Kenyan FinTech company IMFact, which uses supply chain financing to provide working capital to microbusinesses and small- to medium-sized businesses (SMBs), has received an investment from FSD Africa Investments in the amount of 3 million British pounds (about $4 million), according to a press release.
The IMFact business model is a “pooled receivables” factoring platform, which means it buys bulk invoices from microbusinesses and SMBs for both upfront cash and deferred payments, the release stated. This gives sellers cash without having to wait for invoices to be paid. It also frees up capital to buy new inventory, pay suppliers and expand business.
IMFact was established in 2019 by Cardano Development (CD), an incubator and fund manager based in Amsterdam, The Netherlands, with financing from KfW on behalf of the German Ministry for Economic Cooperation and Development (BMZ). It received initial capital from Rockefeller Foundation and Convergence. IMFact Kenya is the first regional hub to become operational and was developed by CD with funding support from Total Impact Capital Advisors (TIC).
This model is different from the pre-existing invoice discount style in which the company picks the best receivables or invoices, while the rest can’t be used as collateral, according to the release. Additionally, IMFact’s model allows more access to working capital as it doesn’t require an upfront deposit or guarantees.
Many of the businesses that will benefit from the investment into IMFact are family-owned ones, which distribute medical equipment and pharmaceuticals. But IMFact will also work with other industries as well, the release stated.
IMFact will provide total funding of 475 million British pounds (about $638 million) to around 570 businesses in the next five years, supporting around 5,600 jobs, according to the release.
FSD Africa’s goal is to help finance businesses in Africa, which is behind on global averages for pooled receivables financing, the release stated. Only South Africa has a significant factoring model. Kenya, meanwhile, where IMFact is based, had numbers sitting at under 2%.
“Building back from COVID-19, boosting Kenya’s status as a hub for financial services, and creating jobs, are at the core of the U.K.’s Strategic Partnership with Kenya,” said British High Commissioner to Kenya Jane Marriott in the release. “We’re pleased to support this investment by FSDAi into IMFact, which will support [SMBs] in Kenya to build back from the challenges of the pandemic.”
In other Kenya-related news, Kwara, a digital banking startup, raised $4 million in seed round funding to develop its neobank app and help turn savings cooperatives into modern digital banks.
Jane Marriott, the British High Commissioner to Kenya, said: “Building back from COVID-19, boosting Kenya’s status as a hub for financial services, and creating jobs, are at the core of the UK’s Strategic Partnership with Kenya. We’re pleased to support this investment by FSDAi into IMFact, which will support SMEs in Kenya to build back from the challenges of the pandemic.”
“We are pleased to be working with IMFact to support the rapid financing of MSMEs in Kenya at a time when many are stuggling to get access to working capital from traditional lending institutions. We particularly look forward to seeing the impact the investment has on Kenya’s medical and pharmaceutical sector and hope to encourage further scaling of fintech solutions to solve the funding gap among smaller businesses.”
Anne-Marie Chidzero, Chief Investment Officer, FSD Africa Investments, said:
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