Numida, a Kampala, Uganda-based fintech startup has announced the close of its $2.3 million seed round, led by Pan-African payments company MFS Africa. Also participating are DRK Foundation, Equilibria Capital, Segal Family Foundation and a host of other angel investors.
“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,” said Mina Shalid, Numida’s co-founder. “That was the problem we set out to solve — to create the mechanisms to get that cashflow data and present it in a form that can be used and incorporated into the underwriting processes.”
Here Is What You Need To Know
- With this new financing, Numida plans to expand aggressively in Uganda and pilot in a new market, preferably in West Africa (Ghana).
- Numida also plans to introduce additional financial services such as payments, micro-insurance and deposits to its customers.
Why The Investors Invested
Investment by MFS Africa in Numida is rather strategic. MFS Africa is one of the main players in the African mobile money sector. Its CEO, Dare Okoudjou, recently said the company is actively considering acquisitions and investments to strengthen his network in East and West Africa. It also seeks to strengthen its presence in Cameroon, Gabon and Chad in central Africa and Rwanda, Uganda and Kenya in the east. Investment in Numida is the first confirmation of his statement.
“That’s an opportunity we see in the future. We were concerned about scaling across the continent and who would be the best partner for this. We thought MFS has a lot of expertise and footprint on the continent that will allow us to scale moving forward,” Dare Okoudjou said, about investment in Numida.
For its part, the San Francisco-based Draper Richards Kaplan Foundation is a global venture philanthropy firm supporting early stage, high impact social enterprises. The organisation focuses on early stage funding as well as provides rigorous support to entrepreneurs tackling some of society’s most complex problems. It provides $300,000 of unrestricted capital over three years. It also likes to join the board of directors of startups it invests in.
Based in the USA, Segal Foundation is a multi-stage impact investor focused on East Africa. The investor most recently was part of Ugandan mobility startup Tugende’s $6.3m fundraise in 2020.
The Bermudu and Switzerland-based Equilibria Capital is an asset management firm that manages investment funds.
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A Look At What The Startup Does
Numida was founded in 2017 by Mina Shahid, Catherine Denis, and Ben Best, who saw an opportunity to create one of East Africa’s first digital fintechs focused on semi-formal micro and small businesses. Typically, these companies obtain loans from family, loan sharks, and unlicensed money lenders who have bad credit.
However, when the company was established, the owners had no intention of providing credit to companies. A bookkeeping tool that allowed conventional microfinance institutions (MFIs) to provide unsecured credit to semi-formal businesses was the focus of an initial pilot in 2016.
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The founders anticipated that these microfinance organisations will continue to service these companies with data collected from months of bookkeeping. But they had no idea what would happen after nine months. Even though the MFIs seemed to love the data that Numida could provide, they were reluctant to change their underwriting habits, according to Shahid. As a result, they turned down all Numida customers who applied for loans across the site due to a shortage of collateral.
“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,” he said.
After multiple revisions, the firm went live in October 2019, with the CEO claiming that lending levels had increased by 6x. To date, it has disbursed about $250,000 a month of unsecured credit to 3,000 micro and small enterprises in Uganda, totaling more than $2 million. The CEO explained that this is due to outstanding collections, repayment rates, and customer retention.
Charles Rapulu Udoh
Charles Rapulu Udoh is a Lagos-based lawyer who has advised startups across Africa on issues such as startup funding (Venture Capital, Debt financing, private equity, angel investing etc), taxation, strategies, etc. He also has special focus on the protection of business or brands’ intellectual property rights ( such as trademark, patent or design) across Africa and other foreign jurisdictions.
He is well versed on issues of ESG (sustainability), media and entertainment law, corporate finance and governance.
He is also an award-winning writer
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