Bfree, a credit management fintech, has secured $1.7 million in a pre-Series investment to grow globally and capitalize on the opportunities in emerging markets, where digital lending apps have exploded in popularity. 4Di Money, Octerra Capital, VestedWorld, Voltron Capital, Logos Ventures, and several other angel investors joined in the new round, bringing the total capital received by the Lagos-based business to $2.5 million after raising $800,000 in a seed round last May.
Bfree is currently conducting a large recruiting drive in Ghana, India, Uganda, Brazil, Colombia, Mexico, Russia, Poland, Pakistan, and Indonesia, among the 16 new markets in which it is establishing offices. This is as the company expands beyond Nigeria, where it began operations in August 2020 before moving to Kenya in July of last year. Bfree co-founder and CEO Julian Flosbach told TechCrunch, “We’re moving into economies with enormous populations, credit deepening, and an immature regulatory framework, where a behavioral collecting technique is likely to work.”
Following their firsthand experience working for digital lenders in Nigeria, Chukwudi Enyi (COO), Moses Nmor (CPO), and Flosbach (CEO) launched Bfree to offer better, ethical, and tech-inspired debt-collection tools and methods. “We recognized a little bit of a breach in the value proposition of lenders – they are competent at giving out loans, but the credit market’s aftersales services didn’t function since collections operations were inefficient and not user friendly,” Flosbach explained.
Bfree, according to Flosbach, uses ethical debt collection standards and collaborates closely with defaulters to develop tailored settlement choices, with the ultimate goal of enhancing repayment rates and customer satisfaction. Ethical debt collection practices protect customers’ personal information during the collection process, provide for flexible repayment choices, and avoid excessive penalties such as late fees and debt shaming (as is the practice with many digital lenders at the moment).
Digital lenders, microfinance institutions, and banks are among the 30 credit institutions with which the business is now collaborating. The startup creates defaulter user profiles using data provided by lenders and analyzes their data via an algorithm to forecast their behavior and offer the best collecting approach. Bfree either refers customers to a self-service platform, where they may set up new payment plans using their phone number, or follows up on debt balances via automated communication (chatbots, callbots, or IVR technology) or direct calls, depending on their risk profile. The company also holds financial literacy campaigns on a regular basis.
In recent years, digital lenders have sprung up in emerging economies, giving loans to a demographic that has hitherto been underserved by traditional lenders. Unlike loans from official financial organizations (such as banks), where borrowers must at the very least have an account, have regular account activity, and maintain minimum operating balances, the credit supplied is frequently quick and collateral-free. Traditional lenders, on the other hand, require some form of collateral to protect them from losses if borrowers default on their payments.
Digital lenders provide much-needed credit to people who have been turned down by traditional lenders, but they have a high default rate (in mid-2020, Kenya’s default rate on digital loans was 23 percent), forcing them to hire collection agencies, which, among other things, use debt-shaming tactics like calling borrowers’ friends and relatives. Bfree has contacted 1.1 million defaulters so far, and it currently serves roughly 800,000 consumers, the majority of whom are from Nigeria. By the end of next month, Flosbach expects the startup to have processed 1.4 million profiles.
