Uganda-based Numida has secured $12.3 million in pre-Series A funding led by Serena Ventures. Other participating investors include; Breega, 4Di Capital, Launch Africa, Soma Capital, Y Combinator, MFS Africa, and Lendable Asset Management which extended a $5 million debt to the startup.
Numida is a digital lender focused on providing funding for small and medium-sized enterprises. The platform is looking to drive financial inclusion for these businesses which make up more than 90 percent of businesses existing in Africa.
Following the latest round, the startup is planning on embarking on growth opportunities beyond Uganda, where it is based. It is eyeing a continental expansion and believes that its business model can be adopted across Africa to unlock the true potential of MSMEs in the continent.
Speaking on the latest development, CEO Mina Shahid who co-founded the startup with Catherine Dennis and Ben Best said, “I’m most excited about continuing to build and provide financial products for these micro and small business owners who have been forgotten by the traditional financial services industry even though they are hardworking and have viable businesses. There are so many of these businesses across the continent, we really do believe that we’ve proven a model in Uganda that can be Pan-African and unlock the potential of these businesses to grow and achieve great things.”
The startup wants to extend its loan services to an additional 10,000 businesses. This is part of its plan to hit its target of 40,000 within the next 18 months. The startup plans to enter two new markets and will be making its pick from Africa’s big four.
Numida offers loans between $100 and $5,000 at an interest rate of between 10 percent and 16 percent. “We do risk-based pricing but on average, the interest rate is about 11.5%,” CEO Mina Shahid said.
Numida is the first Ugandan startup to make it to the Y Combinators accelerators program (W22).
Numida employs its own credit scoring model which is built off loans it has given to businesses and individuals. The CEO says that Numida operates differently than its rivals. “When we started building this business, we saw that a lot of people were getting taken advantage of because they didn’t really understand the user terms because most people don’t actually read these privacy policies or user agreements to understand what they were giving up. And so, we wanted to be very conscious about our approach, and we only ask for information that helps us determine if it is a business and if the person applying for a loan is the owner of the business. The information we use is the one provided by the customer on the app, so we don’t snoop or scrape any data…We have a bunch of historical data that helps determine whether or not the information we’re collecting is relatively in the right ballpark,” he said.
The startup has grown more than 7.5 times since its seed round due to the huge demand for loans. Numida has issued loans worth $20 million to MSMEs. “We continue to improve our assessment of risk and our understanding of risk so that we can build a healthy portfolio that can allow us the room to reduce our prices while continuing to provide unsecured working capital loan products to these businesses,” the CEO said.