The credit start-up in Nigeria Payhippo raised $ 3 million in a funding round, funding the company she plans to use to find the talent needed to optimize its technology as it ramps up efforts to quickly grant credit to more small and medium-sized enterprises (SMEs) in this West African country.
The round was led by a range of angel investors, including Ham Serunjogi and Maijid Moujaled, the co-founders of the African Cross-Border Payments Company Chipper Cash; San-Francisco-based payment company Olugbenga Agboola Floating wave; Bolaji Balogun, CEO of investment bank Chapel Hill Denham; and Hakeem Belo-Osagie, the founder of Metis Capital Partners.
This is the largest amount Payhippo has raised to date after receiving $ 1 million in pre-seed funding earlier this year.
Co-founder and director of operations of the company, Chioma okotcha, said they were looking to hire more engineers and data scientists.
“We capture our data from the loans we issue, and more talent on the team would allow us to optimize our technology to better serve our clients,” she said.
The digital lender says it disburses short-term loans in under three hours, a record that remains unmatched by the country’s traditional banking institutions, which often require borrowers to meet strict standards. conditions, such as regular account activity and maintaining minimum operating balances. Applying for a bank loan also requires a visit to physical branches and many documents.
“We’re really focused on keeping it three hours down and making sure businesses can get the money they need when they need it. Ours is also a product that works for SMEs in terms of a flexible repayment structure, ”Okotcha said.
SMEs are the force behind the Nigerian economy representing 96% of companies and 84% of jobs in the country. However, the lack of access to credit continues to slow their growth and limit their contribution to the country’s GDP, according to a study on Bank Loans and SMEs in Nigeria, published by the Ilorin Journal of Human Resource Management.
It is this funding gap that Payhippo has been designed to fill since its inception in August 2019.
“We saw that traditional banks and lenders didn’t lend to small businesses primarily because there was no credit rating or the collateral requirements were too high. We decided to enter the market and create an instant financing option, where we create a credit rating that allows small businesses to get the cash they need to buy inventory for business continuity, ” Okotcha says TechCrunch.
“We use data from historical records that borrowers have built with us, but we also check their banking history to see the actual performance of their businesses,” Okotcha said.
Payhippo applies its own credit scoring formula which uses different SME data to determine the value of loans to be granted. Loans are disbursed via cell phones. The average loan disbursed by Payhippo is around $ 1,300, with the minimum loan being around $ 200.
Payhippo says he relies on his quick turnaround time for loan applications to expand his customer base in Nigeria before venturing to other countries. The company says it has so far disbursed around 5,000 loans since its inception, valued at $ 1 million and with a repayment rate of 97%, which has earned it $ 64,000 in revenue. He added that demand for credit is high, fueling its current 25% month-on-month growth.
In the future, the company aims to tap the credit needs of almost all 40 million SMEs in Nigeria to develop its activity.
“We know that only 1% of the Nigerian market represents around 40,000 businesses, and we want to be able to disburse 40,000 loans per day, ”she said.
Payhippo is one of the many digital lenders in Nigeria offering short term loans to SMEs. Others include Carbon and FairMoney. Last year, Fairmoney disbursed a total loan volume of $ 93 million, which is an increase of 128 percentage points from 2019. Carbon has also disclosed in a previous interview that it reached 659,000 customers last year and disbursed $ 63 million in loans, an increase of 9.1 percentage points from fiscal 2019.