Monday, October 29, 2018     07:14AM  / ByPk Malinz / Image from DigestAfrica.com

InDecember last year, Asaak – a Uganda-based mobile SME lender – announced thatit had closed a $1.5 million Series Seed.

U.S.-basedventure capital firm, Resolute Ventures – led the round which closed inNovember last year. Other notable investors included 500 Startups, CatalystFund, HOF Capital, and Social Capital.

Yet, lessthan a year since the announcement, the startup has opened up the second roundof equity financing. That is according to Dylan Terril, Asaak’s Chief BusinessOfficer.

Inconversation with him, we talked about their fundraising plans. Though hedeclined to reveal the actual amount and other details.

“Westarted raising a few weeks ago [September,],” Dylan started, “[and] we shouldclose by end of the year.”

Althoughthey have raised institutional debt before, they are only looking at equitycapital for this particular round. “We’ve secured some institutional debtrecently, but right now we are focused on expanding the operations of thebusiness and building product,” he said.

Manylending businesses have struggled when it comes to repayment. But, Dylan saysthat they are heading into the fundraising at a point when “repayment for loansis quite high.”

Somethinghe 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 oncredit scoring.

Founded in2016 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 andTitus founded the startup during their work through a partnership with PilgrimAfrica and Engineers Without Borders in Soroti, Uganda. At that time, they weresupplying farming villages with agriculture machinery. During the tenure, theyfound out that many small-scale farmers were struggling to access credit.

Also read:CB Insights puts Q2 2018 investment in African fintechs at $63M

“Whilethere was an issue of not having the infrastructure for farming, the real issuethey saw was that farmers didn’t have access to credit,” Dylan says.

But, theyalso found out that the challenge wasn’t in Soroti alone. Hence the decision tospread out. “We realized that Soroti isn’t the only place that needs asustainable credit solution. There are other places and types of businessesthat needed access to credit all over the country.”

Asaak’sbusiness model revolves around charging a premium on the loans that theyadvance. They receive funds from institutional investors, at an interest rate,then advance these to the borrowers at a marked up interest. The difference iswhat makes up their revenue.

Althoughsome mistake Asaak for a microfinance company, they say that they aren’t.

“As alender in Africa, outside parties often mistake us for another microfinancesolution. But we are a business lender backed by fintech,” Dylan says. Addingthat “we are trying to distance ourselves from the ‘microfinance'”.

Currently,Asaak operates like a marketplace. This implies that investors can come in andadvance loans to several businesses of their choosing. Although they are notlooking to change that, the startup is also looking at raising its internalfunds to finance those deals.

“We havepartners in the U.S. and Europe that are interested in this type ofmarketplace,” Dylan says, “so we’ve capitalized on those opportunities.” Addingthat they “are also developing an internal fund.”

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