Access to finance remains a key constraint to small business growth, p data showing a financial shortfall of $330 billion for small businesses, which make up 90% of businesses in Africa.
That’s the gap Kenyan embedded finance fintech Pezesha is looking to bridge as it expands into Nigeria, Rwanda and Francophone Africa following a US$11 million pre-Series A equity-debt round led by Women’s World Banking Capital Partners II with participation of Verdant Frontiers Fintech Fund , cFund and blockchain builder Cardano Input Output Global (IOG). The round also included $5 million in debt from Talanton and Verdant Capital Specialist Funds.
The fintech’s new growth strategy follows its plan to leverage its embedded finance offerings beyond current markets, including Uganda and Ghana, to address the funding gap affecting millions of micro, small and medium enterprises (MSMEs) in those markets.
Founded in 2017 by Hilda MoraaPezesha has built a scalable digital lending infrastructure that enables both traditional and non-traditional financial institutions to offer working capital to MSMEs.
“The opportunity and impact in solving working capital problems for SMEs is huge. [We are] addressing the root cause, which is information asymmetry issues, to ensure quality and responsible lending. Pezesha solves this through our robust API-driven credit scoring technology,” Moraa, also CEO, told TechCrunch.
Fintech works with partner companies such as Twiga and MarketForce, who integrate their credit score APIs into their platforms to enable their customers to receive real-time loan offers.
Pezesha said it currently works with over 20 partner companies that have enabled it to lend to over 100,000 businesses to date. It expects that number to grow before the end of the year as an additional 10 companies integrate with its infrastructure. Fintech is able to provide loans of up to $10,000 at single digit interest rates and a repayment period of one year.
Pezesha plans to create a $100 million funding opportunity each year for businesses by leveraging local and international banking institutions, high net worth individuals and decentralized funding.
“We’re building for the future, and that means leveraging new innovations for additional liquidity that allows us to offer affordable loans to SMEs,” said Moraa, a two-time founder who launched Pezesha after successfully going out Weza Tele in 2015
Charles Hoskinson, the co-founder of IOG and Cardano, while commenting on their investment in Pezesha, said in a statement that “Facilitating the movement of capital to emerging markets to support economic growth and job creation is the core promise of blockchain and cryptocurrencies. Our vision is focused on using technology to make it easier for people around the world to borrow and lend to each other in a regulated way. This investment in Pezesha is an important milestone and we are excited to be a part of their growth story.”
IOG’s investment in Pezesha follows earlier message that the two companies have partnered to build a peer-to-peer financial operating system for Africa.
Moraa said working with strategic partners like Cardano will open up the debt liquidity market and offer affordable capital critical to the growth of all sectors of the economy.
Fintech plans to open up more credit opportunities for female entrepreneurs who continue to be blocked by the formal banking sector.
“Pezesha is dedicated to solving the working capital problem in Africa through its robust credit infrastructure and this investment will allow them to expand the range of financial products offered especially to women-owned MSMEs,” said Christina “CJ” Juhas, Chief investment director of Women’s Global Banking Asset Management.
Pezesha did not disclose how much it has raised in the past, but Moraa noted that 20% of its initial investment before starting in 2017 came from local angels. The fintech, which raised seven figures last year, counts Seedstarts, GreenHouse Capital and Consonance Investment Managers among its several investors.
“We have the right business model, we are profitable and we continue to look for investors who are aligned with our goals and values,” Moraa said.