Digital lending platforms have become an easy, fast and alternative source of loans for small businesses and individuals overlooked by traditional banking institutions. These platforms have become a lifeline for millions of unbanked people, and demand is expected to continue to grow, with the Middle East and Africa digital lending platform market expected to reach $2 billion in value over the next five years, registering four-fold growth since 2021.
This is the market opportunity that Ghanaian fintech company Fido plans to exploit as it expands into new markets in East and Southern Africa, backed by $30 million in debt capital funding in Series B. The new capital includes a $20 million capital injection from global impact investment manager BlueOrchard and Dutch entrepreneurial development bank FMO.
Fido was originally founded by Nadav Topolski, Tomer Edly, and Nir Zepkowicz in 2015 to offer loans via mobile phones, but over the years it has expanded its revenue streams by introducing other products, including savings, bill payments, and smartphone financing.
The fintech is home to a number of companies in Africa's digital lending space, including venture capital firms Branch and Tala, which leverage mobile technology and alternative data sources such as mobile money transaction histories to provide instant microloans to individuals and small businesses that often cannot access credit from formal banking institutions.
Unlike lending apps, banks often offer loans to active customers, which requires collateral and a lengthy paperwork process. That makes microlenders an alternative but costly source of capital for small and medium-sized businesses. “They’re economic engines, especially in sub-Saharan Africa, but they have few tools to grow,” said Alon Eitan, CEO of Fido.
“The majority of the population in sub-Saharan Africa is unbanked or underbanked. For many customers who enter our ecosystem, we are likely their first point of contact with financial services. We take them from having zero financial footprint to building their entire financial base within an ecosystem where they can get credit, insurance, save, buy a phone and do business,” Eitan said.
Fido offers insurance built into all its loan products and plans to include additional coverages for commercial clients, including climate insurance to protect agricultural borrowers against extreme weather events such as droughts and floods, and merchant insurance.
The fintech's customers can access loans ranging from $20 to $500, while businesses can access larger loan amounts depending on their needs, the nature of their business and their credit score. Loans are repayable within six months and carry interest rates between 7% and 12%. Eitan said Fido's default rate is less than 4%, which he attributes to the company's credit scoring system.
“We deliver the best rates in the industry by combining mission-critical AI models across the entire loan lifecycle, from acquisition models that score new customers based on mobile device data and other alternative data, to fraud models, to AI collections processing models,” he said.
Fido claims to have served one million customers to date, 40% of whom are small and medium-sized enterprises, and has provided more than $500 million in loans in Ghana, where it says it has nationwide coverage, and in Uganda, where it has served 50,000 customers since launching in December last year.
“We expect to exceed $1 billion in total payments by early next year and want to use the new funding to grow further, reach more customers and make a real impact on them,” he said, adding that the business has been profitable for the past four years.