Digital lending platforms have become an easy and fast alternative source of credit for micro, small and medium-sized businesses and individuals who were overlooked by traditional banking institutions. These platforms have become a lifeline for millions of low-income individuals, and demand continues to grow, with the digital lending platform market in the Middle East and Africa expected to reach $2 billion in the next five years, growing fourfold since 2021.
This is the market opportunity that Ghanaian fintech Fido plans to capitalize on as it explores new markets in East and Southern Africa, and is supported by a new $30 million Series B debt-equity funding round. The new capital includes $20 million in equity investment from global impact investment manager BlueOrchard and Dutch entrepreneurship development bank FMO.
Fido was first launched in 2015 by Nadav Topolski, Tomer Edry, and Nir Jefkovic to offer mobile phone lending products, and has grown its revenue over the years by adding other products including savings, bill payments, and smartphone financing.
Fintech companies are among a number of companies making inroads into Africa’s digital lending space, including venture-backed Branch and Tala, which leverage mobile technology and alternative data sources like mobile money history to provide instant microloans to individuals and small businesses that often cannot access loans from formal banking institutions.
Unlike lending apps, banks often lend to active customers, require collateral, and go through lengthy processes involving paperwork. This makes microlenders an alternative but expensive source of capital for small businesses, especially in sub-Saharan Africa, which has “little tools to grow while driving the economy,” says Fido CEO Alon Eitan.
“Most of the population of sub-Saharan Africa is unbanked or underbanked, and for many of our customers coming into our ecosystem, we are probably their first interaction with financial services. We take them from having no financial footprint at all to building a full financial foundation within our ecosystem where they can access credit, insurance, savings, mobile phone purchases, businesses and more,” said Eitan.
Fido offers built-in insurance on all its loan products and plans to include additional coverages for corporate clients, including climate insurance to protect agricultural borrowers from extreme weather events such as droughts and floods, and merchant insurance.
Fintech clients receive loans ranging from $20 to $500, while businesses receive higher amounts based on need, business nature and credit score. Loans must be repaid within six months and carry interest rates ranging from 7% to 12%. Eitan says Fido’s default rate is less than 4%, which he attributes to the company’s credit scoring system.
“We can deliver these industry-leading rates by incorporating mission-critical AI models across the loan life cycle – from underwriting models that evaluate new customers based on mobile device data and other alternative data, to fraud models and AI collections processing models,” he said.
To date, Fido has served 1 million customers, 40% of whom are small and medium-sized enterprises, and has provided over $500 million in loans across Ghana, with nationwide coverage in Ghana and 50,000 customers in Uganda since its launch in December last year.
“We hope to hit $1 billion in spend by some point early next year, and we’re going to use the new funding to grow further, reach more customers and… make a real impact on them,” he said, adding that the business has been profitable for the past four years.
