Payhippo, lending startup based in Lagos, Nigeria, has secured $3 million in a seed round, which it expects to use to hire the expertise it needs to improve its technology as it expands its efforts to provide quick finance to more small and medium-sized businesses (SMEs) in the West African country.

Ham Serunjogi and Maijid Moujaled, co-founders of the African cross-border payments company Chipper Cash; Olugbenga Agboola of the San Francisco-based payments firm Flutterwave; Bolaji Balogun, CEO of investment banking firm Chapel Hill Denham; and Hakeem Belo-Osagie, founder of Metis Capital Partners led the round. All of the founders are African.

After obtaining $1 million in pre-seed fundraising earlier this year, this is the most money Payhippo has ever raised.

The startup plans to use the funding to hire more engineers and data scientists.

Why The Investors Invested

The startup has generated considerable traction. Since its inception, the company claims to have granted roughly 5,000 loans totaling $1 million with a 97 percent return record, netting them $64,000 in revenue. It also stated that loan demand is robust, which is supporting the company’s current month-over-month increase of 25%.

In order to expand its operations, the company plans to tap into the financial needs of Nigeria’s almost 40 million SMEs.

“We know that just 1% of the Nigerian market is about 40,000 businesses, and we want to be in a position where we disburse 40,000 loans in a day,” said co-founder Okotcha. 

A Look At What The Startup Does

Chioma Ruky Okotcha, Zach Bijesse, currently the chief executive officer, and Uche Nnadi, the chief technical officer, founded Payhippo in 2019. The startup was part of the Y Combinator summer class of 2021.

Payhippo employs its own credit score system to calculate the value of loans to be given out, which is based on various SME data. Mobile phones are used to disburse the loans. Payhippo’s average loan is around $1,300, with the smallest loan being around $200.

Read also: Ivorian Payments Startup, QuickCash, Acquired By Nigeria’s E-Settlement

Payhippo says it plans to expand its customer base in Nigeria first before expanding to other countries, citing its quick turnaround time for loan applications.

“We had seen that traditional banks and lenders wouldn’t loan small businesses mainly because there were no credit scores, or the collateral requirements were too high. We decided to come into the market and create an instant financing option, where we create a credit score that allows small businesses to get the liquidity they need to buy inventory for business continuity,” Okotcha said. 

“We use data from historical records that borrowers have built with us, but we also check their banking history to see the actual performance of their businesses,” she said.

Read also: South Africa’s API Fintech Stitch Forays Into Nigeria Market.

Payhippo is one of numerous digital lenders in Nigeria that provide SMEs with short-term loans. Carbon and FairMoney are two others. FairMoney disbursed a total loan volume of $93 million last year, up 128 percentage points from the previous year. Carbon has, recently, also revealed that it reached 659,000 customers last year and disbursed $63 million in loans, up 9.1 percentage points from the previous fiscal year.

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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 write