Tiger Global-Backed FairMoney Gets Boost As Debt Tools Draw African Startups

MyCredit Investments Limited, better known as the digital lender-turned-neobank FairMoney Nigeria, has announced the successful launch and reception of its inaugural NGN 2.5 B (~USD 3.6 M) Series 1 Commercial Paper (CP) Issuance.

FairMoney’s Commercial Paper Issuance attracted significant interest from a wide range of qualified institutional investors, the company revealed, surpassing the issue size by nearly 100 percent due to high demand. The startup launched in Nigeria as an app-based digital lender in 2017, disbursing a reported NGN 117 B (~USD 169 M) in loans en route to transforming into a fully-fledged neobank with 2 billion bank accounts among 5 million customers after acquiring a microfinance bank license in 2021.

FairMoney’s announcement refers to the issuance of a financial instrument known as a commercial paper. A commercial paper is a short-term debt instrument typically used by corporations to raise funds to meet their immediate financing needs. In this instance, FairMoney successfully issued a Series 1 Commercial Paper with a value of USD 3.6 M. The Notes were issued as a 270-day paper offering investors a yield of 16 percent.

In the midst of the venture capital (VC) retreat that has rocked the tech industry and suppressed funding, startups are increasingly looking elsewhere for short-term capital.

As the usual tech funding sources remain fraught and VC deals become less attractive, companies are warming up to special capital conduits—such as debt financing which is witnessing a boom amid the VC pullback—to bolster their business through the difficult period. FairMoney now appears to have taken this less-trodden CP path, one of a few to have done so in recent years, in circumstances where market forces make equity deals unfavourable.

In October 2020, against the backdrop of the challenging economic situation sparked by the Covid pandemic, Metro Africa Xpress (“MAX” or “MAX.ng”), a notable mobility platform in Nigeria and West Africa, announced the successful issuance of a NGN 400 M (~USD 578 K) 1-year fixed-rate notes, describing it as the first ever for an Africa-based mobility company. MAX said it received strong interest from highly reputable local and international fixed-income investors.

In the same vein, FairMoney says its issuance was met with significant interest from qualified institutional investors, such as banks, mutual funds, and other financial institutions. This response demonstrates confidence in its ability to meet financial obligations. The impressive debut of the commercial paper issuance could boost FairMoney’s position in the financial market and set a promising foundation for future fundraising activities. FairMoney’s last equity round was announced in July 2021; a USD 42 M Series B round led by Tiger Global, a formidable investor known for notable investments and exits in Uber, Coinbase, and Nubank, among others.

Laurin Hainy, CEO/Co-founder of FairMoney, hailed the establishment of the Programme and subsequent CP Issuance as a remarkable milestone, presenting the Company with a golden opportunity to continually access funding from the dynamic debt capital market.

African startups have experienced a significant increase in venture funding through debt financing, diverging from the more conventional equity-based funding methods. The latest funding report by Partech, a startup investor backing African companies, reveals that venture capital debt funding for African startups surged to an unprecedented USD 1.5 B across 71 deals in 2022, doubling the previous figures. This shift indicates a growing trend in the region, highlighting the attractiveness and viability of debt financing as an alternative means of funding for startups in Africa.

The issuance of the CP will provide crucial support for FairMoney Nigeria’s short-term liquidity requirements and facilitate the expansion of its loan portfolio. Prominent financial institutions, including United Capital Plc, Renaissance Capital Africa, FBNQuest Merchant Bank, and Stanbic IBTC Capital Limited, played pivotal roles as financial advisors in this transaction.

According to Henry Obiekea, the Managing Director of FairMoney Nigeria, the inaugural public issuance by the company is a significant milestone. This achievement comes on the heels of FairMoney Nigeria’s recent attainment of double investment-grade credit ratings from GCR and DataPro, he emphasised.

The issuance not only demonstrates the startup’s financial stability but also serves as an opportunity to contribute to the development of the Nigerian financial markets. Additionally, it provides investors with a new and appealing asset class to consider for their investment portfolios.

Featured Image Credits: FairMoney