Nigerian ethical credit collection fintech Bfree secures $ 1.7 million and expands to Asia, Europe, South America and Africa
Bfree, a Nigerian credit management fintech, embarked on a global expansion after raising $ 1.7 million in a pre-Series A cycle, to exploit opportunities in emerging markets, where applications of digital lending have recently sprung up en masse.
The funds that participated in the last round included 4Di Capital, Octerra Capital, VestedWorld, Voltron Capital, Logos Ventures and several other angel investors, bringing the total capital raised by the Lagos-based startup to $ 2.5 million, after realizing 800,000 dollars during a round table. last May.
Bfree is now leading a massive recruitment drive for the 16 new markets in which it is establishing itself, including Ghana, India, Uganda, Brazil, Colombia, Mexico, Russia, Poland, Pakistan and indonesia. It was as it expanded beyond Nigeria, where it began operations in August 2020 before entering Kenya in July of last year.
“We are going into markets with large populations, deepening credit and an underdeveloped regulatory environment, where a behavioral collection approach is likely to work,” Julian Flosbach, co-founder and CEO of Bfree, told TechCrunch .
Bfree was founded by Chukwudi Enyi (COO), Moses Nmor (CPO) and Flosbach (CEO), who sought to develop better ethical and technology-inspired debt collection tools and processes as a result of their first-hand work experience. for digital lenders in Nigeria.
“We saw that there was like a small hole in the value proposition of the lenders – they are good at giving loans, but the after-sales services of the credit market did not work because the collection processes were inefficient and unfriendly. “said Flosbach.
Flosbach told TechCrunch that Bfree uses ethical debt collection standards and works closely with defaults for tailored settlement options, with the ultimate goal of increasing repayment rates and customer satisfaction.
The ethical standards of debt collection ensure the confidentiality of customer information during the process, explore flexible repayment options, and do not result in unnecessary penalties such as late fees and debt humiliation (as is currently in practice with many digital lenders).
Bfree was founded by Julian Flosbach (CEO), Chukwudi Enyi (COO) and Moses Nmor (CPO) inspired by the need to introduce ethical debt collection tools and processes in emerging markets. Image credits: Blibre
The startup is currently working with 30 lending institutions, including digital lenders, microfinance institutions and banks. Using customer data provided by lenders, the startup creates user profiles of defaults and runs their data through an algorithm to predict their behavior and recommend the best collection method.
Depending on a client’s risk profile, Bfree directs them to either a self-service platform, where borrowers set up new payment plans using their phone number, track debt balances via automated communication (chatbots, callbots or IVR technology) or direct calls. The startup also regularly conducts financial literacy campaigns.
Emerging markets have seen an increase in the number of digital lenders in recent years offering credit to a population that has remained underserved by formal lenders. The credit offered is often instant and unsecured, which is different from loans from formal banking institutions (such as banks) where borrowers are at a minimum required to hold an account, have regular account activity and maintain minimum operating balances. In addition, traditional lenders require some sort of collateral to protect them from losses when borrowers fail to repay.
Digital lenders extend much needed credit to people stranded by formal banking institutions, but they experience a high default rate (in mid-2020, digital loan defaults in Kenya stood at 23%), causing them to forced to outsource collection services. agencies, which, among other techniques, use debt shame tactics like calling friends and relatives of borrowers.
Bfree has so far tracked 1.1 million defaults to date and currently manages around 800,000 clients, the majority of which are in Nigeria. Flosbach predicts the startup will process 1.4 million profiles by the end of next month.
In preparation for its next stage of growth, Bfree enlisted the services of leading industry professionals including CTO Konrad Pawlus, formerly of SALESmanago, and Yohan Theater, who previously worked for the investment management firm. PIMCO. The theater takes over as responsible for data decision-making and financial engineering. The duo will be part of the team that will lead the startup’s new venture as it strives to disrupt traditional finance by leveraging blockchain technology for secondary debt markets.
“Lenders in the United States or Europe have the option of selling large chunks of their debt portfolios to third parties. This means that they only bear part of the risk of the loans they issue. In emerging markets, this is generally not the case. Lenders should bear all of the credit risk on their own. A key driver of this difference is higher transaction costs and contractual uncertainties, ”Theater said.
“The arrival of DeFi (decentralized finance) is a game-changer: transaction costs can be reduced while contractual security is increased by smart contracts. These are some of the risk sharing instruments that we now actively offer to lenders and borrowers, ”he said.