Accion Venture Lab, Newid Capital and several angel investors have participated in a $1.25m seed funding round in Lidya, a fintech platform based in Nigeria.

“Small businesses around the world today are unable to get the financing they need to grow and thrive,” said Michael Schlein, CEO and President of Accion.

“Innovative fintech startups like Lidya are addressing this need with technology and new sources of information to help entrepreneurs obtain the necessary capital to hire employees, expand to new markets, and sustain successful businesses,” he said.

Lidya’s new round of funding will allow the company to accelerate product development and further develop its team.

The company’s credit algorithms allow small businesses to build a credit score and access financing to grow their businesses.

“This round of funding and backing from our world-class group of investors is a strong validation of the potential of fintech in Africa and will position the company to be the go-to source of financing for entrepreneurs looking to grow their business,” said Ercin Eksin, co-founder of Lidya.

Lidya currently operates in Nigeria where 20,000 businesses have registered for the service.

Lidya’s digital platform uses over 100 different data points to help any SME access much-needed working capital and build a customized credit score.

Once a customer has been evaluated by the platform, qualified businesses receive a loan in as little as 48 hours based on their risk and capacity.

Lidya has financed businesses spanning the agriculture, consumer goods, services, and creative industries, among others, and is targeting N1.5bn in loan originations to SMEs in Nigeria in its first year of operations.

“Our vision is to digitize and streamline the credit assessment process to make it easy for any SME across Africa to access the funding they needed to grow their business,” said Tunde Kehinde, co-founder of Lidya.

Ainsley Morris, Partner at Newid Capital, added: "Newid Capital is pleased to back such a successful team in their work with Lidya. Tunde and Ercin are well-poised to create a revolutionary model that will expand SME financing across Africa."

The International Finance Corporation (IFC) estimates that the emerging market MSME financing gap alone stands at more than $2trn.

MSMEs contribute up to 33% of GDP in emerging economies, but face a significant shortage of capital to fund their businesses.

Given their small loan sizes and the high costs typically associated with serving them, banks and traditional lenders are often reluctant to serve these businesses.

At the same time, the size of funding needed by many of these businesses make them too large to be eligible for funds from traditional non-bank financial institutions such as microfinance providers. 

Amee Parbhoo, Accion Venture Lab Director of Investments, said: “Lidya’s promising and scalable model and strong management team position it well to address the unmet need for capital faced by many small enterprises. We at Accion Venture Lab are excited to bring our experience with other small business finance innovators to support Lidya’s effort to meet this need in Nigeria.”