Uganda’s Numida acquires $2.3 million in funding to increase lending to SME’s

A Ugandan fintech Numida acquires $2.3 million in funding in an announcement made recently. The startup closed a seed round led by Pan-African payments company, MFS Africa with participation from firms like DRK Foundation, Equilibria Capital and Segal Family Foundation alongside angel investors. Numida acquires $2.3 million in funding which will allow small companies to access credit that they cannot obtain via banks and other financial institutions, as they are normally limited by tight demands which are beyond their grasp.

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Numida acquires $2.3 million in funding to expand its infrastructure

The Numida app Credit:

Founded in 2017 by Mina Shahid, Catherine Denis and Ben Best, Numida acquires $2.3 million in funding with the goal of extending credit through a digital platform to small and mediums sized businesses especially the ones in the informal sector. Such businesses are not prioritized enough yet they continue to make significant contributions to the economy.

“One of the major reasons why financial institutions don’t give loans to these businesses is because they don’t have good financial track records and cash flow history,” Shahid said to TechCrunch. “That was the problem we set out to solve — to create the mechanisms to get that cash flow data and present it in a form that can be used and incorporated into the underwriting processes.”

By understanding the challenge these businesses face, the founders of Numida initially set out to solve it through developing a bookkeeping tool that would encourage traditional microfinance institutions to provide unsecured credit to the businesses. However, the founders later realized that this was not a probable solution as institutions continued to reject those who applied for credit even when they were presented with sufficient data.

“So we thought among ourselves that if our mission is to unlock access to resources that these mom and pop shops need in order to grow their businesses, we’re not going to do that by partnering with these traditional MFIs; we had to do that ourselves,” he continued.

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The start-up based in Uganda then moved in a new direction, where they worked directly with small companies in order to provide unsecured capital loans for them as soon as possible. This is particularly good for many companies across the country because they tend to struggle during the take-off phase.

The startup reports exponential growth since its inception. As Numida acquires $2.3 million in funding, it has served 3000 micro and small businesses with unsecured credit of up to $2 million in Uganda while providing $250,000 a month.

One of the challenges the company faces is the lack of relevant data to improve its model since it is one of few fintech startups that is targeting lending to micro and small businesses. “We look at the business fundamentals, the cash flow of the business, and some demographic data about the applicants. We’ve had to build our own data set because there are no readily available cashflow data on semi-formal, micro and small businesses in Africa,” said Shahid.

Numida acquires $2.3 million in funding which will allow it to take advantage of MFS Africa‘s pan-African experience and will use its infrastructure to launch new digital financial products for micro and small businesses.

“MFS Africa is committed to supporting this critical segment, and offering a lending solution is a natural extension of our services, and by partnering with Numida, this can become a reality. Numida has been a long-standing partner of MFS Africa, and we have followed its progress with much excitement,” said Patrick Gutmann, a Managing Director at MFS Africa.

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