A Nigerian lending startup just raised $3 million to provide quick loans to SMEs

Nigeria’s lending startup Payhippo has raised $3 million in a seed round to extend credit to small and medium-sized enterprises (SMEs) in West Africa. Unlike traditional banking institutions, Payhippo says it disburses short-term loans in less than three hours. In Nigeria, banks often have stringent loan acquisition policies, including physically visiting a branch.

Since its inception in 2019, the company has disbursed 5,000 loans valued at $1 million and with a repayment rate of 97%, netting them $64,000 in revenue, according to Tech Crunch.

“We really focus on keeping this under three hours, and making sure that businesses can get the money they need when they need it,” said Chioma Okotcha, the co-founder and chief operations officer of Payhippo. “Ours is also a product that works for the SMEs in terms of a flexible repayment structure.”

The $3 million funding represents the largest amount Payhippo has raised to date after receiving $1 million in pre-seed funding earlier this year.

Tech Crunch reports that the round was led by angel investors, including Ham Serunjogi and Maijid Moujaled, the co-founders of the African cross-border payments company Chipper Cash; Olugbenga Agboola of the San-Francisco based payments firm Flutterwave; Bolaji Balogun, the CEO of investment banking firm Chapel Hill Denham; and Hakeem Belo-Osagie, the founder of Metis Capital Partners.

Co-founder Okotcha said her outfit is looking to hire more engineers and data scientists. “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,” she said.

Payhippo’s decision to focus on SMEs stems from the fact that SMEs account for over 90% of businesses and 84% of employment in Nigeria. However, the majority of them lack access to bank credit.

“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,” Okotcha told TechCrunch.

“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.”

“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.”

Payhippo, which was founded by Okotcha, Zach Bijesse, the chief executive officer, and Uche Nnadi, the chief technical officer, plans to meet the credit needs of some 40 million SMEs.

“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,” said Okotcha.