Kenyan fintech startup, Zanifu, which enables micro, small, and medium-sized businesses (MSMEs) in the African FMCG supply chain to get access to working capital, has raised $11.2 million debt-equity funding in a pre-Series A round led by Beyond Capital Ventures and Variant Investments.
Four other investors, namely, Founders Factory Africa, AAIC Investment, Google Black Founders Fund, and existing investor Launch Africa also participated in the round, bringing the total debt-equity funding raised by the startup to $12.7 million. The funding will be used to expand Zanifu’s solutions for distributors and scale its operations in Kenya.
Zanifu, founded by Steve Biko and Sebastian Mithika in 2017, focuses on providing inventory financing to micro, small, and medium-sized enterprises (MSMEs).
One of the key challenges faced by these businesses is securing credit from formal lenders due to a lack of structure, accounting records, and suitable assets for collateral. Zanifu addresses this by offering credit based on the data it collects from the businesses and their suppliers. By paying the suppliers directly, Zanifu reduces the risk associated with the line of credit.
The funding will enable Zanifu to provide additional financial services, such as insurance, and develop tools to assist businesses with inventory management and bookkeeping. The company aims to support distributors with up to $10,000 in stock financing, while retailers can receive goods worth $200 to $500.
Zanifu has already expanded its clientele, serving 500 distributors and providing credit to 13,000 microbusinesses. The fintech’s success is attributed to its underwriting algorithm, which has resulted in a repayment rate of 99.2%. The monthly interest rate for the line of credit ranges from 5% to 6%.
To enhance user experience and convenience, Zanifu has developed an Android application that enables customers to check their credit limit and place orders. The app also incorporates multiple payment options for prompt repayments. Additionally, retailers can use the app to pay for inventory acquired from distributors outside their database.
Following the new funding, the startup plans to scale its operations in Kenya, shelving its previous plan to expand to Ghana, and Uganda – some of the markets where small businesses also find it hard to raise capital for their operations, and growth.
Around Africa, small enterprises are economic drivers with studies showing that they make up nearly 90% of businesses in the continent, and contribute significantly to job creation. It is estimated that Kenya has a $19 billion financing gap for MSMEs.
The startup’s co-founder and CEO Steve Biko, who co-founded Zanifu with Sebastian Mithika,said:
We have decided to go deep in Kenya. We are focusing on serving more micro-SMEs and also getting more distributors into our fold, and ensuring the capital we are dispersing is actually generating returns for these businesses and helping them grow. So that’s really how we’re looking at it for now. We will go to other markets once we get to profitability.
The fintech, which is licensed by the Central Bank of Kenya, plans to offer other financial services like insurance, and build tools, for instance, help businesses to manage inventory, and do bookkeeping.
