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Monday, October 29, 2018 07:14AM / By
Pk Malinz / Image from DigestAfrica.com
In
December last year, Asaak – a Uganda-based mobile SME lender – announced that
it had closed a $1.5 million Series Seed.
U.S.-based
venture capital firm, Resolute Ventures – led the round which closed in
November last year. Other notable investors included 500 Startups, Catalyst
Fund, HOF Capital, and Social Capital.
Yet, less
than a year since the announcement, the startup has opened up the second round
of equity financing. That is according to Dylan Terril, Asaak’s Chief Business
Officer.
In
conversation with him, we talked about their fundraising plans. Though he
declined to reveal the actual amount and other details.
“We
started raising a few weeks ago [September,],” Dylan started, “[and] we should
close by end of the year.”
Although
they have raised institutional debt before, they are only looking at equity
capital for this particular round. “We’ve secured some institutional debt
recently, but right now we are focused on expanding the operations of the
business and building product,” he said.
Many
lending businesses have struggled when it comes to repayment. But, Dylan says
that they are heading into the fundraising at a point when “repayment for loans
is quite high.”
Something
he believes is aided by the fact that each loan is backed by collateral.
Though, they project that in the future, their loans will be advanced based on
credit scoring.
Founded in
2016 by Kaivan K. Sattar and Titus Opesen, Asaak has a full-time team of 26.
This is distributed across San Francisco (USA), Kampala (Uganda) and Soroti
(Uganda).
Kaivan and
Titus founded the startup during their work through a partnership with Pilgrim
Africa and Engineers Without Borders in Soroti, Uganda. At that time, they were
supplying farming villages with agriculture machinery. During the tenure, they
found out that many small-scale farmers were struggling to access credit.
Also read:
CB Insights puts Q2 2018 investment in African fintechs at $63M
“While
there was an issue of not having the infrastructure for farming, the real issue
they saw was that farmers didn’t have access to credit,” Dylan says.
But, they
also found out that the challenge wasn’t in Soroti alone. Hence the decision to
spread out. “We realized that Soroti isn’t the only place that needs a
sustainable credit solution. There are other places and types of businesses
that needed access to credit all over the country.”
Asaak’s
business model revolves around charging a premium on the loans that they
advance. They receive funds from institutional investors, at an interest rate,
then advance these to the borrowers at a marked up interest. The difference is
what makes up their revenue.
Although
some mistake Asaak for a microfinance company, they say that they aren’t.
“As a
lender in Africa, outside parties often mistake us for another microfinance
solution. But we are a business lender backed by fintech,” Dylan says. Adding
that “we are trying to distance ourselves from the ‘microfinance'”.
Currently,
Asaak operates like a marketplace. This implies that investors can come in and
advance loans to several businesses of their choosing. Although they are not
looking to change that, the startup is also looking at raising its internal
funds to finance those deals.
“We have
partners in the U.S. and Europe that are interested in this type of
marketplace,” Dylan says, “so we’ve capitalized on those opportunities.” Adding
that they “are also developing an internal fund.”
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