Making a week of credit easier to understand.

We were working in a predominantly Muslim market, and we quickly realized that a conventional interest-bearing loan was a problem for many of the people we wanted to serve. They needed stock for their shops. They also cared about how that stock was financed.

As a co-founder working on the product, I helped the team respond to that concern in the financing itself and in the way we explained it to retailers.

We introduced Murabaha-based inventory financing.

The retailer received goods to sell in their shop and paid the agreed sale price later. We weren’t handing them cash. The transaction was tied to the stock they needed for their business.

Murabaha is a sale at a disclosed cost plus an agreed profit margin, with payment deferred under the agreed terms. Our financing partners formally reviewed the structure we used.

1. 01

   Receive the goods

   Stock for the shop, supplied under the agreed sale.

2. 02

   Sell the stock

   The retailer sells those products through their business.

3. 03

   Pay the agreed price

   Payment follows the agreed term; the example below uses one week.

People understood a percentage in the context of a year. But if you’re buying ৳7,000 of stock and paying for it a week later, an annual percentage still leaves you with arithmetic to do before you know what you owe.

We changed the explanation to a question people could answer immediately: how many taka will I pay for each ৳1,000 worth of goods, for this week?

Take an illustrative markup of ৳8 for every ৳1,000 of goods for one week. On ৳5,000 of stock, that’s five lots of ৳8: ৳40. The agreed total is ৳5,040. Someone can work that out without converting an annual percentage into a weekly amount.

Retailers understood the explanation quickly. They could calculate what a purchase would cost, and the financing structure addressed the religious concerns they had raised with us. We saw a much more receptive response.

Two years after introducing this approach, demand was still above what we could supply. Our banking partners sometimes struggled to keep up with it.

The pricing explanation looks small on a screen. For the retailer, it meant being able to check the cost before committing to a purchase. Five lots of eight is arithmetic they could do themselves.

The religious concern needed a change to the financing structure. The arithmetic needed a change to the explanation. We had to address both for the offer to make sense to the people using it.

I’m still a co-founder of SupplyLine, though I’m no longer involved day to day. My main role is now at Optimizely.