Numida raises $12.3M led by Serena Ventures

Over 90% of businesses in Africa are micro, small, and medium-sized firms (MSMEs), however, due to the nature of their operations, many of them frequently lack the kind of collateral that banks will accept, and they continue to face barriers when trying to obtain loans from formal institutions.

As part of its plan to promote financial inclusion in emerging economies, Uganda-based fintech Numida has chosen to concentrate its digital lending business on small businesses in order to close the gap. Numida is actively looking for development opportunities outside of Uganda as a result of the rising demand for its services. The company claims to have a successful business model that can be applied across the continent to help MSMEs reach their full potential.

A $12.3 million pre-Series A equity-debt funding round led by Serena Ventures with participation from Breega, 4Di Capital, Launch Africa, Soma Capital, and Y Combinator, VCs who are all making their first investments in Uganda, serves as the backdrop for the expansion aspirations. MFS Africa, an existing strategic partner, also made a follow-on investment, and Lendable Asset Management provided the business with a $5 million loan.

“I’m most excited about continuing to build and provide financial products for these micro and small business owners who have been forgotten by the traditional financial services industry even though they are hardworking and have viable businesses. There are so many of these businesses across the continent, we really do believe that we’ve proven a model in Uganda that can be Pan-African and unlock the potential of these businesses to grow and achieve great things,” Numida CEO, Mina Shahid has been quoted as saying.

Within the next 18 months, Numida intends to increase its active client base to 40,000, a goal that will be much more within reach thanks to its entry into two new African markets (which tentatively could be any two from Ghana, Nigeria, Egypt or Kenya). Businesses in its portfolio are given loans ranging from $100 to $5,000, with interest rates between 10% and 16%. Payment is due after one month.

“We do risk-based pricing but on average, the interest rate is about 11.5%,” Shahid said. Numida, the first startup in East Africa to be accepted into YC (W22), considers a number of factors when determining credit, including the industry and cash flow. Regular customers in good standing have their loans granted immediately, but new applications and regular customers looking for greater facilities must wait up to 24 hours.

The startup has its own credit score system, which, according to Shahid, is based on data from loans given to clients and information about their businesses. He continued by saying that they operate differently from the majority of digital lenders who typically collect data from customers’ phone books and social media accounts as requirements for lending — many of these lenders send out debt-shaming messages to the borrowers’ contacts when they default.