Nigerian business financing startup, Payhippo announces that it has closed a $1 million pre-seed round led by Pan-Africa VCs, Ventures Platform, Future Africa, and Launch Africa. Other investors include Africa-focused VC, Sherpa Ventures; Hustle Fund; and Mercy Corps Venture.
The startup plans to use the fund to expand its reach to more Nigerian cities and also build its team of engineers. Aside from this, it plans to hire a Head of Finance to match the business current growth rate.
Founded in January 2020 by Zach Bijesse (CEO), Chioma Okotcha (COO), and Uche Nnadi (CTO), Payhippo’s goal is to give African small businesses access to finance while at the same time helping them to build their credit history. Since its launch, the startup claims to have disbursed over 2,600 loans to businesses and is currently making a 25% M-o-M revenue growth.
Interestingly, even though the startup began disbursing its first set of loans early in 2020 when the pandemic-induced lockdown crippled many businesses — leading to lay-offs, furlough, and salary cuts, which inadvertently resulted in more loan defaulters — it claims to have had a 97% repayment rate.
Curious about how the team achieved this, Okotcha reveals to Techpoint Africa that this was possible by making sure requesting businesses are not over-financed to the point that they can’t pay back. There’s a process for this.
“As a fintech company, the tech component of what we build is so important, because that’s really what drives how we can access the credit readiness of that SME and how much to give them. The tech does all this calculation in the backend, works out the underwriting, evaluates who the customer, and we’re able to give a loan that is within a safe range,” she explains.
And that’s how the startup is able to help businesses build their credit scores since they won’t have a problem when it comes to repayment.
Also, Okotcha considers the Payhippo repayment plan a rather flexible one as businesses only have to pay at the end of the loan cycle and not in instalments. This means it allows them to use the fund for what they needed it for before returning the principal and interest.
Like how several collateral-free loan apps work, businesses can access higher amounts as their credit scores increase.
Given the size of Nigeria’s informal sector and MSMEs making up 96% of the country’s businesses, Payhippo wants to continue to leverage the over 37-million-SMEs market in Nigeria, knowing that funding is still a major hurdle for running any form of business in the country and this group happens to be more disadvantaged.