Finclusion raises $20 million to build out neobank offering across Africa
The digital banking space in Africa is taking shape as neobanks on the continent grow in numbers like their global counterparts. Venture capital bet from institutional investors in this class of fintechs is massive and in the latest development from Africa, it seems individual investors appetite is increasing likewise.
Finclusion Group, a fintech that uses AI algorithms to provide financial services to African customers via an array of credit-centric products, has raised $20 million in debt and equity pre-Series A financing.
The fintech intends to grow existing operations in South Africa, Eswatini, Kenya, Namibia and Tanzania and expand into Mozambique and Uganda.
According to a statement by the company, the expansion, facilitated by the recent financing, is part of Finclusion’s strategy to “drive financial inclusion within market segments that have traditionally been underserved across the African continent, with a current focus on southern and eastern Africa.”
Since its inception in 2018, Finclusion has built consumer-facing credit products to close the credit gap in countries where it operates.
There’s SmartAdvance, where Finclusion, via employer partnerships, offers solutions for employees’ financial well-being. Its wage streaming product provides payroll loans and future wage loans where employees can take loans off the back of their salary, deduct from their payroll, and lend through employer relationships.
The Africa-focused fintech has disbursed over $300 million worth of loans to more than 240,000 customers up until this point. Following the Lendable debt capital raise in September, the group has recorded an uptick in monthly disbursements, increasing 140% over the last 18 months. Finclusion’s loan book also grew 30% from December 2020 to December 2021.
Despite this growth, Finclusion only has 28,000 customers with active loans outstanding, almost 10% of the total customers the company has served since 2018.
“This is one of the reasons we are going into a neobank strategy to maintain old and new users rather than effectively churning them out,” said chief executive Timothy Nuy to TechCrunch on why the credit provider is transforming into a neobank now.
Nuy affirmed that it had always been Finclusion’s intention to become a neobank. Leading with a credit-led approach— which several digital banks across Africa such as Carbon, FairMoney have adopted—was a great customer acquisition tool for the company, he said.
African customers are in dire need of credit. But from a long term perspective of a company offering just loans, it can be hard to compete with other lenders that provide deposits and investments, financial services that any lender, backed with years of customers’ credit history, can efficiently cross-sell.
Finclusion, taking a cue from other credit-first neobanks, has started diversifying its offerings. Nuy said the company has an insurance product and plans to offer savings products, cards and buy now, pay later offerings via a merchant network in a bid to form a pan-African neobank.