for A2Pay by shifting some of these processes over to digital, which they’re using to fund expansion. Moving forward, A2Pay will continue iterating the credit wellness and onboarding WhatsApp tools and is exploring how the same tools can be used to digitize other components of their training and mentoring of shops. 


Overall lessons from these fintech-led credit innovations for the spaza economy









We recently discussed these credit pilots and findings with 20 stakeholders active in the South African township economy including fintechs, government, investors, market enablers, etc. During the closed-door roundtable, we also set out a shared vision for the key market interventions that may be required to build upon the positive traction A2Pay, Vuleka, and Yebo Fresh have sparked through this program, and to scale access to such services for spazas across the country. 


 JPMC and BFA Global launched Digital Spazas, a program focused on strengthening the financial health and resilience of ‘spazas,’ informal retailers in the South African townships, and helping them digitize to be more resilient in the face of future crises. The program set out to demonstrate that digitally-enabled MSEs are better equipped to survive and bounce back from unexpected shocks,  better suited to grow through higher sales and operational efficiencies, and can ultimately access an expanding suite of financial services.  

The Digital Spazas program partnered with three South African innovators – A2Pay, Vuleka, and Yebo Fresh – with boots on the ground and products already serving spazas in the township economy. For two years, BFA Global worked with these innovators to design and deploy new digital and digitally-enabled solutions that help spazas access credit to restock their shops and continue to sell through the pandemic, access credit for store expansion or asset purchase, increase their income opportunities, and improve their ability to invest in the long-term needs of their business. 

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