Embedded finance solutions in less developed markers are becoming more prominent as platforms look to provide various financial solutions to the unbanked and underserved. Banking infrastructure providers are mainly responsible for the proliferation of such solutions. They allow businesses such as mobile operators, e-commerce platforms, and logistics companies to embed and enable banking products for their customers.
Credable, an upstart in this category that provides its clients with the technology stack, scoring capabilities, and banking partners, has raised a $2.5 million seed round. It follows the pre-seed round of the embedded finance platform secured in early 2021 and led by The Continent Venture Partners (TCVP).
Last May, Credable launched officially with two products: a 30-day term loan product in partnership with Vodacom M-Pesa in Tanzania and a short-term lending product for Diamond Trust Bank in Kenya. Since then, the fintech has enabled over six products for various businesses, from banks and mobile network operators to e-commerce platforms and fintech players across three markets: Tanzania, Kenya and Uganda. So far, over 1.2 million people have opened accounts on its platform and more than 200,000 customers (including consumers and SMEs) have used its banking products. These include savings products, term loans, overdrafts, asset financing and other credit solutions. Credable’s platform has helped disburse $5 million worth of loans disbursed and seen over $3 million of deposits into its savings products, per a statement shared by the startup.
In an interview with TechCrunch, Nadeem Juma, the startup’s chief executive, said the embedded finance platform, which wants to become the “Unit for emerging markets,” is looking to expand its offerings to large markets where the regulatory environment is conducive and businesses with profitable channels across MENAP and West Africa: Pakistan and Nigeria are top on that list. With this new financing, Credable plans to launch four more products this year and partner with businesses in these countries.
“The problem we’re trying to solve is that a huge population of underbanked customers need banking services to improve their livelihoods. They are in different channels that they use every day, like telco-led mobile money, e-commerce platforms, and gig economy apps,” said the CEO who founded the startup with Jad Abbas and Michael Tarimo. “Rather than try to create a new channel to bank these customers, we aim to enable these channels through a B2B2C offering that provides the customers with the banking services they need in the channels they’re already in.”
Fintechs offering banking-as-a-service in the U.S. and Europe, such as Unit, Rapyd and Treasury Prime, have achieved significant scale due to the developed banking systems they enjoy in their markets. Their counterparts, including more prominent players such as Flutterwave, JUMO and Migo and smaller upstarts like Maplerad, Bloc, OnePipe and Anchor, want to replicate this growth in less advanced banking systems across Africa and other emerging markets.
“If you think of a market, like the U.S., you have banks and businesses that have already done this before, and you’ve had businesses that are very familiar with the model. So it’s a seamless journey to get it up and running,” explained CFO Abbas, who, before co-founding Credable, was a director at private equity firm Actis. “But in our markets, we’re not there yet because we have a large underbanked population to start with. And that’s what we’re doing, building that capability to get there, which today involves a lot of different things that Credable takes the lead on when launching new digital banking products.”
According to the executives, these capabilities differentiate the Dubai-based Credable from other platforms in what is developing into a crowded space. In addition to the technology stack and alternative credit scoring capabilities, Juma said the startup “handholds” its business customers through product design, development, and management and works with them to ensure the product is relevant to their end consumers. Credable also provides an end-to-end solution without exposure to credit risk by partnering with balance sheet providers (usually tier-two financial institutions that struggle to access new customers because they lack relationships with tech-enabled businesses.
The two-year-old fintech employs a revenue-sharing model with all its partners to “keep them invested and create some level playing field.” Credable also hopes to address one financial malpractice with this model: predatory microlending, which typically involves imposing unfair and deceptive loan terms on end consumers. Bad actors, who make incremental revenue via this tactic, take advantage of the lack of credit history or little to no access to credit across emerging markets. The fintech upstart believes its revenue-sharing model, instead of the usual cost-per-service model, can help drive down rates as much as possible and create access to affordable capital for consumers and businesses.
Pan-African early-stage VC firm Ventures Platform led the round, which welcomed participation from Launch Africa, MAGIC Fund, ACASIA Ventures, AAIC Investment, Adaverse/Emurgo Africa and other strategic angel investors. Ventures Platform’s general partner Dotun Olowoporoku said the firm believes that Credable’s platform, which allows businesses to provide financial services to previously excluded market segments, will create a flywheel that powers economic growth in emerging markets.
“As we’ve seen the emergence of fintechs and mobile money on the continent over the last ten years, people have been trying to solve the financial inclusion question, how do you enable these customers that are not in the formal sector, with credit or savings products,” said Juma, who, for most of his professional experience, worked in fintech and businesses offering enterprise solutions to the telecommunications and banking sectors. “We think no one’s really cracked that because you have to provide an end-to-end solution and adopt a partnership approach with banks and businesses. There’s a massive opportunity to create impact at scale through a model which helps solve the problem at scale, rather than creating new channels and acquiring customers individually.”
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Photo and Author: Tage Kene-Okafor