Kenyan fintech Zanifu is set to upgrade its platform and increase the number of micro, small and medium-sized enterprises (MSMEs) it grants equity financing to after securing $1 million in seed funding .
Saviu Ventures, which invested in the startup’s pre-seed round in early 2020, Launch Africa Ventures, Sayani Investments and a number of angel investors from Kenya and Nigeria participated in the round. This latest round brings the total funding the startup has received so far to $1.2 million.
Zanifu provides short-term equity financing of up to $2,000 to MSMEs in Kenya and envisions 15,000 additional FMCG retailers over the next year.
“We serve FMCG retailers, especially those too small to access traditional bank financing for their businesses. The only option these MSMEs had was digital consumer loans, which are not always suitable for them. We are filling a gap critical in equity financing, which helps small businesses increase revenue by more than 40%,” said Steve Biko, Co-Founder and COO of Zanifu.
“The FMCG segment has the highest working capital needs among MSMEs, and the speed of the goods they sell allows us to securely secure unsecured trade credits for them.”
Biko and Sebastian Mithika launched the funding business a year after founding the startup in 2017. The startup said it has to date issued 85,000 working capital loans worth more than $13 million. dollars to 7,000 businesses in Kenya.
Mithika said Zanifu is playing its part in bridging the $20 billion MSME financing gap (as estimated by the World Bank) in the country, which is experienced by 5 million small businesses, most of which are informal.
Informal businesses in Kenya are an integral part of the economy, contributing 33.8% of the country’s GDP and providing 83.4% of jobs outside of small-scale agriculture. However, access to finance remains the main obstacle to the growth of these micro and small enterprises. Thus, over the past few years, fintech companies like Zanifu have introduced products tailored to the financing needs of MSMEs.
Zanifu is working with a number of manufacturers and distributors to extend credit to these small businesses, with retailers already sourcing products from the startup’s partners eligible for funding. Zanifu has created platforms for manufacturers, distributors, and retailers that guarantee seamless ordering, payment, tracking, and fulfillment.
Retailers borrow through Zanifu’s lending app, where they upload information including historical purchase data. Retailers are then assigned a credit limit, after its algorithm scores them, within six hours of signing up. Retailers have up to a month to repay the loans, which carry an interest rate of 3.5-5%.
Zanifu, present throughout Kenya, is now eyeing Ghana and Uganda. A regional presence will intensify competition for companies like Numida in Uganda and Payhippo in Nigeria, with some of the fintechs providing unsecured finance to small businesses.
Numida, founded in 2017, provides unsecured credit of up to $3,500 in less than two hours while Payhippo, in a previous interview, said it disburses average loans of $1,300 with the minimum being $1,000. around $200. As alternative financing providers, these digital lenders bridge the financing gap for small businesses, but at a higher interest rate than formal banking institutions.