Digital lending platforms have become an easy and fast alternative source of credit for small businesses and individuals who are ignored by traditional banking institutions. These platforms have become a lifeline for millions of underbanked people, and the demand will continue to grow, driving the value of the digital lending platform market in the Middle East and Africa to soar. 2 billion dollars In the next five years, recording a four-fold growth since 2021.
This is the Ghanaian FinTech Market Opportunity Video The company plans to leverage this opportunity to explore new markets in East and Southern Africa, supported by a new $30 million Series B debt and equity financing. The new capital includes a $20 million equity injection from global investment management firm BlueOrchard and leading Dutch development bank FMO.
It was first launched in 2015 by Nadav Topolsky, Tomer Edery and Nir Zipkowitz In addition to offering mobile loans, Fido has over the years introduced other products, including savings, bill payments and smartphone financing, to increase its revenue streams.
The fintech is one of a growing number of companies in the African digital lending space, including VC-backed Branch and Tala, that are leveraging mobile technology and alternative data sources, such as mobile money transaction records, to offer instant microloans to individuals and small businesses that are often unable to access credit from formal banking institutions.
Unlike lending apps, banks often offer loans to active customers, require collateral, and involve lengthy paperwork. This has made microlenders an alternative, but expensive, source of capital for even small businesses that still need additional funding. Alon Eitan“Young people are the engine of economies, especially in sub-Saharan Africa, yet they are given few tools to grow,” he says.
“The majority of the population in sub-Saharan Africa is either unbanked or underserved, and for many customers who come into our ecosystem, this is probably their first interaction with financial services,” says Eitan. “We’re taking them from a zero financial footprint to the point where they’re building a full financial backbone within an ecosystem where they can get credit, insurance, save, buy mobile phones and do business.”
Fido offers every loan product with built-in insurance and plans to include additional coverages targeting its corporate clients. This will include climate insurance to cover borrowers in the agricultural sector against extreme weather events such as drought and flooding, as well as insurance for artisans.
FinTech clients get loans ranging from $20 to $500, while businesses get higher amounts, depending on their needs, the nature of the organization, and their credit score. The loans are repaid within six months and attract interest rates ranging from 7% to 12%. Fido’s default rate is less than 4%, Eitan says, which he attributes to the company’s credit score system.
“We are able to offer the best rates in the industry by combining critical AI models across the loan lifecycle. From our acquisition model, which scores new customers based on mobile and other alternative data, through to AI fraud and collection processing models,” he said.
Fido claims to have served 1 million customers so far, 40% of whom are small businesses, and has provided more than $500 million in loans in Ghana, where it is said to have nationwide coverage, and Uganda, where it has served 50,000 customers since its launch in December last year.
“Our hope is that by early next year, we will have crossed $1 billion in total spend, and the idea is to use the new money to grow further and reach more customers… and have a real impact on them,” he said, adding that the business has been profitable for the past four years.