Africa Signs $170 Million Fintech Deal
Branch International, a mobile lending app, raised $170 million which is considered as one of the largest Series C funding rounds ever raised by an Africa-focused startup.
Foundation Capital and Visa led the round and it was participated by B Capital, Andreessen Horowitz, Formation 8, and Trinity Ventures. Crunchbase said that the funding is comprised of $100 million in debt financing and $70 million in equity.
Branch international services more than 3 million users in Kenya, Nigeria, and Tanzania. It also has operations in India and Mexico. The company uses smartphone data that includes GPS, call logs, contact lists, and texts like bank balance messages and bill payment receipts to determine the credit capability of the users. The company provides loans ranging from $2 to $700 for up to 68 weeks with interest rates of up to 21 percent in Nigeria and Tanzania and up to 14 percent in Kenya.
The model used by the company appeals to borrowers in emerging markets since the access to credit through traditional banking systems remains problematic in these markets. In the World Bank's Doing Business report for 2019, getting credit is ranked as the second-biggest problem when it comes to doing business in sub-Saharan Africa out of 10 parameters.
Branch International recently announced that they will partner with Visa in offering preferential loan terms to merchants in its African markets that accept Visa on mobile phones. Branch International's borrowers will be permitted to withdraw their approved funds from local ATMs using virtual credentials through the Visa partnership despite having no bank accounts or debit cards.
The partnership of the two companies is crucial since it is the latest in a streak that has seen global payments and finance giants that backs Africa-focused fintech startups.
Stripe and Visa invested $8 million Series A round in a Nigerian payments company, Paystack, in August 2018. Mastercard participated two months later in a $20 million Series A extension round in Flutterwave, another Nigerian startup. Joe Sanders, the former CEO of Visa and the current chairman of Green Visor Capital joined Flutterwave's board of directors as part of the round. Recently, PayPal invested in Tala which is an online lender that operates in Kenya and Tanzania.
The latest funding round of Branch builds the reputation of fintech as the sector in Africa's most coveted by investors. In 2017, Fintech owned nearly a third of all African venture funding and it was known as the most funded sector in the whole continent in 2018.