Kenyan fintech Zanifu nabs $1M to bridge MSME financing gap, eyes Ghana, Uganda expansion

Kenyan fintech Zanifu is set to upgrade its platform and grow the number of micro, small and medium enterprises (MSMEs) it extends stock financing to after securing $1 million in seed funding.

Saviu Ventures, which invested in the startup’s pre-seed round 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 so far received by the startup to $1.2 million.

Zanifu provides short-term stock financing of up to $2,000 to MSMEs in Kenya and is eyeing an additional 15,000 FMCG retailers in the next one year.

“We serve FMCG retailers, especially the ones that are too small to access traditional bank finance for their businesses. The only option these MSMEs have has been digital consumer loans, which are not always suitable for them. We are filling a critical gap in providing stock financing, which enables small businesses to grow their turnovers by more than 40%,” said Zanifu co-founder and chief operating officer, Steve Biko.

“The FMCG segment has the highest working capital needs within MSMEs, and the velocity of the goods they sell allows us to safely underwrite unsecured business credit to them.”

Zanifu co-founders, from left to right, Steve Biko and Sebastian Mithika. Image Credits: Zanifu.

Biko and Sebastian Mithika launched the financing business a year after founding the startup in 2017. The startup said it has to date extended 85,000 working capital loans worth over $13 million to 7,000 businesses in Kenya.

Mithika said that Zanifu is playing its role in bridging the $20 billion (as estimated by the World Bank) MSME financing gap in the country experienced by 5 million small businesses, most of which are informal.

The informal businesses in Kenya are an integral part of the economy contributing 33.8% of the country’s GDP and providing 83.4% of employment outside of small-scale agriculture. However, access to financing remains the main impediment to growth for these micro and small businesses. And thus, over the last few years fintech companies like Zanifu have introduced products that are tailored to the financing needs of the MSMEs.

Zanifu works with a number of manufacturers and distributors to extend the credit to these small businesses with retailers already sourcing products from the startup’s partners qualifying for the financing. Zanifu has created platforms for manufactures, distributors and retailers that ensure seamless ordering, payment, tracking and fulfillment.

Retailers borrow through Zanifu’s loan app, where they upload information that includes historical purchase data. The retailers are then assigned a credit limit, after its algorithm scores them, within six hours after signing up. Retailers have up to a month to pay back the loans, which attract an interest rate of 3.5 to 5%.

Zanifu, which has a presence throughout Kenya, is now eyeing Ghana and Uganda. A regional presence will step-up competition for the likes of Uganda’s Numida and Nigeria’s Payhippo, some of the fintechs providing unsecured financing to small businesses.

Numida, founded in 2017, extends unsecured credit of up to $3,500 in less than two hours while Payhippo, in a past interview, said it disburses average loans of $1,300, with the minimum being about $200. As alternative finance providers, these digital lenders are closing the financing gap for small businesses, but at a higher interest rate when compared to formal banking institutions.