It was the vision of two friends — Chioma Okotcha and Zach Bijesse — to start digital lending platform Payhippo in 2019. They had wanted to impact the lives of small business owners by solving one of the key hurdles they face when they’re growing: being able to access working capital and short-term loans. The founders are on a mission to build technology that can effectively assess the creditworthiness of a business holistically and provide them with funding within a short period of time.
After studying for a Masters in Public Administration at a leading social sciences university in France, Science Po, and an undergraduate degree in computer science, Okotcha went on to work in public policy for entities such as the OECD, the French development agency, and the Tony Blair Institute. It was these job opportunities that gave Okotcha insights into how government policies and regulations can adversely affect the ability for businesses to grow, if there is a disconnect to on-the-ground realities and lived experiences of small and medium-sized businesses (SMEs).
Filling the huge funding gap that exists for SMEs in Africa
Bijesse and Okotcha knew each other socially through playing soccer and volunteering together. Bijesse was working at another digital lender, Lidya, prior to founding Payhippo. They brought a co-founder onboard, Uche Nnadi, who has a background in building technology, so each founder could bring complementary skill sets required to establish the venture. They saw a glaring opportunity in Nigeria, which has more than 40 million SMEs that provide more than 80% of the jobs in the country. “We all agreed that giving SMEs access to finance through digital lending was a niche problem, that no one was getting right. If we can fix it in Nigeria we could replicate the solution across the continent,” Okotcha told The Org.
Payhippo has served as a great conduit for access to funding for small businesses relative to traditional banking institutions, given the speed in which the startup can provide a loan to a micro-enterprise. The World Bank estimates that there is a $5.2 trillion financing gap for about 65 million SMEs who contribute significantly to the GDPs of the countries they operate in. A lot of them do not meet the qualifying criteria of most lending institutions, such as traditional banks. These institutions have onerous processing times and requirements and take considerable amounts of time to test the creditworthiness of a business before providing financing. “A lot of the SMEs we finance have told us how they’ve lost out on business deals due to going via traditional channels to access funding as it tends to be a time sensitive matter and so many of them resort to going through informal channels such as business association and family members,” Okotcha said.
“In Africa, it’s common practice for business owners to borrow from family members who tend to charge up to 25% interest,” Okotcha shared. The founders sought to evaluate how they could take away some of these pain points, to be a leading digital lending solution for SMEs in Africa. They make use of credit bureaus and plug in some of their technology to assess the creditworthiness of entrepreneurs, and have also been a useful mechanism for the bureaus to gather information on the businesses that Payhippo lends.
The key roles accelerators play in the growth of a startup
Payhippo applied to be part of the Y Combinator 2020 summer cohort and its application was rejected after the second round. Okotcha said this setback helped them get critical feedback to redesign elements of their company. The founders saw an improvement in the growth of the business as a result of these changes, and submitted a second application for the 2021 accelerator, for which they were successful. The highlights of being part of Y Combinator for Okotcha was the ability to get rich insights and mentorship on how to build a scalable tech startup and the ongoing interactions with like-minded entrepreneurs who are on the same journey and to attract potential investors internationally. She is a strong advocate for people to join accelerators in the early stages of building startups as they serve as a safe space to ask questions, talk about struggles and challenges and to get advice.
They regard banks and microfinance institutions as competitors but laude themselves for the speedy efficient manner in which they can issue the loans in just under 3 hours.They have issued just over 10,000 loans to date. All that a business owner needs to show is business information and documents with a reference or guarantor, as well as six months bank statements.
PayHippo's founders work closely with Google to explore ways in which they can have the highest standards for data sensitivity and authentication to avoid breaches, to give customers the comfort they need about the security of their information The SMEs they have funded have been a key source of growth. They then developed channel partnerships through SME organizations and fast moving consumer goods and have used social media channels to drive awareness and engagement.
Key insights on attracting and retaining talent in Africa and having a diverse workforce
Oktocha shared how challenging it has been for Payhippo to attract the right tech talent as brain drain, particularly in Nigeria, remains an issue. “What we have seen change is the emergence of organizations that are closing the skills gap. More and more young people are eager to go into the tech space,” Okotcha said. To tackle the brain drain issue Payhippo has tried to embed a strong learning culture by supporting and growing the skillsets of its tech talent. The remote work culture has certainly created a competitive landscape, and they are working very hard on finding the right retention strategies for their staff.
The need to have diversity and inclusion in their hiring practices has been a very deliberate effort by the co-founders. They have recruited from various nationalities and jurisdictions to get diverse skills, and want to have female investors across their portfolio.
Growing the brand and expanding Payhippo
Payhippo raised $3 million in 2021, through reputable channels such as the co-founders of unicorn fintech firm Chipper Cash among others, who have served as credible references to attract other investors from abroad.
Playhippo has evolved from having one product that focused on providing 30 day working capital to small businesses now offering several value added services, such as business intelligence for the business that can help owners make strategic decisions for growth. The startup reached $100,000 revenue per month in 2021 and is hoping to attain $1 million per month revenue in 2022, with the hope of reaching $12 million on an annualized basis.
“Part of our aspiration is to become a bank that provides all the financial infrastructure that a business needs in one place — not just lending, but also providing all the value at services, whether that's deposits, tools to analyze their business and exposure to other products and be number one in that space” Okotcha said. Through Payhippo’s success, Okotcha aspires to be among the next generation of founders who can evolve into becoming investors in Africa’s technology ecosystem, sharing her lessons to see a new breed of entrepreneurs emerging on the continent.