Africa’s SME sector remains crippled by challenges such as funding despite the numerous efforts from governments and financial institutions. Another major issue that SMEs are faced with is the inability to access loan facilities from commercial banks, which are the closest bank to them. Many of these SMEs are credible as against the reasons commercial banks give for not processing loans.
In what is referred to as the informal economy, large populations of Africans operate SMEs. In Nigeria alone, SMEs account for two-third of the entire economy and provides more employment opportunities than the formal sector. Irrespective of all these, SMEs are still faced with the challenge of getting loans which in turn is a hindrance to the growth of small and medium businesses, and eventually the entire SME sector.
The challenges SMEs face in getting loan opportunities have created an opportunity for startups like Payhippo. These startups are leveraging on the market opportunity that this credit gap provides, and are providing loan facilities for these handicapped SMEs.
Payhippo is an AI-based lending platform that provides SMEs with loan facilities and has raised $1 million in a pre-seed round. Payhippo is the brainchild of Zach Bijesse, Chioma Okotcha, and Uche Nnadi. Founded in 2020, the startup aims to provide loan facilities for the about 40 million SMEs that exist within Africa’s territory. The startup wants to give businesses in this category the access to funds that they need to grow their business.
Payhippo’s platform is easy to use and loans can be accessed faster than commercial banks. Payhippo’s model is designed to create an experience that is stress-free and helpful. SMEs get to access the company’s products after the business owner and the business’ cash flow has been scrutinized. This way Payhippo knows the exact loan size that fits the SME. SMEs can have access to bigger loan sizes as they build their credit score over time.
Payhippo has disbursed loans worth N1.44 billion in more than 2,600 loans to SMEs. According to the company, it has recorded a 97 percent repayment rate and is currently making a 25 percent MoM revenue growth, and most of the businesses that have received these loans are grocery stores and small retail shops.
Payhippo mentioned that it plans on using the fund it acquired in the pre-seed round to expand to more cities and also build its team. The startup also revealed that it has plans of hiring someone to fill the position of Head of Finance as its business growth demands more hands to be able to keep up.