By Jeph Ajobaju, Chief Copy Editor
Fintech Lidya has raised a $8.3 million pre-Series B funding round for lending without collateral based on a borrower’s bank account cash flow, and PayHippo has announced raising $1 million pre-seed to back up small businesses.
Lidya operates from Lagos to serve markets in Europe, PayHippo operates from the city to serve African countries.
PayHippo, an artificial intelligence-driven lending platform, which provides loans to Small and Medium-Sized Enterprises (SMEs) got the fund from Ventures Platform, Future Africa, Launch Africa, and Sherpa Ventures.
Other participants include international investors like Hustle Fund and Mercy Corps Ventures.
Expanding finance access for SMEs
PayHippo was founded last year by Zach Bijesse, Chioma Okocha, and Uche Nnadi to serve Africa’s 40 million SMEs that are unable to gain access to funds to grow their businesses.
In Nigeria, a large percentage of the population operates small to medium-sized enterprises but Africa’s SMEs are largely underserved by commercial banks.
Most small business owners find it difficult to access formal financial products or services like loans. The inability to secure lending hinders the growth potential of SMEs and that is what PayHippo is trying to solve, according to Nairametrics.
Payhippo has disbursed N1.44 billion in over 2,600 loans to businesses, most of which are community grocery stores or small retail shops.
The startup claims to have recorded a 97 per cent repayment rate and is currently making a 25 per cent month-on-month (M-o-M) revenue growth.
It plans to use the $1 million see to expand its reach to more Nigerian cities, build its team of engineers, and is seeking to hire a head of finance to match the current growth rate.
“Small businesses are at the core of Africa’s economic growth and we are thrilled to partner with Zach, Chioma & Uche as they build PayHippo. They are essentially bridging the $158 billion SME financing gap,” Ventures Platform Fund General Partner, Kola Anina, said.
Applying for collateraless loans on Lidya
Nairametrics also reports that the $8.3 million funding round for Lidya was led by Alitheia Capital via its uMunthu Fund. Other investors include Bamboo Capital Partners, Accion Venture Lab and Flourish Ventures.
Lidya was founded in 2016 by Tunde Kehinde and Ercin Eksin. It provides financing based on the cash flow in a borrower’s bank account and without collateral.
Both men said the idea for Lidya came about when they saw the need to offer lending services while working for Africa Courier Express (ACE), a last-mile e-commerce delivery company providing logistics services to businesses and consumers.
On the Lidya platform, businesses can create accounts and apply for loans ranging from $500 to $50,000 with decisions made within 24 hours.
According to TechCrunch, Lidya claims to use 100 data points to evaluate each applicant and build a credit score for them to assess credit risk.
In October 2019, Lidya launched new lending operations in Poland and the Czech Republic. Since then, it claims to have disbursed over $3 million to SMEs in the two countries.
And, to date, it has disbursed over 25,000 loans and claims to have more than a 90 per cent customer repeat rate.
Both European markets represent about 30 per cent of Lidya disbursement volume while the overall default rate is less than 1 per cent. Unlike most lending companies that raise debt financing to fund loans, Lidya uses equity to fund its loan book.
Tackling fundamental challenge
In 2017, Lidya raised a $1.3 million seed round and $6.9 million Series A one year later. The $1 million latest funding brings its total to $16.5 million.
Lidya plans to use this new fund to grow lending to SMEs and to solidify its presence across its three markets, as well as grow its teams in Lagos, Prague, and Warsaw.
“Lidya is tackling the fundamental challenge of providing access to credit for dynamic small and growing businesses that otherwise have limited options for financing working capital to scale their businesses in Africa and Europe,” Alitheia Capital Co-founder and Managing Director, Tokunboh Ishmael.
“Alitheia Capital and Goodwell are pleased to be backing a team whose mission aligns with our objective of driving growth and social impact by enabling access and inclusion to finance and financial services.”
