Before starting Lupiya, Evelyn Kaingu and Muchu Kaingu ran a trading business, but when they wanted a loan to fund operations, they found no bank was willing to lend to them. Like most African countries, access to credit for small businesses remains a major barrier, leaving SMEs to depend on informal lending from family and friends.
In response, both co-founders decided to raise $500, which they lent to 18 women for a month. The loans were not just repaid, but the women refinanced them. Seeing increased demand, the duo continued lending manually until 2020, when the COVID-19 pandemic forced a pivot to a credit-led neobank.
“Our thesis about startups is that we want to find the problem first, then we want to find a solution to that problem. We don’t rush to create a technology solution for that business. We do a lo-fi solution first to see how the solution correlates with the problem. When we do that, technology is now used to optimise as well as create scale,” CTO Muchu told Techpoint Africa at GITEX Global, where the startup is courting investors for a Series A extension.
It raised its first institutional investment from Enygma Ventures in 2020 and has since raised more than $14 million from investors such as Alitheia IDF Fund, INOKS Capital SA, and the German Investment Bank, KfW DEG. Now it aims to raise $10 million in a Series A extension to boost its loan book.
Lupiya operates out of Zambia, hardly a top venture capital destination in Africa, and Muchu acknowledges that the startup has faced its fair share of challenges when raising capital.
“It’s been difficult. Raising in Africa generally is difficult, but the secret for us has been a lot of hard work and a lot of dedication. Our results speak for themselves. What we’ve been able to achieve, starting a business with only $500 to being a multi-million dollar business. A lot of lessons have been learnt, and the secret is taking all of those lessons and applying them to the benefit of the business.”
Between 2016 and 2020, it facilitated loans to 5,000 individuals and small businesses, but its loan book and customer base have grown tremendously. It now boasts over 100,000 users in Zambia and is eyeing expansions to Tanzania and Malawi.
“Having one country or market is a single point of failure because African economies are prone to volatility. We also want to externalise some of that risk by looking at additional markets. It’s not like we are abandoning our primary market. The strategy is still to invest heavily in our primary market but start looking at other markets to derisk our investments,” Muchu shared in response to questions about expanding too early.
The self-styled AI-powered neobank has stayed loyal to its lending roots, refusing to take deposits from customers. Instead, it is funding its loan book using a combination of peer-to-peer lending and funds raised from investors. According to Muchu, the decision not to accept deposits is due to the regulatory constraints placed on deposit-taking institutions in Zambia.
Written by Omoruyi Edoigiawerie, a seasoned startup attorney with over a decade of experience. Learn more.
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In 2023, it started P2P lending and has overseen loans of over $2 million in a regulatory sandbox. The loans are provided by more than 2,000 individuals and businesses with annual loan tickets of $1,000 to $2,000. More than ZK250 million ($9.4 million) has been facilitated on the P2P lending front.
“What we figured out is that in the long term, this will not be sustainable to keep raising big ticket sizes for loan book growth. We then thought that the most sustainable strategy is the P2P model, where we can service the loan demand using individuals or organisations.”
All loans on the platform are insured, but P2P lenders bear the liability for loans issued. However, the fintech also uses artificial intelligence for its credit scoring. In addition to loans, Lupiya also provides payment solutions and plans to roll out debit cards soon in partnership with Network International.
Ahead of the finals of the GITEX Global Supernova competition, where it hopes for a repeat of its success at GITEX Africa, Muchu is optimistic about the startup’s chances.
