Embedded financial solutions are becoming increasingly prominent as platforms seek to provide a variety of financial solutions to the unbanked and underserved. Banking infrastructure providers are primarily responsible for the proliferation of such solutions. It allows businesses such as mobile operators, e-commerce platforms and logistics companies to add and enable banking products to their customers.
Credible, a startup that provides its customers with a technology stack, scoring capabilities and banking partners in this category, has raised $2.5 million in seed funding. It will follow a pre-seed round in early 2021, secured and led by Continental Venture Partners (TCVP).
Last May, Credible officially launched with two products: a 30-day loan product in partnership with Vodacom M-Pesa in Tanzania and a short-term loan product for Diamond Trust Bank in Kenya. Since then, fintech has enabled more than six products for various businesses, from banks and mobile network operators to e-commerce platforms and fintech players in three markets: Tanzania, Kenya and Uganda. To date, more than 1.2 million people have opened accounts on its platform and more than 200,000 customers (including consumers and small SMEs) have used its banking products. These include savings products, term loans, overdrafts, property finance and other credit solutions. Credible’s platform has helped disburse $5 million worth of loans and seen more than $3 million in deposits on its savings products, the startup shared in a statement.
The startup’s CEO, Nadeem Juma, said in an interview with TechCrunch that the embedded financial platform, which aims to be a “unit for emerging markets,” is looking to expand its offerings in larger markets where the regulatory environment is favorable and businesses are doing well. Profitable channels in MENAP and West Africa: Pakistan and Nigeria top this list. With this new financing, Credable plans to launch four more products this year and partner with businesses in these countries.
“The problem we’re trying to solve is a huge number of unbanked customers who need banking to improve their lives. They’re in the various channels they use every day, like telco-led mobile money, e-commerce platforms and gig economy applications,” said co-founder of the startup with Jade Abbas and Michael Tarimo. Executive said, “Instead of trying to create a new channel for these customers to bank, our aim is to provide these channels with B2B2C provision to provide the customers with the banking services they need through their existing channels.”
In the US and Europe, banking fintechs such as Unite, Rapid and Treasury Prime have risen to prominence due to the growth of banking systems in their markets. Their peers, including big players like Flutterwave, JUMO and Migo and smaller startups like Maplerad, Bloc, OnePipe and Anchor, are looking to replicate this growth in underdeveloped banking systems in Africa and other emerging markets.
“If you think about a market like the US, you have banks and businesses that have done this before, and you have businesses that are familiar with the model. So it’s been a seamless journey to get it up and running,” explained CFO Abbas, who, prior to founding Credible, was a director at private equity firm Actis. “But in our markets we are not yet there because we have a large underbanked population to begin with. And building on that capability is what we’re working on today as Credible launches new digital banking products to include many different things.
According to the executives, these capabilities set Dubai-based Credible apart from other platforms in a crowded space. In addition to its technology stack and alternative credit scoring capabilities, Juma said it will “hands-on” its business customers in product design, development and management, and work with them to ensure the product is relevant to their end users. Credable also offers an end-to-end solution by partnering with balance sheet providers (typically tier two financial institutions that struggle to find new customers because they don’t have a relationship with technology-enabled businesses) without exposure to credit risk.
The two-year-old fintech uses a revenue-sharing model with all its partners to “keep it invested and create a level playing field.” Credable also hopes to address one financial malpractice with this model: predatory microlending, which typically involves imposing unfair and deceptive loan terms on end users. Bad actors who earn extra income through this method take advantage of a lack of credit history or lack of access to credit in emerging markets. The fintech upstart believes its revenue sharing model can help reduce costs as much as possible and create affordable capital for consumers and businesses, rather than the traditional cost service model.
Pan-African early stage VC firm Ventures Platform, which led the round, welcomed participation from Launch Africa, MAGIC Fund, ACASIA Ventures, AAIC Investment, Adaverse/Emurgo Africa and other strategic angel investors. Dotun Ololoporoku, General Partner of Ventures Platform, believes that the firm’s Cradle platform, which enables businesses in previously underserved market segments to provide financial services, will create a flywheel for economic growth in emerging markets.
“As we’ve seen the emergence of fintech and mobile money across the continent over the last decade, people have been trying to address the question of financial inclusion, how do you enable these customers who are not in the formal sector with credit or? Savings Products,” said Juma, whose professional experience was mostly in fintech and business institutions providing enterprise solutions for the telecommunications and banking sectors. “You have to provide end-to-end solutions and partner with banks and businesses, so we don’t think anyone has cracked it. Instead of creating new channels and developing customers independently, the problem is sustainable.” There is a huge opportunity to make an impact at scale with a model that helps solve.
