South Africa: Finclusion fintech plans expansion into Mozambique, Uganda

By David Whitehouse
Posted on Monday, 8 November 2021 16:27

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South African fintech Finclusion is aiming to enter Mozambique and Uganda in the second quarter of 2022, CEO Timothy Nuy tells The Africa Report.

The plan is for the company to start offering its “wage streaming” product, which allows employees who need it to be paid early, in the new countries, Nuy says in Cape Town. Finclusion is currently going through the licensing process in both countries, he says.

Credit providers, such as Finclusion and Bayport Management, are betting that allowing companies to pay employees early, if needed, provides a cheaper solution than pay-day lending. In September, Finclusion secured $20m in a funding round with Lendable, which provides fintech debt financing in emerging and frontier markets.

Finclusion, which focuses on direct lending, credit scoring and also has an SME loan portfolio, currently operates in South Africa, Eswatini, Kenya, Namibia and Tanzania. Nuy says Finclusion is likely to announce fresh funding “in the next month or two,” to support its expansion. The company aims to become a “leading neo-bank platform in Southern- and Eastern Africa,” he says.

  • Finclusion has 240,000 customers for its brands, including Fractal Labs, Click2Pay, and SmartAdvance.
  • In September, the company bought a stake in HelloHR, a South African payroll software startup. Customers of HelloHR will get access to Finclusion’s wage-streaming and insurance products.
  • Finclusion is planning to roll out a new ‘buy now, pay later’ product for consumers in South Africa in December or January.
  • The product will be targeted at millennials, especially women, Nuy says. The consumers will benefit as they will be able to get a credit record, while the product will be a source of funding for the merchants who supply them, he adds.
  • Nuy also hopes to roll out the new product later in Mozambique and Uganda.

Scaling up

Finclusion was already focusing on digital products before Covid-19, which makes it easier for the company to scale, Nuy says. The company draws on artificial intelligence and machine learning for its credit-scoring process. Nuy says that the company’s default rate of about 7%, which has held stable through the Covid-19 pandemic, is lower than many competitors who have rates of 10% or more.

The system used is open for others to use as “credit-scoring as a service” and the company has already been able to attract some clients of this kind, Nuy says.

  • The company has a loan book of $20m, which Nuy aims to increase to $30m in six months.
  • Finclusion has been “slightly profitable” this year, and Nuy aims to achieve a similar result next year.
  • Nuy wants to avoid running up losses, but the aim at present is building market share rather than profitability, he says. “We’re scaling up.”
  • The company will also “keep an eye on Nigeria” with a view to possible later entry, Nuy says.

Bottom line

Finclusion is confident that its model is strong enough to allow it to delay profitability while it increases market share.

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