Surely, many people in sub Saharan Africa would be glad to have access to small loans. Small business owners, entrepreneurs, ordinary individuals can sure make do with a $2 micro loan at some point. This is exactly what a startup, Branch, is doing (with Nigeria, Kenya, India) in mind, raising a large chunk of investment to propagate this better.
Founded and currently led by Matt Flannery, who previously cofounded and co-led Kiva, a 14-year-old micro-lending platform that enables families to make small loans to entrepreneurs in developing countries, Branch has raised a war chest of $70 million in Series B funding to expand.
The equity portion of the round was led by Trinity Ventures, who raised $20 million in the round for the startup. In participation were International Finance Corporation, Andreessen Horowitz and CreditEase Fintech Investment Fund. Branch also secured a $50 million debt facility from Victory Park Capital, an investment firm with a focus on alternative credit whose portfolio includes LendUp.
Talking to TechCrunch, Schwark Satyavolu, the general partner at Trinity Ventures who led the round for his firm said, “The banking infrastructure in the U.S. is so robust and complete,” He went further that, Branch “seems like an application of Silicon Valley tech to create financial services. But it’s substantially more interesting, because Branch is doing it in emerging markets where you don’t have a robust stack or credit bureaus or information that’s nearly as rich or as deep as in the Western world.”
Basically, Branch loses money on the $2 loans, but I guess sacrifices have to be made to drum up businesses for much larger loans. This strategy, according to the founder and CEO, is working. A charge of 15 percent APR is placed on its largest loans, which are $1,000 and can be paid over a 12-month period.
More important is the impact this would have on developing countries. The app, which has been downloaded over a million times, seems to have received great reception thus far, as we await expansion plans by the company coming into fruition.