Fairmoney raises $42 million in a Series B round and obtains a banking license to bolster its ambitions as a challenger bank
Fairmoney raises $42 million in a Series B round
Fairmoney, a Nigerian microlending startup, has raised $42 million in Series B funding led by Tiger Global, a US hedge fund and investment firm. Existing investors included DST partners, Flourish Ventures, Newfund, and Speedinvest.
With operations in Nigeria and India, the startup intends to diversify its current offerings and expand in order to become its users' preferred financial destination.
Fairmoney provides Nigerians with mobile-based collateral-free lending services. The company was founded in 2017 by Laurin Hainy (CEO), Matthieu Gendreau, Fairmoney (CTO), and Nicolas Berthozat (Product co-founder).
In 2020, the company quietly expanded to India, establishing a strong foothold that enabled it to disburse half a million loans in just six months.
The startup claimed in the same year that it had 1.3 million users who had submitted over 6.5 million loan applications. Additionally, it reported disbursing $93 million in loans.
Six months later, Hainy reports that Fairmoney's Nigerian user base has grown to 3.5 million, and the company has disbursed up to $80 million in loans in the country. Just a couple million short of the total disbursement for 2020. Additionally, it is reported to have 1.3 million unique account holders.
The company anticipates disbursing $300 million in loans in 2020; $270 million in Nigeria; and $30 million in Nigeria.
Hainy reveals that Fairmoney has obtained a Microfinance bank (MfB) license from the Central Bank of Nigeria (CBN) and intends to use the new funds to expand its services and further establish its position as an emerging market digital challenger bank.
“We're going to branch out into SME lending and begin offering current accounts to our customers,” Hainy explains.
SME lending, like personal microloans, has historically been underdeveloped in Nigeria. The majority of commercial banks has demonstrated a preference for lending to government agencies and other large corporate entities, but has shied away from riskier personal and small business loans.
This trend has been exacerbated by a scarcity of credit data for consumers and small business owners, but Hainy believes the Nigerian credit landscape is changing as a result of the rise of API-driven fintech startups such as Okra and Mono.
Additionally, Hainy notes that the company has gathered data on a subset of its users who are small business owners.
Hainy says the company plans to partner with a network of Super Agents across the country to reach Nigeria's 57.8 million unbanked adults. According to Hainy, the goal is to become one of Nigeria's top two commercial banks in the coming years.
“Our vision is to become our users' financial home, and this new round of funding will enable us to expand further into our core markets. We are ecstatic about the opportunities that lie ahead for FairMoney as we expand access to digital financial services for underbanked consumers in emerging markets,” Hainy says.
“With this funding, we'll be able to hire top talent from around the world, including more than a hundred engineers from various countries. As a mission-driven organization, we'll be looking for individuals with a growth mindset," he adds.
However, the journey will not be easy, and Hainy is well aware of the difficulties.
Emergence of Digital Banks
With the emergence of digital banks such as Kuda, Sparkle, V by VFD, and several others, a common sentiment expressed by Kuda CEO Babs Ogundeyi is that these banks are used to supplement the services of a traditional commercial bank.
“A significant challenge will be convincing customers that the company is a bank, not just a lender. Additionally, we'll need to establish a compliance department to ensure compliance with various regulatory requirements," Hainy admits.
Consider that the company raised $11 million in a Series A round in 2019. When combined with the company's $1.2 million seed round in 2018, the latest funding brings Fairmoney's total disclosed funding to $54.2 million.
Fairmoney's funding round represents Tiger Global's second significant investment, following its participation in Flutterwave's Series C in March 2021.
“We are excited to partner with FairMoney as they work to create a better financial hub for Nigerian and Indian customers. We were impressed with the team and their rapid growth to date, and look forward to assisting FairMoney as they continue to scale,” says Scott Shleifer, a Tiger Global Partner.
Hauny asserts that Tiger Global's track record on the continent qualifies them as an ideal partner at this point in the company's development.
According to Hainy, Fairmoney is not looking to enter any new markets; rather, it wants to improve its existing services and eventually take market share away from "cash." Hainy believes that a simple product is the primary competitor of every Nigerian fintech.
