The Ugandan based fintech Numida on Wednesday that it has close a $2.3 million seed round.
Pan-African payments company MFS Africa led the seed round. There was also participation from firms like DRK Foundation, Equilibria Capital and Segal Family Foundation alongside angel investors.
Founded in 2017 by Mina Shahid, Catherine Denis and Ben Best, the company helps micro and small scale businesses access finances. Micro and small scale business lack access to credit facilities. They are often financially excluded from credit and other financial services due to their size and informality. This is the problem Numida wants to solve.
Numida's business model has although changed over time. The idea behind the start-up was to act as a middleman between financial institutions and micro and small businesses by providing bookkeeping tool that enabled traditional microfinance institutions (MFIs) to provide unsecured credit to semi-formal businesses.
"One of the major reasons why financial institutions don't give loans to these businesses is because they don't have good financial track records and cash flow history. That was the problem we set out to solve — to create the mechanisms to get that cash flow data and present it in a form that can be used and incorporated into the underwriting processes—Shahid in an interview with TechCrunch.
Despite how nice this idea sounds, microfinance institutions did not buy the idea as they were unwilling to adjust their underwriting practices. As such, Numida's customers who applied for loans on the platform were all rejected because they lacked collateral.
This served as a turning point in the business model of Numidia, as they sort out to provide these loans by themselves.
"So we thought among ourselves that if our mission is to unlock access to resources that these mom and pop shops need in order to grow their businesses, we're not going to do that by partnering with these traditional MFIs; we had to do that ourselves," Shahid.
To date, it has provided more than $2 million in unsecured credit to 3,000 micro and small businesses in Uganda, disbursing around $250,000 per month. According to the CEO of Numida, this achievement is with outstanding collections, repayment rates, and client retention.
Numida plans to expand aggressively in Uganda and pilot in a new market, preferably in West Africa.
"There are some parallels between Uganda and Ghana, Numida's primary choice in the region. They both have similar mobile money penetration, issues with traditional financial service providers and similar businesses make an enticing market." Shahid.
The company also plan on introducing its customers to additional financial services like payments, micro-insurance and deposits.