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.
Investors in the round include Andela and Flutterwave co-founder Iyinoluwa Aboyeji (who invested via his VC firm Future Africa), LendInvest founder Christian Faes and ComplyAdvantage founder Charlie Delingpole.
Other angel investors in the round include Amandine Lobelle, Jai Mahtani, Sudeep Ramnani, Jonathan Doerr, Richard Aseme (RCA Ventures), Klemens Hallmann, among others. They join the likes of Manuel Koser, Alexander Schuetz, Christian Angermayer, Leo Stiegler, investors in the company’s previous round.
Finclusion’s debt financing, which makes up the largest share of the overall round, was provided by local currency funds in Eswatini and South Africa. It follows the $20 million debt facility supplied by emerging markets debt provider Lendable last September.
The fintech plans to use this new funding to grow existing operations in South Africa, Eswatini, Kenya, Namibia, and Tanzania and expand into Mozambique and Uganda.
In a statement, the company said 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.
Per TechCrunch, 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.
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.
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.
Having proven that it can raise institutional debt (over $32 million in the last six months from Lendable and 12 local currency facilities) and build credit histories of thousands of customers, Finclusion needs to increase its efforts on distribution to reach neobank-like numbers.
Digital banking is gradually taking root in Africa as neobanks are springing up to serve the financially underserved and excluded population in the continent. This upsurge has also led to an uptick in institutional investors from across the world. Finclusion’s pre-series A investment round shows that individual investors don’t want to be left behind in the fray too.