Kenya’s 4G Capital, a micro and small enterprises (MSEs) lender, has raised $18.5 million in a Series C funding round with private equity fund Lightrock to scale its last-mile finance and enterprise training solutions to MSEs in Kenya and Uganda.
The lender will also use the funds to expand its use of digital channels and data science to complement its hybrid ‘touch-tech’ approach and expand its Kuza retail credit service to help store-owners, FMCGs and distributors boost their sales.
According to Wayne Hennessy-Barrett, CEO and Founder of 4G Capital, “We are delighted to partner with Lightrock to further our financial inclusion mission. Lightrock and 4G Capital share a complete alignment of purpose and mission. They bring unrivalled experience of Africa and emerging markets. This capital will have a transformative effect in enabling us to scale the best products and services to the world’s most important sector.”
Shakir Merali, Partner at Lightrock has joined 4G Capital’s Board. Shakir oversees the deployment of funds across Africa and previously managed the Africa Health Fund, as well as the Africa activities of the Global Health Fund, both funds are backed by the Bill and Melinda Gates Foundation, the IFC and several other Development Finance Institutions. He was formerly a partner at Aureos Capital and a Managing Director at Abraaj, and Geocapital Partners investing in early to mid-stage technology businesses across Europe and the United States. Shakir has also worked as a strategy consultant at the Monitor Group and an Information Technology Consultant at Price Water house Coopers. He is also on board of Nairobi-based Copia Global.
Shakir holds a BSc (Econ) in Accounting and Finance and an MSc (Econ with distinction) in Information Technology from the London School of Economics and Political Science.
In March 2019, Lord David Currie, former chairman of the UK Competition and Markets Authority and current chair of the UK’s Advertising Standards Authority was appointed as Non-Executive Director for 4G Capital. Last year, the firm appointed Alex Siboe as Chief Operations Officer to drive the business’s day-to-day administrative and operational functions. Siboe was formerly Head of Digital Financial Services at KCB Bank Kenya. The firm also received a SILVER award as “SME Financier of the Year – Africa” with “distinction serving International Development Association (IDA) countries and fragile and conflict-affected situations” at the 2021 Global SME Finance Forum Awards.
4G Capital provides 100% unsecured business loans for business growth, along with enterprise training, and access to digital solutions. The company blends client-centric relationship management with proprietary AI technology to minimise default risk. 4G Capital’s clients maintain high repayment rates (around 94%) without the need for refinancing; on average customers increase their annual revenue by 82%. One of the world’s top 10 Finance B-Corporations, 4G Capital has positively impacted over one million people to date.
Through its plug-and-play lending service Kuza, 4G Capital allows low income entrepreneurs to obtain stock from distributors using its credit and partnerships, rather than traditional cash on delivery. 4G Capital also enables traditionally excluded groups to better access education, healthcare and improved living standards as their take-home income grows. 4G Capital’s focus on growing value chains from the bottom up means its model has the potential to scale in communities across Africa and wider global emerging markets.
Despite the pandemic, 4G Capital’s revenues for 2021 were 85% higher than in 2020 and in return for $9 million raised from 2016-to 2020, the company has loaned over $230 million to MSEs which, despite being the foundation of frontier economies, are more vulnerable than larger enterprises to shocks. Today’s raise will help the fintech increase effective financial inclusion which is critical to regional economic growth. The IFC’s SME Finance Forum reports MSEs in Sub-Saharan Africa account for 80% of total employment and contribute over 55% of GDP. Without access to institutional capital, 72% of MSEs rely on family or friends for loans, and 30% fail due to funding shortages.
“Often used to justify the backing of many African companies, ‘Financial inclusion’ has not always translated into positive outcomes for customers. What is needed on the continent is investment capital to back companies with the mission of financial empowerment. 4G Capital provides liquidity to the vast market of economically generative businesses – the mobile phone repairers, hairdressers and food sellers – that dot the landscape of Africa,” said Shakir Merali, Partner at Lightrock.
Merali says the the systemic value of improving lives is compounded, as productive employment leads to economic outcomes and better education and health outcomes in the communities these businesses serve.