Microlender 4G Capital secures USD 18.5m for on-lending in Kenya, Uganda

March 16, 2022 in Business, Companies, Financial Services by Editor

Some of the indigenous foods on display at the fair

MSEs are the bedrock of frontier economies, accounting for 80pc of total employment and over 55pc of GDP in Sub-Saharan Africa account

 

Without access to institutional capital, 72pc of MSEs rely on family or friends for loans, and 30pc fail due to funding shortages

 

 

4G Capital has announced the closure of its Series C funding round with private equity fund Lightrock, worth USD 18.5 million dollars. The lender says the investment will allow it to scale up its last-mile finance and enterprise training solutions to micro and small enterprises (MSEs) in Kenya and Uganda.

Part of the funding will be used to help the company expand its Kuza retail finance service to help store-owners, FMCGs and distributors boost their sales. Kuza is a fintech plug-and-play service, allowing distributors to stock entrepreneurs using 4G Capital’s credit, rather than traditional cash on delivery. Partnerships with P&G, Diageo and other brands adopting the service have proven highly successful.

“Lightrock and 4G Capital share a complete alignment of purpose and mission. They bring unrivalled experience of Africa and emerging markets. This capital will have a transformative effect in enabling us to scale the best products and services to the world’s most important sector,” said Wayne Hennessy-Barrett, CEO and Founder of 4G Capital.

4G Capital provides unsecured business loans for business growth, along with enterprise training, and access to digital solutions. The company blends client-centric relationship management with proprietary AI technology to minimise default risk.

The lender says so far, clients have demonstrated high repayment rates of around 94pc without the need for refinancing because; on average customers increase their annual revenue by 82pc. Since its inception in 2013, the lender has loaned over 1,750,000 small business working capital loans valued at over USD230 million. The company has over 240,000 clients, 81pc of whom are female, with 77pc running micro and SME enterprises in rural areas.

Shakir Merali, Partner at Lightrock, joins 4G Capital’s Board and says, “Often used to justify the backing of many African companies, ‘Financial inclusion’ has not always translated into positive outcomes for customers. What is needed on the continent is investment capital to back companies with the mission of financial empowerment. 4G Capital provides liquidity to the vast market of economically generative businesses – the mobile phone repairers, hairdressers and food sellers – that dot the landscape of Africa.”

The company has used its scalable and capital-efficient model to grow the initial USD9 million raised from 2016 to 2020, the USD230 million it has so far loaned out. The microfinance industry has an average lending to capital ratio of 3.45, but 4G Capital has loaned over 16 times the capital raised.

The lender says that while MSEs are the bedrock of frontier economies, they are more vulnerable than larger enterprises to shocks making effective financial inclusion critical to regional economic growth. According to the IFC’s SME Finance Forum, MSEs in Sub-Saharan Africa account for 80pc of total employment and contribute over 55pc of GDP. Without access to institutional capital, 72pc of MSEs rely on family or friends for loans, and 30pc fail due to funding shortages.