Bfree, a Nigerian startup that enables lenders to recover loans ethically, gets $3M backing

Bfree, a tech-enabled debt recovery startup based in Nigeria, was founded to automate and introduce ethical debt recovery processes after its founders learned from the use of aggressive recovery techniques and the adverse effects, such as persistent calling and debt -Shameful, seen by predatory digital lenders. ,

After launching in 2020, the startup introduced several scalable loan recovery methods, including a self-service platform that allows borrowers to set up new payment plans and conversational AI tools (chatbots and callbots) as part of their collection. gives. -One-service offering. These tools ensure humane after-sales services for borrowers and actions based on behavioral and financial data.

Over the past few years, its customer-base has grown to include some of the major banks in Ghana, Kenya and Nigeria, where it plans to continue expansion, fueled by a recent $2.95 million funding round led by Capria Ventures. Supported by fresh funding. Angaja Capital, Greenhouse Capital, Launch Africa, Modus Africa, Axion CVC and several angel investors also participated in the round, bringing total funding to $6.5 million, which also included last year’s undisclosed $1.1 million bridge round.

Julian Flossbach (CEO), who co-founded the startup with Chukwudi Enyi (COO) and Moses Enmore (CPO), told TechCrunch that while Befree started with digital lenders, which he says They have been quick to adopt its products, they currently only work with a few of them, as their main focus is on banks, which contribute up to 70% of revenues.

“Because of the tremendous pressure to increase our margins, we essentially had to either raise pricing or lose a lot of small customers,” Flosbach said. Digital Lender. The startup currently serves 14 customers, though it has worked with 45 since launch.

Bfree says 92% of its interactions with customers are fully automated, but it maintains a call center run by a small team for follow-up when customers call or require a phone call. It also launched a debt collection management SaaS called Workflow, which targets companies with in-house collections teams or those who aren’t willing to outsource.

The startup is arguably the only tech-enabled credit recovery company in the whole of Africa, where collectors rely heavily on traditional options like call centers to follow up on settlements.

Free to create a secondary market for loans

Its current loan portfolio stands at over $400 million, of which it has managed to collect 12.5%.

The startup also plans to create a secondary loan market to allow third-party investors, such as hedge funds, who want to diversify their investments to buy non-performing loans (NLPs) from banks in Africa. Debt buyers purchase loans from banks at a fraction of the loan’s face value, and make a profit from the collection. Banks sell NLPs to reduce their risk, manage loan portfolios and free up funds.

“We collect a lot of data of borrowers, especially borrowers who have defaulted. We were actually able to, for the first time, develop an algorithm that could value these assets. We can estimate how much of the loan has not been repaid, say for 90 days; What is the probability of it being paid in the next one year? Then we go to the banks and buy these assets and remove them from their balance sheets, allowing them to reduce the risk,” Flosbach said.

He said they also have an analytical solution for banks that helps them gain insight into the secondary debt markets.

Commenting on the investment, Susana Garcia-Robles, managing partner of Capria Ventures, a Global South specialist VC firm that invests in applied generative AI, said: “The advent of generative AI provides a path for more efficient scaling, allowing the company to expand It helps to do so. Continent at low cost. Bfree is well positioned to play a key role in improving access and reducing risk in financial services.

“We anticipate the increasing prominence of credit management and are confident that Befree will lead the creation of a secondary market on the continent for distressed assets. “Bfree has secured important partnerships with top-tier banks and fintechs, confirming the effectiveness of its product and strengthening our confidence in its ability to transform credit collection in Africa,” Garcia-Robles said.

As the startup has been diversifying its offerings, it has also slowed down its aggressive expansion plans announced two years ago, when venture capital flowed freely and to focus on its three core markets in Africa. “Development at all costs” was the mantra. It is based on an awareness of different market dynamics and the realization that every market requires different approaches and products.