Face­book-linked mo­bile lender raises Sh200m for M-pesa loans

LEND­ING Sil­i­con Val­ley start-up Branch says to use funds to grow its loan book

Business Daily (Kenya) - - CORPORATE NEWS - David Herbling hdavid@ke.na­tion­media.com

Branch, a Face­book-linked mo­bile phone lend­ing app, has raised Sh200 mil­lion by is­su­ing a com­mer­cial pa­per.

The Sil­i­con Val­ley start-up will use the funds to grow its loan book.

Branch says it has dis­bursed Sh4 bil­lion via mo­bile money plat­form M-pesa since its Kenya launch in April 2015. Cen­tum-owned Nabo Cap­i­tal was the ar­ranger of the debt fa­cil­ity - us­ing Branch’s loan book as col­lat­eral.

The com­mer­cial pa­per was snapped up by high net-worth in­di­vid­u­als and fund man­agers, the tech firm said.

“De­mand for mo­bile loans is likely to in­crease as the caps are shrink­ing the sup­ply of credit in many tra­di­tional av­enues,” said Daniel Szla­pak, di­rec­tor of Africa at Branch.

“Growth is pow­ered by sim­plic­ity of the mo­bile app, cou­pled with the fact that col­lat­eral is not re­quired. A loan can be ap­plied for in sec­onds, whereas tra­di­tional pro­cesses take days,” Szla­pak told Busi­ness Daily.

The choice of Nairobi to raise

cap­i­tal for Cal­i­for­nia-based fin­tech un­der­lines Kenya’s po­si­tion as a re­gional tech and in­no­va­tion hub.

Branch de­clined to re­veal the pric­ing of the pa­per, say­ing it was “is­sued at a mod­est premium to listed cor­po­rate pa­per.”

Ukaid-backed con­sul­tancy FSD said the deal was a new fron­tier for Kenya’s mo­bile money mar­kets.

“Ground-break­ing deals like this can chart a path for other do­mes­tic cap­i­tal providers and en­trepreneurs to fol­low”, said Ta­mara Cook, head of dig­i­tal in­no­va­tions at FSD Kenya.

“If banks aren’t will­ing to in­ter­me­di­ate funds, this deal shows how fin­techs and star­tups can go di­rectly to the do­mes­tic cap­i­tal mar­kets to ac­cess the cap­i­tal they need.”

To date, Branch has raised $15 mil­lion in eq­uity and debt fund­ing, mostly from global funds in­clud­ing For­ma­tion 8, Khosla Im­pact, and An­dreessen Horowitz, an in­vestor in Face­book and Airbnb.

Mr Szla­pak dis­closed plans to raise an­other $50 mil­lion in both debt and eq­uity to ex­pand Branch to other mar­kets. Branch opened shop in Tan­za­nia last year.

It started lend­ing in Nige­ria this year.

The firm says its NPL ra­tio has dropped to five per cent from a high of over 20 per cent dur­ing launch.

When we started the busi­ness in early 2015, de­fault rates were over 20 per cent.

With the in­tro­duc­tion of cut­ting edge ma­chine learn­ing tech­nol­ogy, de­fault rates have re­duced sig­nif­i­cantly ap­proach­ing 5 per cent.

Branch said it lends out Sh400 mil­lion every month to its 350,000 cus­tomers, with loans capped at Sh50,000, and re­payable in be­tween one to 12 months. The in­ter­est rates range from 13.6 per cent per month and can drop to 1.2 per cent as a bor­rower builds a credit his­tory.

MO­BILE Branch has dis­bursed Sh4bn through M pesa. FILE

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