Micro, Micro and Medium Enterprises (MSMEs) in Africa make up more than 90% of businesses on the continent – although they are marginalized from accessing credit from formal institutions due to the nature of their operations. For example, many often lack the type of collateral accepted by banks.
To bridge the gap, Uganda-based fintech Numida has chosen to focus its digital lending business on small enterprises as part of its strategy to drive financial inclusion in emerging markets.
Due to increased demand for its services, Numida is currently looking at growth opportunities beyond Uganda, with a proven business model to unlock the potential of MSMEs across the continent.
Growth plans to raise $12.3 million in a round led by Serena Ventures against the backdrop of pre-debt funding from Brega, 4D Capital, Launch Africa, Soma Capital and Y Combinator, VC. Investment in Uganda.
Existing strategic investor MFS Africa also made a series investment, with Lender Asset Management extending a $5 million loan to the startup.
I am excited to continue to build and provide financial products to small and medium business owners who have been overlooked in the traditional financial services sector, despite their hardworking and profitable businesses. There are so many of these businesses on the continent, we believe we have proven a model that can be pan-African in Uganda and unlock the potential for these businesses to grow and achieve great things,” Numida CEO Mina Shahid, who co-founded the startup in 2017 with Catherine Dennis and Ben Best, told TechCrunch.
Numida Co-Founders (LR) Kathryn Dennis, Ben Bess and Mina Shahid. Image credit: Numida
Moral credit
Numida plans to extend loans to an additional 10,000 businesses in the next 18 months to hit its 40,000 target, a goal that will be brought closer by entering two new African markets (a choice of Ghana, Nigeria, Egypt or Kenya). .
Businesses on the portfolio receive loans ranging from $100 to $5,000, which are repaid after one month and attract interest rates of 10 percent to 16 percent.
“We do risk-based pricing, but the average interest rate is about 11.5%,” Shahid said.
For loan consideration, Numida, the first startup in an East African country to enter YC (W22), looks at a range of businesses, including sector and cash flow. Repeat customers in good standing will have their loans approved immediately, but new applicants and businesses looking for larger facilities may have to wait up to 24 hours for loans to be approved.
The startup uses its own credit scoring model, which Shahid says is built on loans to customers and business profiles. Unlike most digital lenders, which delete information from customers’ phone books and social media accounts as a condition for lending – many lenders access borrowers’ communications by default.
When we started building this business, we saw that many people were using it because they didn’t really understand the user terms because most people couldn’t read privacy policies or user agreements to understand what they were offering. We want to be upfront and thorough about our process, and we’re only asking for information to help us know if it’s a business and if the person applying for the loan is the owner of the business,” Shahid said.
“The data we use is what the customer provides on the app, so we don’t cut or delete any data…the data we collect is relatively in the right ballpark.”
Numida has grown more than 7.5 times since raising its seed funding last year as demand for fast loans continues to grow. The startup has grown from $250,000 a month to $2 million and has invested $20 million in working capital for small and medium businesses.
The startup continues to receive debt support from institutions like Lendable, and the cost of borrowing continues to grow. Shahid said that in the interim, they hope to continue to improve their products for more affordable prices.
“We will continue to improve our risk assessment and understanding of risk so that we can build a healthy portfolio that allows us to reduce the cost of our division by offering unsecured working capital loan products to these businesses,” he said.
