On a Mission to Solve the $330B SME Credit Gap in Africa
Guest post by Tony Chen
Partner, Verdant Frontiers
Tony has enjoyed 20+ years creating new businesses, launching five companies with multiple exits. Tony and his family lived in rural Kenya for three years, where he built a portfolio of 15 Kenyan companies.
If you are a small business owner in Africa, one of the biggest problems you face is access to a small business loan. The bank won't lend to you without collateral. If you are "lucky" enough to find a loan shark, your business will be put at risk by unsustainable interest rates and you will be put at risk by aggressive collection techniques.
On a mission to solve this $330B small business credit gap is Hilda Moraa, CEO and Founder of Pezesha. Her team has built an embedded finance solution and credit scoring system for small businesses. Pezesha has now profitably disbursed more than 100,000 loans in Kenya, Uganda, and Ghana with a non-performing loan percentage in the low single digits.
Hilda - Front row, 3rd from the left
With rapid expansion across these three markets and the opening of new markets like Nigeria, Pezesha is realistically projected to disburse 1,000,000 business loans over the next 12 months. Think about the impact as hundreds of thousands of the best small businesses in Africa receive affordable working capital loans to keep their businesses flowing and growing.
I met Hilda back in 2019. Right from our first meeting, I knew that she is exactly the type of "both/and" entrepreneur in which I love partnering.
First of all, she is both purpose-driven and profit-savvy. Put another way, she is what is described in Matthew: "as shrewd as a serpent and innocent as a dove." She has wisely executed the day-to-day tasks of the business, making a lot of tough decisions around partners, investors, and people. And yet, she is fundamentally driven by solving the problem at scale and her desire to serve others.
Secondly, she has a "both/and" that I like to call "perseverance and pivoting." She has the conviction to keep fighting and the humility to learn from the market. Especially for early-stage start-ups, so much rides on knowing when to persevere and when to pivot. I've seen Hilda masterfully pivot Pezesha from a peer-to-peer lending platform into a premier B2B solution. And I've seen her persevere on building a product that is tricky to get right.
Finally, since we invest in fintech, we love teams that respect both the "fin" and the "tech." Sometimes the two worlds can seem to be in conflict, so being great at both is hard. While others took shortcuts, Hilda led the long-but-worthwhile process that enabled Pezesha to be one of the first fintechs ever to be "approved" by the CMA (Kenya's version of the SEC). She took time to build relationships with the regulators and helped them understand the nuanced interplay between the "fin" and the "tech." And she has built an exceptional tech team that consists of software devs, data scientists, cloud experts, architects, and devOps.
I invested in Pezesha in 2019 and then also in 2021. As Verdant Frontiers launches our first fintech fund, we are excited to contribute these investments into the fund. And we are proud that the first check we'll write from the fund later this month is into Pezesha's recently closed Pre-series A round.
Fintech in Africa represents one of the great growth frontiers today, with major VCs (SoftBank, Sequoia, a16z), global companies (Google, Toyota, Tencent) and financial companies (Goldman, Visa, Fidelity) all pouring money in. Africa is now home to at least seven fintech unicorns (companies that are valued at $1B+). More importantly, fintech in Africa represents one of the most impactful kingdom opportunities to build a trustworthy and dare-I-say faith-driven financial backbone for Africa and the world. It's upon this backbone that so many other developments and innovations will be built.
To learn more about Pezesha, the Verdant Frontiers Fintech fund, or how I got into this fun world of African fintechs, email me at tony@verdantfrontiers.com.
