In Africa, small and medium enterprises(SMEs) play a major role. The 44 million SMEs across the continent account for an estimated 80% of jobs. Despite their importance to the African economy, these enterprises have limited access to capital.
Traditional credit facilities such as banks often neglect these SMEs from accessing credit due to a lack of collateralization, leaving these businesses to obtain necessary loans from loan sharks. The International Finance Corporation (IFC) estimates that 40% of formal micro, small and medium enterprises in developing countries have an unmet financing need of $5.2 trillion every year.
In Uganda, YC-backed Numida has provided more than $20 million in unsecured working capital to 27,000 micro and small businesses. Founded by Mina Shahid, Catherine Denis, and Ben Best in 2017, the startup has raised $12.3 million in an equity and debt funding round to consolidate its presence in Uganda and expand to other parts of the continent.
The pre-Series A $7.3 million equity round was led by Serena Ventures with participation from Breega, 4Di Capital, Launch Africa, Soma Capital, Y Combinator, and existing investor MFS Africa. The round will be completed with $5 million in debt from Lendable Asset Management.
Numida’s proprietary credit models and tech-enabled underwriting processes allow them to provide unsecured working capital loans to semi-formal African SMEs. Instead of borrowing from informal lenders or family, business owners can download the Numida app, apply in minutes, and receive capital within a day disbursed to their mobile money wallet. Numida is also the first digital lender in the East African region to offer risk-based pricing, and business owners can access loans of up to USD 4,000.
Less than half (49%) of Ugandans have access to a mobile phone, with 71% of those connected using a basic phone. In 2013, Uganda launched a strategic plan called Vision 2040 to transform Ugandan society from a “Peasant to a Modern and Prosperous Country” within 30 years.
On a call with TechCabal, CEO and co-founder Mina Shahid said that to provide a technology-based solution to the Ugandan population, Numida had to spend years perfecting its user interface and user experience. “It’s very different designing a mobile app for someone who has never used a computer, which is the majority of our customers, compared to designing a mobile app for somebody who is tech savvy.”
He added that before launching in Uganda, the company had done test pilots in Ghana and considered Kenya, but chose Uganda because of its population and the market size of financially excluded SMEs.
According to Shahid, Numida’s business model is very simple. The company relies on its 30-day loan product for business owners based on risk pricing to make money. Numida offers loans ranging from $100 to $5,000 with an interest rate of 10% to 16% to its customers based on its unique credit scoring model. Shahid added that Numida created this model from the data it gathered from over 100,000 loans it has given out. He added that the rate for non-performing loans is in the single-digit range.
According to Shahid, since their $2.3 million raise in April 2021, the company has also increased the percentage of its female users from 33% to 50%. Shahid said this was his proudest achievement, as Numida wanted to drive economic gender inclusion in Uganda. According to Shahid, this growth in female users was achieved by building trust with the female entrepreneur community through acquisition campaigns targeting women.
He added that with this raise, geographical expansion is in the works with Egypt, Nigeria, Ghana, Kenya, and Tanzania on the company’s horizon. Numida also wants to increase its user base in Uganda to 40,000 businesses, double its current size.
Alison Rapaport Stillman, General Partner at Serena Ventures who led this round, said in a statement, “While we’ve spoken to countless fintechs in Africa who claim that their end game is to provide financing to small businesses, Numida is already doing it. We’re impressed by the strength and commitment of Numida’s team and their methodical approach to solving a very complex problem – how to give a $500 loan to a business that has no collateral, operates in cash and is semiformal. We are excited to join their mission to unlock the potential of these businesses across the continent.”
