Zanifu, a Kenyan fintech providing inventory financing to micro, small and medium-sized businesses, has raised $11.2 million in debt-equity funding in a pre-Series A round led by Beyond Capital Ventures and Variant Investments. Founders Factory Africa, AAIC Investment, Google Black Founders Fund and existing investor Launch Africa also participated in the round. This brings total debt-equity funding raised by the startup to $12.7 million.

The fintech provides inventory credit to retailers, and the new funding will enable it to expand the solution to distributors too, the startup’s co-founder and CEO Steve Biko told TechCrunch.

Zanifu targets businesses that find it hard to access credit from formal financial institutions for lack of structure, accounting books and assets that can be used as collateral, Biko said. Yet, these businesses require credit to sustain their operations and/or to expand their businesses. Zanifu extends credit to the businesses based on data it collects from them, and their suppliers. The fintech de-risks the line of credit by directly paying their suppliers.

“In our first product, we only lent to retailers to help them expand their business, but we found out that distributors have a similar problem,” said Biko.

Stock financing varies based on the size of the business, but distributors can access up to $10,000, while retailers get goods whose worth ranges from $200-$500. The startup says it has so far given credit to 13,000 micro-businesses, and has already served 500 distributors following the expansion of its customer base.

A 5% – 6% interest is charged monthly, and, so far, a 99.2% repayment rate has been reported, owing to various factors, including Zanifu’s underwriting algorithm which, Biko says, has gotten better over time.

Its customers use an android application to know their credit limit, and make orders. The fintech has integrated multiple payment channels into the app to facilitate swift repayments. It also enables retailers to pay for stock bought from other distributors not included in its database.

“We found out that most of these retailers, especially in this market, have multiple distributors. And we increased their limits and allowed them to pay any of their distributors,” he said, adding that Zanifu is building a platform for distributors to update their stock keeping units.

Following the new funding, the startup plans to scale its operations in Kenya, shelving its previous plan to expand to Ghana and Uganda — some of the markets where small businesses also find it hard to raise capital for their operations and growth. Around Africa, small enterprises are economic drivers, with studies showing that they make up nearly 90% of businesses in the continent, and contribute significantly to job creation. It is estimated that Kenya has a $19 billion financing gap for MSMEs.

Other companies serving the credit needs of these enterprises in Kenya include Pezesha and Standard-Chartered Ventures-backed Solv.

“We have decided to go deep in Kenya. We are focusing on serving more micro-SMEs and also getting more distributors into our fold, and ensuring the capital we are dispersing is actually generating returns for these businesses and helping them grow. So that’s really how we’re looking at it for now. We will go to other markets once we get to profitability,” said Biko, who co-founded Zanifu with Sebastian Mithika.

The fintech, which is licensed by the Central Bank of Kenya, plans to offer other financial services like insurance, and build tools, to (for instance) help businesses manage inventory and do bookkeeping.



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