B2B e-commerce and embedded finance platform TradeDepot has raised US$110-million in an equity and debt funding round to support the delivery of Buy-Now-Pay-Later (BNPL) services to five million SME retailers and drive further expansion of its merchant platform across Africa.
The Series B equity round was led by the International Finance Corporation (IFC) – a member of the World Bank Group, with participation from Novastar, Sahel Capital, CDC Group, Endeavor Catalyst and existing investors, Partech and MSA Capital. The debt funding was led by Arcadia Funds.
According to TradeDepot, Africa’s SME retailers generate US$1-trillion in sales annually and contribute US$2.6-trillion to the continent’s nominal GDP, but a fragmented distribution network and lack of access to financing has led to inefficiencies in distribution and many missed opportunities across the value chain.
The e-commerce platform said it offers a broad range of consumer goods to SME retailers via its ShopTopUp and also provides credit lines to enable these retailers to access inventory and pay in instalments as they sell on to their own customers.
The new funding will expedite the delivery of this service to more retailers, TradeDepot added.
With active operations in 12 cities across Nigeria, Ghana and South Africa, TradeDepot leverages its data, technology and robust logistics operations to connect retailers with suppliers and unlock financing to fund inventory purchases for retailers, enabling increased sales, higher margins and other value-added services for all parties.
Speaking about the new funding, Onyekachi Izukanne, CEO and co-founder of TradeDepot, said, “We remain super focused on making digital commerce and financing both accessible and affordable to neighbourhood retailers across key cities in Africa. We are delighted to be joined by an elite group of new investors and have IFC’s Wale Ayeni and Brian Odhambo of Novastar joining our Board of Directors, to support us on this journey to drive growth and prosperity across the continent.”
TradeDepot has built a network of leading consumer goods brands and SME retailers across Africa, and created a proprietary risk scoring engine that uses retailers’ purchase history, previous repayment performance and other related data points to predict their creditworthiness.
TradeDepot asserts that this game-changing financing model, coupled with industry-leading technology to support logistics operations, has led to a 200% increase in transaction volumes for retail store owners.
“The informal sector is a large and critical part of Africa’s economy, accounting for around 80 per cent of jobs in the region,” said Makhtar Diop, IFC’s Managing Director. “We are excited to work with TradeDepot to leverage technology to help small businesses across the continent, particularly the many retailers led by women, access the resources they need to grow and scale.”
BNPL concept gains popularity in India
BNPL has emerged as a feasible and appealing credit alternative for e-commerce purchases in India, says data and analytics firm GlobalData.
An analysis of GlobalData’s E-Commerce Analytics reveals that the e-commerce market in India grew by 12.2% in 2020 and will end 2021 with a growth of 17% to reach INR4.5 trillion (US$61.6bn). It is expected to further grow at a compound annual growth rate of 18.2% to reach INR8.8 trillion (US$120.3bn) in 2025.
In countries like India with low credit card penetration (five credit cards per 100 individuals), BNPL is emerging as an alternative credit tool among consumers, especially tech-savvy millennials. It provides consumers with the flexibility to pay for their purchases at later dates with low or no-interest, making them an attractive proposition for consumers.
Ravi Sharma, Lead Banking and Payments Analyst at GlobalData, comments: “COVID-19 has adversely affected the consumers’ disposable income, creating demand for short-term consumer financing. The increasing credit demand coupled with growing preferences for e-commerce, has made the BNPL service as one of the preferred short-term borrowing tools among the consumers.”
According to GlobalData’s 2021 Banking and Payments Survey, 55% survey respondents indicated that they used BNPL service for buying goods and services online in past six months.