photo by Getty Images

photo by Getty Images

When Samuel Ejeh decides to open a new location for his Lagos-based supermarket chain Grocery Bazaar, he likes to move quickly. But expansion is capital-intensive, constraining his cash flow, and banks in Nigeria just don’t operate at the same speed as Ejeh.

Instead, he grabs his phone, pulls up the Lidya banking app, applies for the cash cushion he needs, and—a day or so later—gets the money in his account and goes about the business of expansion. Since he began borrowing with Lidya in July 2017, Ejeh has taken out more than 30 loans, one of them for 47.5 million naira (about $130,000). “Lidya lets us take advantage of these opportunities and move on,” he says.

Ejeh’s story is part of a chorus of capital-hungry voices that led Tunde Kehinde (MBA 2011) to cofound Lidya in November 2016. The son of small-business owners—his father ran an engineering consulting company, and his mother started four businesses, ranging from a video game store to a bakery—Kehinde was exposed early on to the pains of capital constraints. “I grew up seeing how difficult it is,” he says. Working in an emerging market made his family’s businesses more susceptible to macro shocks in the global economy, and there were few places to turn to for financial support. “There’s not much venture capital now, and for sure there wasn’t much venture capital back then,” he adds. “It was very tough to go to the bank because they would ask you for physical collateral—land or cash or machinery—so you ended up borrowing from the bank of mom and dad or the bank of your friend to support your business.”

Early in his career, Kehinde realized that these capital challenges were epidemic. In 2012, he helped found Jumia, an e-commerce platform that has become known as “the Amazon of Africa”; at the time of its IPO last April, it was valued at $1.3 billion. A year later, Kehinde and fellow Jumia executive Ercin Eksin went on to found Africa Courier Express (ACE), a logistics company meant to meet the growing last-mile delivery needs of the African e-commerce industry that Jumia had jump-started. At both companies, Kehinde constantly heard from retailers about the same kinds of challenges his parents had faced running their businesses. “Our merchants were struggling to scale,” he says. “They would say, ‘I have something that’s working. It’s selling. But how do I buy more product and move to the next level? There are very few places to turn.’ ” The data backed up Kehinde’s experiences: Last year, the International Finance Corporation estimated the credit gap for small businesses in Nigeria to be at least $25 billion.

To ease access, Kehinde made sure that Lidya simplified the application process, asking business owners for only a bank statement as part of their mobile-based loan application, and delivering funds to successful applicants within 48 hours. “The joke we crack is that with most traditional lenders it takes six to eight weeks for a ‘maybe.’ So they ask you for all of your financials, a five-year projection, and physical collateral, and then they will come back to you without an answer. Most small businesses, though—even in the United States or Europe—don’t have access to those things, and they don’t have six to eight weeks to get a decision.”

Illustration by Jon Krause

illustration by Jon Krause

But how to deliver that capital with the necessary speed while still giving the loans a proper vetting? Kehinde’s and Eksin’s extensive experience with small businesses helped them narrow in on the numbers in the bank statement that offer sure signs of stability, and Lidya’s in-house, Portugal-based engineering team developed an algorithm that can quickly assess more than 100 data points. “We don’t do consumer loans. We’re not the best for long-term asset financing. We’re the best for working capital loans to buy and sell more inventory, meet payroll, or make some improvements to your business,” says Kehinde. “So all the data points we collect are around that, the team we hired are experts in that, and the technology we built is based on that.”

Lidya has granted more than 10,000 loans in the past two years, distributing about $2 million in 2017 and jumping to about $10 million in 2018. (The company expects that number to more than triple for 2019.) Kehinde takes deep satisfaction in this growth. “If we back businesses, they will create jobs. They will impact their local communities. They will help the economies grow sustainably,” he says. “That’s what powers us and powers our entire team. The dream behind Lidya is it should be easier for the next generation to follow their dreams.”

But the success of Lidya also has a global message. In October, the company announced it would be expanding to Poland and the Czech Republic, eager to find more space in what the World Bank estimates to be a $1.2 trillion global credit gap for small to medium-sized enterprises in emerging markets. Success outside Nigeria, notes Kehinde, would send a powerful signal that innovation isn’t wholly reliant on the whiteboards of Silicon Valley and other more established global tech meccas; Africa can export great ideas, too, he says. “We’re building world-class technology in emerging markets. So our technology can succeed in the States, it can succeed in Europe. And we’re going to show that that can happen. You can do honest business here—and you can build a global business starting from Nigeria.”

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