Bfree, a Nigerian credit management fintech, has raised $1.7 million in a pre-Series A investment to expand globally and take advantage of the prospects in emerging economies, where digital lending apps have recently sprung up in droves.
4Di Capital, Octerra Capital, VestedWorld, Voltron Capital, Logos Ventures, and several other angel investors joined in the new round, bringing the total capital received by the Lagos-based business to $2.5 million after raising $800,000 in a seed round last May.
Bfree is using the funds to launch a big recruiting drive in Ghana, India, Uganda, Brazil, Colombia, Mexico, Russia, Poland, Pakistan, and Indonesia, among the 16 new markets where it will be operating. This is as the company expands beyond Nigeria, where it began operations in August 2020 before moving to Kenya in July of last year.
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“We are going into markets with large populations, credit deepening and an underdeveloped regulatory environment, where a behavioral collection approach is likely to work,” Bfree co-founder and CEO, Julian Flosbach said.
Why The Investors Invested
The startup has achieved considerable traction since its last funding. According to the company, it currently serves over 800,000 customers, the majority of whom are in Nigeria. It also claims that it has followed up with 1.1 million defaulters so far. By the end of next month, Flosbach expects the startup to have processed 1.4 million profiles.
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Based in South Africa, 4Di Capital is an independent seed-and early-stage technology venture capital firm.
Based in Lagos Nigeria, Octerra Capital is a venture capital firm focused on impact investments.
Chicago-based VestedWorld is a venture capital fund focused on investing in companies in Ghana, Kenya, and Nigeria.
Led by Olumide Soyombo and Abe Choi, Voltron Capital is a Nigeria-based venture capital firm.
Logos Ventures was both a private equity and venture capital firm based in Jerusalem, Israel.
A Look At What The Startup Does
Following their first-hand experience working for digital lenders in Nigeria, Chukwudi Enyi (COO), Moses Nmor (CPO), and Flosbach (CEO) formed Bfree in August 2020 with the goal of developing better, ethical, and tech-inspired debt-collection tools and methods.
“We saw that there was like a little bit of a breach in the value proposition of lenders — they are good at giving out loans, but the aftersales services of the credit market didn’t work as collections processes were inefficient and not user friendly,” said Flosbach.
According to Flosbach, Bfree uses ethical debt collection standards and collaborates closely with defaulters to develop tailored settlement options, with the ultimate goal of enhancing repayment rates and customer satisfaction.
Ethical debt collection practices protect customers’ personal information during the collection process, provide for flexible repayment choices, and avoid excessive penalties such as late fees and debt-shaming (as is the practice with many digital lenders at the moment).
It presently collaborates with 30 lenders, including digital lenders, microfinance institutions, and banks. The startup creates defaulter user profiles using data provided by lenders and analyzes their data via an algorithm to forecast their behavior and offer the best collecting approach.
Bfree either refers customers to a self-service site, where they may set up new payment plans using their phone number, or follow up on their debt balance using automated communication (chatbots, callbots, or IVR technology) or direct calls, depending on their risk profile. The company also holds financial literacy campaigns on a regular basis.
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Bfree has gained the services of prominent industry specialists, including CTO Konrad Pawlus, formerly of SALESmanago, and Yohan Theatre, formerly of investment management giant PIMCO, in preparation for its next stage of expansion. As the chief of data decision-making and financial engineering, Theatre takes over. The two will be part of the team that will lead the startup’s new business as it attempts to disrupt traditional finance by utilizing blockchain technology in secondary debt markets.
“Lenders in the US or in Europe have the opportunity to sell significant chunks of their debt portfolios to third parties. This means they only carry a portion of the risk of the loans they issue. In emerging markets, this is typically not the case. Lenders have to carry the entire credit risk on their own. A key driver for this difference lies in higher transaction costs and contractual uncertainties,” said Theatre.
“The arrival of DeFi (decentralized finance) is a game-changer: transaction costs can be slashed while contractual certainty is increased by smart contracts. These are some of the risk-sharing instruments that we are now actively providing to lenders and borrowers,” he said.
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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