Denis Opudo
High living standard in the US makes a loan worth $2 not valuable since the money cannot even buy a bar of chocolate. However, in cities like Nairobi, Kenya and Lagos, Nigeria $2 can do what $40 can do for the people in the US. This makes such micro-loan important in such cities as operating a small business. Branch startup offers such loans to small businesses. The limit can, later on, grow into larger loan limits depending on your creditworthiness.
Branch was founded in 2015 by Matt Flannery who happens to also operates as the startup’s CEO. Matt is also the co-founder of Kiva. Kiva is a micro-lending platform which has been operational for a period of 14 years. Kiva assists families to give small loans to entrepreneurs in developing countries. From running Kiva he realized that running nonprofit platform can only get bigger through fundraising. He was motivated by the spread of digital payments and smartphones in Africa. He realized that he only needed to raise huge capital so as to give more loans to small business owners. This was to happen without the need of getting to them physically.
He then used that idea to come up with Branch app. The app is in a position to analyze various information on user’s phones that will tell how one gets credit. For instance, every time one uses ATM in Nigeria the bank sends them an SMS. The SMS shows them balance remaining in the bank account. These are the type of information needed by Branch. Moreover in Kenya, once someone pays electricity bill they receive a receipt in form of an SMS. Currently, Branch has been downloaded onto above 1 million mobile phones in sub-Saharan Africa.
The startup has achieved what the founder expected financially. Furthermore, the startup announced on 29th March 2018 that it is planning a Series B funding worth $70 million. This will go to expanding its loan offering to more countries like India. The $20 million equity part was spearheaded by Trinity Ventures. CreditEase Fintech Investment Fund, International Finance Corporation, and Andreessen Horowitz also took part. Furthermore, the startup got $50 debt from Victory Park Capital. In total the startup has secured $80 million. This gives hopes to SME in developing countries.
Branch operates in different ways compared to banks. This is because it has fewer requirements to get loans. It charges 15% on loans starting from $2 at a period of one month. Furthermore, 15% APR is charged on largest loans of $1,000 which can be paid for a period of 12 months. New customers borrow from the startup averagely 20 times in their first year after downloading the app. The good thing about Branch is that it does not charge an overdraft fee.
The startup has offices in Nairobi, San Francisco, and Lagos. It is good to know that the startup was already profitable before seeking for the new funding. The startup receives a monthly growth of 20% and it is planning to have saving accounts for its customers.
