Digital lending platforms are revolutionizing access to credit for microenterprises and individuals often overlooked by traditional banks.
With a $30 million Series B round led by FMO and BlueOrchard, Ghanaian fintech Fido aims to accelerate its growth across East and Southern Africa.
Emerging as a Lifeline
Digital lending platforms have emerged as swift, alternative sources of credit for microenterprises and individuals underserved by traditional banks. These platforms are a vital resource for millions of underbanked individuals, and their demand is projected to soar. In the Middle East and Africa, this market is expected to reach $2 billion within the next five years, marking a four-fold increase since 2021.
The Ghanaian fintech Fido plans to capitalize on this burgeoning market. Supported by a fresh $30 million Series B debt-equity funding, the firm is eyeing new territories in East and Southern Africa. The funding initiative includes a $20 million equity injection from global impact investors BlueOrchard and Dutch entrepreneurial development bank FMO.
Fido’s Journey and Product Expansion
Founded in 2015 by Nadav Topolski, Tomer Edry, and Nir Zepkowitz, Fido began by offering loans through mobile phones. Over the years, it has diversified its product range to include savings, bill payments, and smartphone financing, significantly boosting its revenue streams.
Fido is part of a growing cohort of African digital lending firms utilizing mobile technology and alternative data, such as mobile money transaction histories, to provide instant micro-loans. These services are a lifeline to individuals and small businesses that struggle to access traditional credit sources.
Micro-Lenders vs. Traditional Banks
Traditional banks often lend to active customers, demand collateral, and involve lengthy paperwork processes.
Micro-lenders like Fido offer a quicker, albeit more expensive, alternative for small businesses. Fido’s CEO, Alon Eitan, points out that small businesses are the economic engines in sub-Saharan Africa but receive very few growth tools.
“A majority of the population in sub-Saharan Africa are either unbanked or underbanked. For many of our customers, we are their first interaction with financial services,” said Eitan.
Innovative Loan Products
Fido offers loans with embedded insurance, appealing to both individuals and businesses. It is planning to introduce additional insurance products targeting business owners, such as climate insurance for agricultural borrowers and tradesmen insurance.
The loans offered by Fido range from $20 to $500 for individuals, with higher amounts for businesses based on their needs and credit scores. These loans are repayable within six months, attracting interest rates between 7% and 12%.
Leveraging AI for Credit Scoring
Fido’s default rate remains below 4%, thanks to its robust credit scoring system. This system employs mission-critical AI models throughout the loan lifecycle. AI helps in scoring new customers using mobile device data and alternative sources, detecting fraud, and optimizing collection processes.
“We are able to deliver these industry-best rates using AI models across the loan lifecycle—from acquisition scoring to fraud detection and AI collection models,” Eitan explained.
To date, Fido claims to have served one million customers, including 40% small businesses, extending over $500 million in loans across Ghana and Uganda.
Future Prospects and Profitability
Fido aims to reach a billion dollars in total disbursement by early next year, using new funds to expand and impact more customers significantly.
The fintech has been profitable for the last four years, bolstering its reputation and operational stability.
“Our goal is to use these funds to serve more customers and genuinely impact their lives,” said Eitan.
The Role of Impact Investors
Impact investors like BlueOrchard and FMO play a crucial role in Fido’s mission, providing not only capital but also strategic support.
Their investment underscores the growing confidence in digital lending platforms as a transformative force in financial inclusion.
Fido’s innovative approach in digital lending, supported by impact investors, positions it as a key player in the financial landscape of sub-Saharan Africa.
With a robust credit scoring system and a diverse product range, Fido aims to significantly enhance financial inclusion for underbanked populations.
Source: Techcrunch