A lending and Nigerian startup PayHippo which focuses on crediting small and medium-sized enterprises (SMEs) has secured $3 million in a seed round. However, the company plans to use the latest in sourcing for talents needed to optimize its technology that will enhance the company’s speedy credit to West African SMEs.
As for the funding round, PayHippo is this time braced with a number of angel investors, that include Ham Serunjogi and Maijid Moujaled, the co-founders of the African cross-border payments company Chipper Cash; Bolaji Balogun, the CEO of investment banking firm Chapel Hill Denham; Olugbenga Agboola of the San-Francisco based payments firm Flutterwave; and Hakeem Belo-Osagie, the founder of Metis Capital Partners.
Based on this development, the company’s co-founder and chief operation officer ‘Chioma Okotcha’ made clear that the team is looking to hire more data scientists and engineers.
“We capture our data from the loans we issue, and more talent in the team would allow us to optimize our technology to serve our customers better”, Chioma said.
As a loan company, it claimed it disburses short-term loans in less than three hours, which is understood to be a record time that remains unmatched by traditional banking institutions in Nigeria, owing to the fact that these institutions often require borrowers to meet stringent conditions, which also require that the borrower maintain regular banking activity in addition to minimum operating balances, yet, a visit to physical branches and extensive paperwork are required as well. As a result, Okotcha made it clear that:
“We really focus on keeping this under three hours and making sure that businesses can get the money they need when they need it. Ours is also a product that works for the SMEs in terms of a flexible repayment structure”.
In another dimension, studies have it that SMEs are the force behind Nigeria’s economy accounting for 96% of businesses and 84% of employment in Nigeria. However, a major concern has always been lack of access to credit which continues to hinder the growth of aforementioned categories, which in turn, limit their contribution to the nation’s GDP, per Ilorin Journal of Human Resource Management about bank loans and SMEs. Hence, startup PayHippo is, therefore, poised to bridge this financing gap.
“We had seen that traditional banks and lenders wouldn’t loan small businesses mainly because there were no credit scores, or the collateral requirements were too high. We decided to come into the market and create an instant financing option, where we create a credit score that allows small businesses to get the liquidity they need to buy inventory for business continuity”, Okotcha told a source familiar with the matter. Adding that,
“We use data from historical records that borrowers have built with us, but we also check their banking history to see the actual performance of their businesses”.
Moreover, the subject startup is structured in a way that credits are not just given to borrowers, rather PayHippo applies its own credit scoring formula that uses different SME data in order to determine the value of loans to be issued out, which is disbursed via mobile phones. The company claimed the average loan disbursed is about $1,300, with the minimum loan in the region of $200.
Further on this, PayHippo aims at tapping the credits needed by about 40 million SMEs in Nigeria to grow their businesses.
“We know that just 1% of the Nigerian market is about 40,000 businesses, and we want to be in a position where we disburse 40,000 loans in a day”, the founder said.
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