Digital lending platforms have revolutionized access to credit for individuals and microenterprises in the Middle East and Africa, offering an alternative to traditional banking institutions. These platforms have become a lifeline for the underbanked population and are projected to drive the digital lending platform market in the region to a value of $2 billion in the next five years, marking a significant four-fold growth since 2021.
One fintech company, Fido, based in Ghana, aims to capitalize on this burgeoning market opportunity by expanding into East and Southern Africa. To support its expansion plans, Fido has secured $30 million in Series B debt-equity funding, including a $20 million equity injection from global impact investment manager BlueOrchard and Dutch entrepreneurial development bank FMO.
Founded in 2015 by Nadav Topolski, Tomer Edry, and Nir Zepkowitz, Fido initially focused on providing loans through mobile phones. However, over the years, the company has diversified its product offerings to include savings, bill payments, and smartphone financing, thereby expanding its revenue streams.
Fido is part of a growing number of African digital lending companies, such as Branch and Tala, that leverage mobile technology and alternative data sources, like mobile money transaction histories, to offer instant micro-loans to individuals and small businesses who struggle to access credit from traditional banking institutions.
Unlike banks, which often require collateral and involve lengthy processes, micro-lenders like Fido provide a more accessible but expensive source of capital for small businesses. Fido CEO Alon Eitan emphasizes the importance of supporting small businesses, which are the driving force behind economies, particularly in sub-Saharan Africa. He states, “We take them from zero financial footprint to the point where they’ve built a whole financial backbone within an ecosystem where they can get credit, insurance, make savings, buy mobile phones and do their business.”
Fido differentiates itself by offering every loan product with embedded insurance. The company plans to introduce additional insurance covers targeting its business customers, including climate insurance to protect borrowers in the agriculture sector from extreme weather events and tradesman insurance.
The loan amounts offered by Fido range from $20 to $500 for individuals, with higher amounts available for businesses based on their needs, nature of the enterprise, and credit score. The repayment period is six months, with interest rates ranging from 7% to 12%. Fido boasts a default rate below 4%, which Eitan attributes to the company’s credit score system and critical AI models used throughout the loan life cycle, including customer acquisition, fraud detection, and collection treatment.
Since its inception, Fido has served over a million customers, with 40% of them being small businesses. The company has disbursed over $500 million in loans across Ghana, where it has countrywide coverage, and Uganda, where it has served 50,000 customers since its launch in December of the previous year.
Looking ahead, Fido aims to surpass a billion in total disbursement by early next year and utilize the new funding to further expand its reach and impact more customers. Notably, the company has been profitable for the past four years, underscoring its financial stability and potential for sustained growth in the digital lending market in Africa.