Micro-lending app Branch has raised $2m (ksh 200m) to bolster its loans to SMEs in Kenya and across the east African region as its loan book hits Ksh 4 billion and demand for loans skyrockets while supply shrinks.
The credit was arranged by Centum-owned Nabo Capital from local investors and fund managers according to Business Daily Africa.
The terms of the deal were not revealed the signifies a shift from normal sources of capital to fintech startups in Africa, and Kenya especially.
In December 2015, Branch became the first African-based startup to raise investment from Silicon Valley VC firm Andreessen Horowitz, whose portfolio includes Facebook and AirBnB, closing a $9.2m Series A round. The mobile-based financial services company has raised over $15m in equity and debt funding to date.
These investment is expected to help it grow its loans portfolio locally as well as take on its competition Tala (formerly Mkopo Rahisi), among others.
“Demand for mobile loans is likely to increase as the caps are shrinking the supply of credit in many traditional avenues,” Daniel Szlapak, director of Africa at Branch told the paper.
In July this year, Branch announced it had disbursed 1,500,000 loans since its launch in Kenya in 2015 and was now eying entry into Nigeria, Africa’s most populous nation.
In Kenya, Branch had 350,000 customers and disbursing nearly $4m Sh400 million a month. In Tanzania, the firm said it was growing by 30 per cent month over month since the beginning of the year.
“We’ve seen fantastic growth at Branch because we know what our borrowers expect from their financial partner: they want speed, transparency and convenience.We are disrupting the existing lending space by making credit available at the tap of a button, within minutes of downloading the app – no paperwork or collateral necessary,’’ said CEO Matt Flannery.
Branch offers MPesa loans of up to KSh 50,000 via an Android application that can be downloaded for free from the Google Play Store.
Lending decisions are made by a proprietary credit score calculated by analysing over 2,000 data points on applicants’ phones. New borrowers start out with a loan of up to KSh 1,000 and can grow their credit limit based on their repayment performance on previous loans.
The company’s growth has been spurred by its unique policy of offering lower interest rates to customers who have reached higher credit limits, thereby encouraging repeat uptake.
The firm launched a KSh30,000 loan targeted at Uber drivers and partnered with Jumia to give vendors working capital loans.