Nairobi and San Francisco-based mobile microfinance company Branch has secured $9.2 million in funding from Venture Capital firm Andreessen Horowitz to fund its expansion across Africa.
Mobile-based financial services company Branch has raised a Series A equity funding round of $9.6 million, as it positions itself for further growth and expansion into new markets. The funding will allow for the scaling of its operations, hiring talent in Kenya as well as expansion across East Africa in 2016.
The round was led by Andreessen Horowitz (a16z) , a prestigious US-based VC firm that has previously backed top international technology companies such as Facebook and Airbnb. Alex Rampell, the partner who invested on behalf of the fund, commented on the deal: “The combination of smartphones, digital money, and machine learning offers an opportunity to leapfrog old-fashioned credit infrastructure, and that’s precisely what Branch is doing”. Seed investors Khosla Impact and Formation 8 also participated in the Series A round.
“Over the last few months we’ve been growing rapidly”, Founder and CEO Matt Flannery said. “With this latest round of funding, we’re able to expand further to meet the huge demand for our credit product in Kenya and enter new markets.” Flannery founded Branch after a decade of founding and running Kiva.org, the micro-lending website that today operates across 80 countries.
This week, the company disbursed its first loan in Tanzania, marking an important milestone towards its goal to expand to several African countries and disburse 1,000,000 additional loans to its customers. Already, around 150,000 people in Kenya are using the app and the Branch App enjoys a 5* rating on the Google Play Store. On average, each customer has taken out 3 loans each, ranging from KSh250 to KSh50,000. The loans are typically approved within minutes, which makes the process smooth and stress-free for its customers.
The socially conscious technology company launched the Branch app in May 2015 to provide financial services to the rapidly expanding middle class in Kenya through its innovative Android phone application. It uses advanced data science to calculate a credit score for its customers by analyzing the information on their phone such as call and SMS history. This enables Branch to meet the growing demand for credit among millions of Kenyans and disburse loans within minutes into customers’ mobile money wallets, while maintaining low default rates.
“Our product is simple. Forget about bank queues and month-long processes. Branch is like a bank in your pocket, there for you at all times”, explained Daniel Szlapak, Africa Director. “The proprietary technology we have developed means that we are able to charge lower interest rates than our competition, and reward users who repay on time with lower fees, larger loan amounts and more flexible repayment terms as they continue to use the app.”
Branch is currently available for download in the Google Play Store in Kenya and Tanzania.
Additional quotes from the Branch team:
So far most of its customers have found the app via social media and word of mouth. “We’ve proven that our model works and know that there’s huge demand, so we’re looking forward to our Series A funding enabling us to reach our next stage of growth”, adds Sofia Zab, Marketing Director.
“User privacy is extremely important to us”, adds cofounder Daniel Jung. “We use world-class data encryption and never sell our user information to third parties.”
“This round of funding will enable us to scale our team along with our loan portfolio.” adds Andrew Huelsenbeck, Expansion Director. “We are always looking to hire smarter, purpose-driven people who want to make a positive difference in the world through technology.”
When did Branch Launch in Kenya?
Branch launched in Beta mode in April 2015.
How does it work?
Branch is really simple. It’s like a bank branch in your pocket, only much faster! Our first product is credit. You just download the app from the Google Play Store, login with your Facebook account, and you get a loan. We have a ‘robot’ in the cloud — a machine learning algorithm — which analyses data from your phone, Facebook, and other sources to determine how much to lend to you. Branch will deposit the funds in your mobile money account in a matter of minutes.
Average Loan Size: Our vision is to offer larger and larger loans to our most loyal users. We currently offer loans up to KSh50,000 but start with much smaller loans to new users who need to prove their ability to repay. Our average loan size is growing fast and is now around KSh4,000 because we have so many new users.
Interest rates: We want to be the fastest, cheapest source of credit in Kenya. Kenyans deserve better banking. The fees we charge for our loans vary depending on how new users are on the system. As users prove themselves, loan sizes go up, loan length goes down, and APR goes down as well. Our current fees range from 6% to 16% on loans from 3 weeks to 1 year in length.
What proportion is non-performing loans: When we started, our default rate was around 25% because we had very little data. Our “robot” learned very quickly how to manage risk and is improving each day. Now, the default rate has dropped to under 5%.
Current loan book size: We have disbursed millions of USD in loans and are growing 50% month-over-month.
To read a blog post by Matt Flannery, Founder, Branch, click here.
To read a blog post by Alex Rampell, General Partner, Andreessen Horowitz, click here.
Matt Flannery, Co-Founder: https://www.linkedin.com/in/matthew-flannery-4b6895111
Daniel Jung, Co-Founder: https://www.linkedin.com/in/daniel-jung-bb6b449
Randy Bares, Co-Founder: https://www.linkedin.com/in/aeramor
Daniel Szlapak, Director of Africa: https://ke.linkedin.com/in/dszlapak