Micro, small and medium-sized enterprises (MSMEs) across Africa make up the bulk but are still marginalized in accessing credit from formal institutions because of the nature of their operations
To bridge the gap, Uganda-based fintech Numida has decided to focus its digital lending business on small enterprises.
Spurred by an increase in demand for its services, Numida is currently eyeing growth opportunities beyond Uganda saying that it has a proven business model that can be adopted across the continent to unlocks the potential of Micro, Small and Medium enterprises.
The growth plans come against the backdrop of $12.3 million pre-series A equity-debt funding in a round led by Serena Ventures with participation from Breega, 4 Di Capital, Launch Africa, and Y Combinator, VCs that are all making their first investment in Uganda.
MFS Africa made a follow-on investment as well as a $5 million debt to the startup.
Micro and small business owners who have been forgotten by the traditional financial services industry because they are hard working and have viable businesses are excited about continuing to build and provide financial products. There are so many of these businesses across the continent, we really do believe that we've proven a model in Uganda that can be Pan-African and unlocks the potential of these businesses to growth and achieve great things.
Catherine Denis, Ben Bes, and Mina Shahid were part of the founding team of the company. The image is attributed to Numida.
It is ethical to lend.
Within the next 18 months, a goal that will be brought closer by its entry into two new African markets, will be reached with the extension of loans to 10,000 businesses.
Businesses on its portfolio can get loans of between $100 to $5,000, with an interest rate of between 10% and 16%.
The average interest rate is about 11.5%.
For credit consideration, the first startup in the East African country to get into YC (W22) looks at the sector and cash flow. New applicants and repeat businesses must wait up to 24 hours for the loans to be approved if they want a larger facility.
The credit scoring model used by the startup is based on the loans it has extended to customers and businesses. He said that they operate differently from most digital lenders who collect data from clients phone books and social media accounts as conditions for lending, and reach out to the borrowers in cases of default.
Most people don't read privacy policies or user agreements to understand what they're giving up and that's why a lot of people get taken advantage of. We only ask for information that helps us determine if the person applying for a loan is the owner of the business, and that's what we wanted to be very conscious of.
We have a bunch of historical data that helps determine whether or not the information we are collecting is in the right place.
Since raising its seed funding last year, the company has grown by 7.5 times. From issuing $250,000 a month to $2 million a month, the startup's working capital has grown.
As the startup continues to receive debt backing from institutions, the value of loans is expected to increase. They hope to continue to modify their products in order to make them more affordable.
He said that they continue to improve their assessment of risk and understand risk so that they can build a healthy portfolio that can allow them to reduce their prices.
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