Kenyan fintech startup, IMFact has secured a £3 million ($3.9m) investment from FSD Africa Investments (FSDAi), the investment arm of FSD Africa.
The funding from FSDAi, which is IMFact’s first external equity investment, comes at a critical time, as Covid-19 has put unfair pressure on MSMEs in a variety of industries, most notably healthcare. IMFact’s innovative approach is especially timely because it allows for the release of previously locked-up funds.
“IMFact is extremely pleased to have passed the extensive scrutiny of FSDAi’s due diligence process which has paved the way for them to become a cornerstone investor in IMFact following the successful financial close of our third-round capital raise. This investment paves the way for further capital investors, including debt, which will support the further deployment of capital to our fast-growing list of clients.” Peter Fiala, chief investment officer, IMFact said.
IMFact is a financial institution that uses supply chain financing to help SMEs get access to operating capital quickly and easily.
IMFact purchases large invoices from MSMEs for a mix of upfront cash and deferred payments as a “pooled receivables” factoring business. This provides sellers with immediate cash without the need to follow up or wait for invoices to be paid, allowing them to invest in new inventory, pay suppliers, and grow their operations.
IMFact is expected to deliver £475 million in funding to about 570 businesses over the next five years, supporting around 5,600 jobs, based on existing plans and subject to additional fundraising.
Family-owned businesses, such as those that provide medical equipment and pharmaceuticals to public and private organizations, are among the MSMEs projected to profit. IMFact, on the other hand, will work with supply chain companies in various industries.
Through IMFact’s financing, ABC Pharmacy is now making a transition in its business model by extending its credit terms to clients. With the increase in capital available, the company has been able to increase sales and grow its business. Dr John Muturi, CEO of ABC Pharmacy said: “The financing from IMFact will be a game-changer for our future business operations.”
FSDAi’s ultimate objective in making the investment is to encourage the development of technology-enabled, “pooled receivables” financing across Africa.
IMFact was established in 2019 by Cardano Development (CD), an incubator and fund manager based in Amsterdam, The Netherlands, with financing from KfW on behalf of the German Ministry for Economic Cooperation and Development (BMZ). It received initial capital from Rockefeller Foundation and Convergence. IMFact Kenya is the first regional hub to become operational and was developed by CD with funding support from Total Impact Capital Advisors (TIC).
“We are pleased to be working with IMFact to support the rapid financing of MSMEs in Kenya at a time when many are struggling to get access to working capital from traditional lending institutions. We particularly look forward to seeing the impact the investment has on Kenya’s medical and pharmaceutical sector and hope to encourage further scaling of fintech solutions to solve the funding gap among smaller businesses.” Anne-Marie Chidzero, chief investment officer, FSD Africa Investments, said.
Commenting on the new investment, Joost Zuidberg, chief executive officer, Cardano Development, said IMFact has a very competitive product that directly addresses the barriers for Africa’s MSMEs to access formal and affordable finance.
“We are delighted to welcome FSDAi into IMFact in support of our early growth in Kenya and expansion to other African markets. We are passionate about financial services innovation, and believe that IMFact will prove to be a step-change in broad access for Africa’s MSMEs to working capital. With its innovative approach in using the pooling of debtors to mitigate risk.” he said.