Mobile-based micro-lender Branch has raised a Series A equity funding round of $9.6 million led by Silicon Valley’s Andreessen Horowitz (a16z) , also a backer in Facebook and Airbnb to help it scale its operations, hire talent in Kenya as well as expand across East Africa in 2016.
The firm this week disbursed its first loan in Tanzania, an important milestone towards its goal to expand to several African countries.
With plans to disburse 1,000,000 additional loans to its customers, Branch has served around 150,000 people in Kenya with each customer taking three 3 loans each, ranging from KSh250 to KSh50,000.
“Over the last few months we’ve been growing rapidly”, Founder and CEO Matt Flannery said. “With this latest round of funding, we’re able to expand further to meet the huge demand for our credit product in Kenya and enter new markets.”
Flannery founded Branch after a decade of founding and running Kiva.org, the micro-lending website that today operates across 80 countries. Branch uses advanced data science to calculate a credit score for its customers by analysing the information on their phone such as call and SMS history. This enables Branch to meet the growing demand for credit among millions of Kenyans and disburse loans within minutes into customers’ mobile money wallets, while maintaining low default rates.
“Our product is simple. Forget about bank queues and month-long processes. Branch is like a bank in your pocket, there for you at all times”, explained Daniel Szlapak, Africa Director. “The proprietary technology we have developed means that we are able to charge lower interest rates than our competition, and reward users who repay on time with lower fees, larger loan amounts and more flexible repayment terms as they continue to use the app.”
Apart from using this round to hire more smart, purpose-driven skills, expand to other markets, Branch is also getting customer and investor validation to raise more and reach more customers with through technology.
Branch’s main competitor in Kenya and Tanzania is Mkopo Rahisi by Inventure which raised $10m last year to fuel growth. Some other competition is from Safaricom and CBA’s M-SWARI and Safaricom and KCB’s KCB MPesa and a new player you’venever heard of called Saida.
Other investors in Branch include Khosla Impact, Formation 8, and Andreessen Horowitz. To date, the company has raised $10.8 million in equity funding.
Branch currently offer loans up to KSh50,000 but start with much smaller loans to new users who need to prove their ability to repay. It’s average loan size is now around KSh4,000 while current fees range from 6% to 16% on loans from 3 weeks to 1 year in length. It’s loan default rate has dropped to under 5%.