Payhippo, a startup that aims to close the SMEs finance gap in Nigeria, has bagged $3 million in funding taking the total investment in the startup to $4 million. The latest round comes just three months after the startup closed a $1 million pre-seed round in July.
Notable angel investors like Ham Serunjogi and Maijid Moujaled (co-founders of Chipper Cash), Olugbenga Agboola (Flutterwave), Bolaji Balogun, the CEO of investment banking firm Chapel Hill Denham; and Hakeem Belo-Osages, the founder of Metis Capital Partners, were all present in the Series A round.
There is no doubt that SMEs play a significant role in Nigeria. However, the financial needs of SMEs are mainly unmet, which tends to limit the growth of these firms. Small businesses find it difficult to access loans in Nigeria, even when they are creditworthy. This is because of the business model of banks. Banks require credit scores and huge collateral, which most of these small business does not possess.
Payhippo is banking on this pitfall to gain traction. It uses alternative credit scoring that allows it to disburse short-term loans in less than three hours.
"We had seen that traditional banks and lenders wouldn't loan small businesses mainly because there were no credit scores, or the collateral requirements were too high. We decided to come into the market and create an instant financing option, where we create a credit score that allows small businesses to get the liquidity they need to buy inventory for business continuity," Chioma Okotcha, the company's COO and co-founder, said.
"We use data from historical records that borrowers have built with us, but we also check their banking history to see the actual performance of their businesses," she added.
The startup claims that it has disbursed about 5,000 loans since inception, valued at $1 million and with a repayment rate of 97%, earning them $64,000 in revenue. It also claims that its month-on-month growth stands at 25%.
Nigeria in focus
GDP: $432.294 billion in 2020 compared to $448.12 billion in 2019
Population: 206,139,587 in 2020 compared to 200,963,03 in 2019
GDP per capita: $2,097 in 2020 compared to $2,229 in 2019