Fintech startup Lidya raises US$8m pre-Series B funding to strengthen its position in the market

NIGERIA – Lidya, a fintech startup, has raised US$8.3 million in a pre-Series B funding round led by Alitheia Capital’s uMunthu Fund with participation from Bamboo Capital Partners, Accion Venture Lab, and Flourish Ventures

Lidya hopes to strengthen its position in its three markets of Nigeria, Poland and the Czech Republic with this raise. The company’s leadership structure has also changed as a result of the investment.

Co-founder Ercin Eksin has departed Lidya to pursue other initiatives, according to the company’s announcement, and Kehinde has taken over as the sole CEO.

Lidya will also expand its teams in Lagos, Prague, and Warsaw, with a portion of the funding going toward credit lines.

“We’re really excited about the fact that we started in Nigeria and now our product is live in two European countries. Typically people come into Nigeria from other parts of the world but we’ve gone from Nigeria to other parts. We’re proud of the traction we’ve gotten in our push to build the biggest finance house for SMEs in our markets,” said the CEO of Lidya, Tunde Kehinde.

“Lidya is tackling the fundamental challenge of providing access to credit for dynamic small and growing businesses.”

Alitheia Capital – Managing director, Tokunboh Ishmael

Founded in 2016 by the duo of Tunde Kehinde and Ercin Eksin, Lidya gives loans to businesses to expand and generate more income.

The co-founders identified a demand for loan services while working at their previous Nigerian company, Africa Courier Express (ACE). ACE was a last-mile e-commerce delivery company that offered businesses and consumers logistics services.

Most of the businesses ACE dealt with had credit and finance concerns, according to the founders, who also held founding and managerial responsibilities at Jumia Nigeria. Despite the fact that alternatives existed, the founders thought that these platforms could not effectively meet their ever-increasing needs.

“Lidya is tackling the fundamental challenge of providing access to credit for dynamic small and growing businesses that otherwise have limited options for financing working capital to scale their businesses in Africa and Europe,” Alitheia Capital co-founder and managing director Tokunboh Ishmael said.

“Alitheia Capital and Goodwell are pleased to be backing a team whose mission aligns with our objective of driving growth and social impact by enabling access and inclusion to finance and financial services.”

Businesses can register accounts on the Lidya platform and apply for loans ranging from US$500 to US$50,000, with decisions made within 24 hours.

Lidya claims to analyse each applicant using 100 data points and produce a credit score for them to estimate credit risk. The company had disbursed 1,500 business loans and was about to explore new African markets when it announced its fundraising in 2018. It, however, selected Europe.

Lidya stated in October 2019 that it had begun lending operations in Poland and the Czech Republic. However, the company’s efforts in Eastern Europe did not completely go off until March and April 2020.

Lidya claims to have distributed over US$3 million to SMEs in the two nations since then. The company claims to have disbursed over 25,000 loans and has a customer retention rate of over 90%.

Currently, both European markets account for over 30% of Lidya’s disbursement volume, with a default rate of less than 1%. Unlike most lending organizations, Lidya funds its loan book with equity rather than debt finance. Although it is an unusual strategy, Kehinde explains why the organization felt it was important.

“The idea was for us to show that our algorithms work and that we can disburse money into the market and get it back. Then we can transition to using debt for our lending operations,” said the CEO as the company hopes to close partnerships with banks, family offices, and hedge funds soon.

This is in addition to Lidya’s US$300,000 line of credit from Bamboo Capital Partners.

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