African fintech giants attracting lions share investments

  • Asante announced the US$7.5 million Series A investment anchored by Goodwell Investments
  • The AfDB signed a grant agreement for US$500,000 to be used for a study into factors hampering access to finance for women in northern Nigeria
  • Asante addresses the credit gap and accelerates its rollout

In mid-October, Asante Financial Services Group (Asante) closed the first tranche of US$7.5m Series A funding to bridge the gap in MSME lending in Africa.

Asante announced the US$7.5 million Series A investment anchored by Goodwell Investments with the participation of other investors including Sorenson Impact Foundation and Forsage Holdings.

The Series A investment will enable the high-impact fintech to scale its credit offerings to the underserved segment of MSMEs in Kenya and Uganda,  and expand to Nigeria and Rwanda.

Read: Accelerating Fintech investment and digital banking for Africa

And just as the Kenyan company was announcing this milestone, Nigeria which also doubles up as one of the most prestigious markets to invest in saw the African Development Bank (AfDB) sign a grant agreement for US$500,000 with Y’ello Digital Financial Services (YDFS), a fintech subsidiary of MTN Nigeria, to be used for a study into economic, religious, and social factors hampering access to finance for women in northern Nigeria.

The research, which includes a feasibility study, women-focused design and testing, will focus on both agents and customers to provide insights into women’s use of mobile money services, will be funded through the Africa Digital Financial Inclusion Facility (ADFI).

Despite being the continent’s largest economy, 55 per cent of rural Nigerians still lack access to financial services. The rate of mobile money adoption currently stands at 4 per cent,  with an agent ratio of 228.8 agents per 1,000 adults. Political instability and conservative cultural norms in parts of Northern Nigeria are thought to present barriers to women’s access to finance. Additionally, 80 per cent of agents in the region are men.

“The African Development Bank, through the Africa Digital Financial Inclusion Facility (ADFI), is delighted to support this project, furthering our work to improve the quality of life for people in Nigeria and contribute to the Sustainable Development Goals, particularly as relates to poverty, and gender inclusion,” said Stefan Nalletamby, African Development Bank Director of Financial Sector Development.

On behalf of YDFS, Usoro Usoro, Chief Executive Officer, said, “We are truly excited about this partnership with the African Development Bank, and the possibilities for advancing financial inclusion in Nigeria, particularly for the traditionally excluded segment of women in Northern Nigeria.”

Back in Kenya, East Africa’s investment hub, Founding CEO of Asante Chidi Okpala said, “We are delighted to welcome our new investors including Goodwell, Sorenson and Forsage in our inaugural institutional fundraise. Together, we will advance access to finance, and financial independence and wellbeing for the millions of small businesses on the continent.”

MSMEs have a significant impact on the economies of most countries, especially emerging markets, representing 90 per cent of all businesses, 66 per cent of all jobs created and 50 per cent of the world’s GDP.

Yet according to the World Bank, the annual SME credit gap in Sub Saharan Africa is about US$330 million. MSMEs are often neglected by lenders due to a combination of factors.

Fintech giants in Africa continue receiving funding from investors as customers’ needs evolve. [Photo/Infomineo]
These include the high cost of customer acquisition and due diligence, insufficient data availability for accurate credit assessments, lack of collaterals, uncertain customer lifetime values, and the high costs of distribution and servicing. There is a large opportunity for lenders who are able to overcome these challenges.

Read: TLG invests in neo-banking platform in Nigeria

Asante differentiates itself with its ecosystem-based digital lending platform that uses alternative data and a proprietary AI loan decisioning management system to approve loans to MSMEs.

The company works directly with ecosystem channel partners to collect conventional and non-conventional MSME data, with the prior consent of the clients. Its channel partners include Africa’s largest telcos, mobile-based marketplaces, airlines, retailers, payment processors, insurance companies, smartphone phone OEMs and large FMCGs.

This significantly reduces the cost of customer acquisition and due diligence, while providing sufficient alternative data for credit underwriting.

As a result, Asante is in a strong position to address the credit gap and accelerate its rollout. Asante has executed over 16 strategic corporate channel partnerships, giving Asante direct access to 2m MSMEs with a monthly lending opportunity in excess of US$200 million.

“With over 650 per cent growth in lending activities since Q1 2021 and a sustained average all-in default rate of 2.5 per cent, Asante is well-positioned to fast track scale and deepen our impact in our operating markets. Our bold post-COVID response is helping small businesses recover, reconstruct and reposition for growth while ensuring that thousands of jobs are safeguarded. We look forward to a round extension very early in the new year to support the solid growth momentum,” notes Okpala.

“MSMEs—particularly those in the informal sector—are being held back by a lack of responsible lending from traditional financial services providers who are unable to run accurate credit checks and offer profitable loans to this segment of the market. Asante has solved these problems through its innovative digital platform and ecosystem approach. The company’s success to date is proof that the model works, and we are very confident that the business will scale quickly and successfully with this round of funding,” explains Bitta Wycliffe, Senior Investment Associate at Goodwell Investments.

“This is the 20th investment by Goodwell Investments’ uMunthu fund, of which 50 per cent is invested in financial inclusion. Asante is a perfect fit and a great addition to our portfolio of other socially responsible financial services providers.”

Asante is a strategic partner of Mastercard for digital lending in Africa and the only African fintech in a class of 6 scaling start-ups selected in May 2021 to join the award-winning Mastercard Start Path programme.

The company is currently piloting its Business Lending Platform, to further extend its lending and other services to small business clients with essential tools like Business Financial Manager, Management Toolkit and Tax Advisory to assist them to operate more efficiently while infusing resilience into their operations.

Via the platform, Asante will also be able to offer insurance, payments, and other products to its clients.

Read: Kenya: Women own half the 1.3 million MSMEs

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