Payhippo, a Nigerian financing firm that helps small businesses get loans, revealed that it has raised $3 million in seed funding.
Angel investors included Ham Serunjogi and Maijid Moujaled, co-founders of African cross-border payments company Chipper Cash; Olugbenga Agboola of San Francisco-based payments firm Flutterwave; Bolaji Balogun, CEO of investment banking firm Chapel Hill Denham; and Hakeem Belo-Osagie, founder of Metis Capital Partners.
Payhippo was formed by three co-founders, Zach Bijesse(CEO), Chioma Okotcha, (COO), and Uche Nnadi, (CTO), in August of 2019. The team had the idea to establish a unique loan product for small businesses in Africa after working in fintech and lending firms in Nigeria.
Payhippo provides small businesses with loans in less than three hours; with immediate funding, to enable SMEs business owners to make the necessary investments for growth, a record that is unmatched by traditional banking institutions in the country, which generally imposes strict requirements on borrowers, such as regular account activity and maintaining minimum operating levels. A bank loan application also necessitates a trip to a physical branch and the completion of significant paperwork.
“We worked very hard to keep it under three hours and to ensure that businesses get the money they need on time.” “Ours is also a solution that works for SMEs in terms of a flexible repayment plan,” said Chioma Okotcha, CEO.
Small and medium-sized businesses (SMEs) are the backbone of Nigeria’s economy, accounting for 96% of all businesses and 84% of all jobs. However, according to an Ilorin Journal of Human Resource Management study on bank loans and SMEs in Nigeria, a lack of access to capital continues to hinder their growth and limit their contribution to the country’s GDP.
Since its inception, Payhippo has been dedicated to bridging this finance gap. Okotcha said, “I helped operate my family’s business in Nigeria, and I know how difficult financing can be for SMEs in Nigeria.” “That is why I chose to work in the field of microfinance policy.” However, I noticed that there was still a significant demand for SMEs in Nigeria and across the continent.”
The company employs its own credit score system to calculate the value of loans to be given out, which is based on various SME data and uses Mobile phones to disburse the loans. Payhippo’s average loan is around 123,138 Naira ($1,300), with the smallest loan being around 82,084 naira ($200).
Payhippo says it intends to expand its customer base in Nigeria first before moving to other countries, emphasizing the speed with which loan applications are processed. The company claims to have given out 5000 loans to small businesses in Nigeria so far, with over 26 million naira ($64,000) in revenue from over 369 million naira disbursed in September 2021, resulting in a 25% monthly growth rate and a 97% loan repayment rate.
To expand its operations, the company plans to tap into the financial needs of Nigeria’s almost 40 million SMEs. Okotcha, also, stated that “With the funding, we will be able to hire more engineers and data scientists.” As we continue to address the persisting finance gap for small businesses in Nigeria, we intend to improve our technology and expand our lending services. Our mission at Payhippo is to give sufficient and readily available money to millions of small businesses so that they may manage and expand their operations.
This is not the first time Payhippos is getting pre-seed funding earlier this year. On July 2, 2021, Pan-Africa VCs, Ventures Platform, Future Africa, and Launch Africa announced that the firm had received a $1 million pre-seed investment. Sherpa Ventures, an Africa-focused venture capital firm; Hustle Fund; and Mercy Corps Venture were among the other investors.
“As a fintech organization, the tech component of what we do is very important,” Okotcha said in a statement. “It’s truly what drives how we can access that SME’s credit readiness and how much to lend them.” “We can provide a loan that is within a safe range because the technology does all of this computation in the backend, figures out the underwriting, and assesses who the consumer is,” she adds. “We know that 1% of the Nigerian market represents roughly 40,000 businesses, and we want to be able to disburse 40,000 loans in a single day,” she said.
Payhippo is one of the numerous digital lenders in Nigeria that provide SMEs with short-term loans. Carbon and FairMoney are two others. FairMoney disbursed a total loan volume of $93 million last year, up 128 percentage points from the previous year. Carbon also revealed in an earlier interview that it had 659,000 customers and disbursed $63 million in loans last year, an increase of 9.1 percentage points from the previous year.