Lidya Raises $8.3M to Expand Lending in Europe | Fintech News

Lidya Secures $8.3 Million in Pre-Series B Funding

Nigerian fintech company Lidya has successfully concluded an $8.3 million pre-Series B funding round, as announced today.

Alitheia Capital, through its uMunthu Fund, spearheaded the investment. Additional participation came from Bamboo Capital Partners, Accion Venture Lab, and Flourish Ventures.

Funding History and Total Investment

Including a $1.3 million seed round from 2017 and a subsequent $6.9 million Series A round secured the following year, Lidya’s total funding now amounts to $16.5 million.

This new capital injection will be utilized to expand Lidya’s lending operations, specifically targeting small and medium-sized businesses (SMEs) within its existing markets.

The Genesis of Lidya

The concept for Lidya originated in Nigeria, where Tunde Kehinde and Ercin Eksin identified a gap in lending services while working at Africa Courier Express (ACE).

ACE functioned as a last-mile e-commerce delivery service, providing crucial logistics support to both businesses and individual consumers.

Identifying a Critical Need

Having previously held founding and executive positions at Jumia Nigeria, the founders observed that many businesses utilizing ACE’s services faced significant challenges related to credit and financing.

Existing platforms, they determined, were not sufficiently equipped to meet the evolving and expanding requirements of these businesses.

Launching a Digital Lending Platform

In 2016, Kehinde and Eksin co-founded Lidya as a digital SME lending platform.

Businesses can establish accounts on the platform and apply for loans ranging from $500 to $50,000, with loan decisions being rendered within a 24-hour timeframe.

Data-Driven Credit Assessment

Lidya employs a data-driven approach, utilizing 100 distinct data points to evaluate each applicant and construct a credit score for assessing credit risk.

Following a funding announcement in 2018, the company had already disbursed 1,500 business loans and was preparing for expansion into new African markets. However, a strategic shift led them to Europe.

Expansion into Europe

In October 2019, Lidya announced the commencement of lending operations in Poland and the Czech Republic.

Full operational activity in Eastern Europe began in March and April 2020, with Lidya reporting over $3 million in disbursements to SMEs in these two countries since then.

To date, the company has facilitated over 25,000 loans and boasts a customer repeat rate exceeding 90%.

Strategic Rationale for European Expansion

The decision to prioritize Europe over further African expansion stemmed from Lidya’s ambition to establish a global presence, addressing a $3 trillion credit gap.

As CEO Kehinde explained to TechCrunch, the company deliberately avoided limiting itself to a single market, conducting thorough data analysis before venturing into Europe.

Future Plans and Leadership Changes

The current funding round will be instrumental in strengthening Lidya’s position within its three core markets.

Concurrently, a change in leadership has occurred, with Eksin departing Lidya to pursue other ventures, and Kehinde assuming the role of sole CEO.

Performance in European Markets

Currently, European markets account for approximately 30% of Lidya’s total disbursement volume, while maintaining a default rate of less than 1%.

Notably, Lidya distinguishes itself by utilizing equity funding for its loan book, rather than relying on traditional debt financing.

Unconventional Funding Approach

Kehinde explained that this unconventional approach was adopted to demonstrate the efficacy of their algorithms and the viability of disbursing and recovering funds.

The company is actively pursuing deals with banks, family offices, and hedge funds to transition towards debt financing, in addition to a $300,000 line of credit already secured from Bamboo Capital Partners.

Navigating the Pandemic

Lidya initiated lending in Europe during the peak of the COVID-19 pandemic.

Kehinde acknowledged the challenges of launching in two new countries remotely, emphasizing the team’s resilience and dedication in maintaining operational cohesion.

Looking Ahead

The CEO stated the company’s goal is to achieve five times its current performance within the next year, ensuring both Lidya’s and its customers’ success.

Lidya intends to expand its teams in Lagos, Prague, and Warsaw, allocating a portion of the funds to bolster lines of credit.

Investor Perspective

Tokunboh Ishmael, co-founder and managing director of Alitheia Capital, commented, “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 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.”

A Reverse Expansion Trend

The expansion from Nigeria to Europe is relatively uncommon among African startups, with South African companies more frequently establishing offices in the U.K. and the Netherlands.

Kehinde expressed pride in Lidya’s achievements, having established a presence in both the Czech Republic and Poland, and anticipates further growth from the five-year-old digital lender.

“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.”

UPDATE: Lidya ex co-CEO Ercin Eksin has denied the company’s report that he left to pursue other projects. In his words, “I didn’t leave Lidya to pursue other projects. The existing investors took control of the company in an unjust manner. Therefore, I’m currently litigating them in the U.S.”