Numida, Ugandan FinTech Startup Secures $12.3 Million in pre-Series A Round

Small and medium-sized businesses (SMEs) are very important in Africa. An estimated 80% of jobs on the continent are held by the 44 million SMEs.

Despite being crucial to the African economy, many businesses only have a limited amount of access to funding.

Due to a lack of collateralization, traditional credit facilities like banks frequently deny these SMEs access to credit, forcing these companies to turn to loan sharks for the necessary financing. According to estimates from the International Finance Corporation (IFC), the formal micro, small, and medium-sized businesses in developing nations have an annual unmet funding need of $5.2 trillion.

27,000 micro and small enterprises in Uganda have received more than $20 million in unsecured working finance through Numida, which is supported by YC. The firm, which was established in 2017 by Mina Shahid, Catherine Denis, and Ben Best, has raised $12.3 million in an equity and debt investment round to strengthen its position in Uganda and grow into other regions of the continent.

Serena Ventures led the pre-Series A $7.3 million equity round, which also included Breega, 4Di Capital, Launch Africa, Soma Capital, Y Combinator, and current investor MFS Africa. Lendable Asset Management will provide $5 million in debt to complete the deal.

With the use of their in-house credit models and technologically advanced underwriting procedures, Numida can offer unsecured working capital loans to SMEs in semi-formal African economies. Business owners can download the Numida app, apply in a matter of minutes, and receive funds disbursed to their mobile money wallet the following day instead of borrowing money from unofficial lenders or family. Additionally, Numida is the first online lender in East Africa to offer risk-based pricing, and entrepreneurs have access to loans up to USD 4,000.

71% of Ugandans who are connected use a basic phone, while less than half (49%) of the population has access to a mobile phone. In order to convert Ugandan society from a “Peasant to a Modern and Prosperous Country” in 30 years, the country established a strategic plan called Vision 2040 in 2013.

According to CEO and co-founder Mina Shahid, Numida had to spend years honing its user interface and user experience in order to offer a technology-based solution to the Ugandan people. “Developing a mobile app for someone who is tech knowledgeable is very different than developing a mobile app for someone who has never used a computer, which is the majority of our clients.”

The company had test pilots in Ghana before debuting in Uganda, and it had also explored Kenya, but it decided on Uganda due to its population and the size of its market for financially excluded SMEs.

Shahid claims that the Numida business model is fairly straightforward. To generate revenue, the company focuses on its risk-based 30-day loan product for entrepreneurs. On the basis of its own credit scoring model, Numida provides loans to its customers in the range of $100 to $5,000 with interest rates ranging from 10% to 16%. Shahid continued by saying that Numida developed this model using information gathered from the approximately 100,000 loans it has disbursed. The rate of non-performing loans, he continued, is in the low single digits.

Shahid claims that since the company raised $2.3 million in April 2021, the proportion of female customers has climbed from 33% to 50%.

Because Numida intended to promote economic gender inclusiveness in Uganda, Shahid cited this as his proudest professional accomplishment. Shahid claims that the increase in female users was brought about by acquisition programs that specifically targeted women and helped to establish trust with the community of female entrepreneurs.

With this financing, he continued, the company plans to expand geographically, with Egypt, Nigeria, Ghana, Kenya, and Tanzania among the potential new markets. Additionally, Numida hopes to treble the number of firms it currently has registered as users in Uganda to 40,000.

While we’ve spoken to several fintechs in Africa who claim that their end purpose is to give finance to small businesses, Numida is already doing it, said Alison Rapaport Stillman, General Partner at Serena Ventures, who led this investment. We are pleased by the tenacity and dedication of the Numida team and their scientific approach to addressing a very challenging issue – how to provide a $500 loan to a semiformal, cash-only, no-collateral business. We are thrilled to collaborate with them on their aim to develop these companies across the continent.