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Branch International: South African FinTech Startup Shaping the Future of Lending in Developing Countries

Microfinance companies in Africa are going a long way to improve financial inclusion across the continent. The demand for access to credit is huge on the motherland. Through innovation, sections of the continent which had been marginalised have been finding relief.

Whilst borrowing as little as $2 may seem trivial to those in the developed world, it can be the lifeline to success for a small business owner in Africa. The ability of these marginalised sections to build a credit profile and access credit is essential to the growth of their businesses and subsequently the economies in which they operate.

At two4africa.com, we are always looking for startups in Africa that already have or have the potential to make an impact in their respective markets. While we consider all African startup companies, we have in the past generally featured startup companies headquartered on the African continent. In this edition, we will look at Branch International, a microfinance lender with their headquarters in the San Francisco Bay Area but operating in Kenya, Nigeria, Tanzania and more recently Mexico.

Branch International was founded in 2015 by Matt Flannery, Daniel Jung and Random Bares. Branch CEO, Matt was previously the CEO of kiva.org, a micro-lending platform enabling families to provide small loans to small businesses in the developing world. The idea to launch a for-profit lending company, Branch, stemmed after Matt realised that he could provide more loans if he could raise huge capital. After formation, the company launched a mobile app through which customers can borrow from as little as $2. A crucial aspect was the need to be able to provide these loans without having to meet and interview the borrowers; this resulted in Branch creating an algorithmic approach to determine credit worthiness via customers’ smartphones.

Since most of the customers in the markets Branch International serve have negligible or no credit history, the company uses alternative data to offer hassle free financial products. Potential customers simply download the Branch App, fill in and submit a short form for quick review and then apply for the loan they need. Once approved, the loan is sent to the borrower’s mobile money or bank account within minutes. The customer can then repay the loan using the mobile account and, in the process, build their credit to unlock larger loans.

While the company is now firmly on its feet and scaling admirably, it hasn’t been all smooth sailing. CEO, Matt Flannery, chronicled in a Forbes feature the challenges Branch faced with fraudsters during the lender’s early days. As innovators, the company was bound to be faced with challenges for which there was no documented solution. Branch was aware they were going to be operating in an unusual environment for risk management and their approach to this predicament is commendable. The company engaged the perpetrators and learnt from them resulting in an improvement in their algorithm to weed out fraudsters.

Despite the teething issues, Branch International is highly regarded. It became the 1st African company to raise funding from the US-based VC fund Andreessen Horowitz whose portfolio includes reputable companies like Facebook and AirBnB. According to Crunchbase, the company has raised a total of $84.7M in disclosed rounds to date. A Series-B funding round announced on the 29 of March 2018 raised Branch International, $70M led by lead investors, Trinity Ventures.

Branch International’s progress should be inspiring to the continent’s entrepreneurs. It shows not only the power of innovation but also the resilience to rise above adversity in new markets.

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