Nigerian fintech, BFREE, has raised $2.95 million, in a round led by Capria Ventures, as it looks to scale across its markets across the continent.
BFREE is defined as a tech-enabled debt collection startup established to automate and introduce ethical debt recovery procedures. The founders were motivated to create Bfree after observing the negative impacts of aggressive debt collection techniques, including incessant calling and debt-shaming, employed by predatory digital lenders.
The negative practices by lenders are well documented and have seen regulators in countries like Nigeria and Kenya take stern actions such as requiring mobile loan apps to apply for fresh mandates, or even delisting the apps from Google Play, in the case of Nigeria.
🇳🇬REGULATION | Nigeria Registers and Approves 211 Loan Apps and Delists 45 from the Google Play Store
The necessity for registration of loan apps, including the 211 approved by the Federal Competition and Consumer Protection Commission (FCCPC), is driven by concerns about the… pic.twitter.com/xkR7Yg8cWE
— BitKE (@BitcoinKE) November 17, 2023
Following its founding in 2020 by Julian Flosbach (CEO), Chukwudi Enyi (COO), and Moses Nmor (CPO), BFREE introduced several debt recovery strategies. These included introducing a self-service platform that enables borrowers to establish new payment plans, as well as conversational AI tools such as chatbots and callbots, as part of its collections-as-a-service offering.
The aforementioned tools aim to provide compassionate after-sales services for borrowers while also leveraging behavioral and financial data to inform actions.
Over the years, BFREE’s customer base has expanded to encompass some of the major banks in Ghana, Kenya, and Nigeria. some of their clients includes:
- Access Bank
- Stanbic Bank
- GT Bank
- Kuda
- Branch
- FairMoney
- Quick Check
The company intends to continue scaling its operations in these regions, with the fresh funding that saw participation from a host of local and international investors:
- Capria Ventures
- Angaza Capital
- GreenHouse Capital
- Launch Africa
- Modus Africa
- Axian CVC
The startup also saw several angel investors participate in the round bringing the total funding raised to $6.5 million, including an undisclosed $1.1 million bridge round raised in 2023.
The startup primarily works with banks, as CEO, Julian Flosbach, noted in a recent interview with TechCrunch magazine.
“Because of the immense pressure to increase our margins, we essentially had to either increase pricing or let go of a lot of smaller customers,” said Flosbach, adding that it makes business sense to work with banks because of their large loan portfolios compared to digital lenders. The startup currently serves 14 customers, although it has worked with 45 since launch.
BFREE’s current loan portfolio stands at over $400 million, out of which it has managed to collect 12.5%.
In addition to its current operations, the startup aims to establish a secondary debt market. This market would enable third-party investors, such as hedge funds seeking to diversify their portfolios, to purchase non-performing loans (NPLs) from banks across Africa.
“We collect so much data of borrowers, especially defaulting borrowers.
We were able for the first time to actually develop an algorithm that can value these assets. We can predict how much is a loan that has not been paid back, let’s say for 90 days; how likely is it going to be paid back over the next one year. Then we go to banks and buy these assets and take them off their balance sheets, allowing them to offload the risk,” said Flosbach.
