FSD Africa Investments (FSDAi), the investment arm of FSD Africa, has made a £3 million ($3.9m) investment in Kenyan fintech firm IMFact.
“IMFact is extremely pleased to have passed the extensive scrutiny of FSDAi’s due diligence process which has paved the way for them to become a cornerstone investor in IMFact following the successful financial close of our third-round capital raise. This investment paves the way for further capital investors, including debt, which will support further deployment of capital to our fast-growing list of clients.” Peter Fiala, Chief Investment Officer, IMFact said.
Why The Investors Invested
“We are pleased to be working with IMFact to support the rapid financing of MSMEs in Kenya at a time when many are stuggling to get access to working capital from traditional lending institutions. We particularly look forward to seeing the impact the investment has on Kenya’s medical and pharmaceutical sector and hope to encourage further scaling of fintech solutions to solve the funding gap among smaller businesses,” Anne-Marie Chidzero, Chief Investment Officer, FSD Africa Investments, said.
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The funding from FSDAi, which is IMFact’s first outside equity investment, comes at a critical time, as Covid-19 has put unfair pressure on MSMEs in a variety of industries, most notably healthcare.
According to current plans, ImFact is expected to give £475 million in capital to roughly 570 businesses over the next five years, supporting around 5,600 jobs.
A Look At What IMFact Does
IMFact was founded in 2019 by Cardano Development (CD), an Amsterdam-based incubator and fund manager, with funding from KfW on behalf of the German Ministry of Economic Cooperation & Development (BMZ). The Rockefeller Foundation and Convergence provided early funding. CD established IMFact Kenya with finance from Total Impact Capital Advisors, and it was the first regional center to go live (TIC).
“We are delighted to welcome FSDAi into IMFact in support of our early growth in Kenya and expansion to other African markets. We are passionate about financial services innovation, and believe that IMFact will prove to be a step-change in broad access for Africa’s MSMEs to working capital. With its innovative approach in using the pooling of debtors to mitigate risk,” Joost Zuidberg, Chief Executive Officer, Cardano Development said.
IMFact is a non-deposit-taking financial institution that uses supply chain finance to provide operating capital to SMEs. As a “pooled receivables” factoring company, IMFact buys big invoices from SMEs for a mix of upfront cash and delayed payments. This allows sellers to invest in new merchandise, pay suppliers, and expand their business without having to follow up or wait for bills to be received.
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IMFact’s “pooled receivables” strategy differs from the traditional invoice discounting practice, in which the finance business cherry-picks the best receivables or invoices, preventing the balance of the receivables pool from being used as collateral. Because it does not require an upfront deposit or guarantees, it also enables faster access to operating capital than invoice discounting, which is typically supplied by banks.
Family-owned businesses, such as those that provide medical equipment and medications to public and private organizations, are among the MSMEs projected to profit from the startup’s funding. IMFact, on the other hand, will work with supply chain companies in various industries.
ABC Pharmacy Ltd, which supplies pharmaceutical items to pharmacies, hospitals, and clinics around the country but has been experiencing difficulties due to a lack of working cash, was one of the first companies to collaborate with IMFact.
ABC Pharmacy is transitioning its business model by giving credit terms to clients thanks to IMFact’s funding. The corporation has been able to raise sales and expand its business as a result of the increased funds available. “The financing from IMFact will be a game changer for our future commercial operations,” said Dr. John Muturi, CEO of ABC Pharmacy.
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The ultimate goal of FSDAi’s investment is to promote the growth of technology-enabled, “pooled receivables” financing throughout Africa. According to our findings, Africa lags behind global averages in terms of this type of funding, accounting for less than 1% of global volumes. Only South Africa has a well-developed factoring business on the continent, with Kenya having a penetration rate of less than 2%.
IMFact Kenyan IMFact Kenyan
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