Branch International — the San Francisco-based firm also known as Branch.co — has snagged $9.2 million in Series A funding that will allow it to expand digital financial services in sub-Saharan Africa.
Billed as a “branchless bank,” Branch.co gives users access to a free Android app. Once installed, the app asks users for access to information like how much they spend on their mobile plan, whom they call most often and other assorted data stored on the phone. From that data (and some calculations in a proprietary algorithm), the firm decides which users to offer a credit line to. Credit lines can range from as little as $2.50 to as much as $500.
The app has gained some traction among sole proprietors and sub-Saharan entrepreneurs, particularly farmers, small merchants and drivers. The firm currently employs six data scientists in the U.S. and 30 employees in Nairobi, Kenya. Branch.co CEO Matt Flannery was previously the cofounder and CEO of nonprofit lending outfit Kiva.org.
Branch.co is not a nonprofit. Flannery noted he chose to go the for-profit business route this time around because philanthropic fundraising can be a huge distraction for tech companies. He also noted that it is easier to attract top tech talent to for-profit firms that can offer better salary and benefits packages.
“Our service is already reaching the middle class in Kenya,” Flannery said, “but I’m building this with the intention that it will serve everyone much the way that Twitter started out as a thing that people used at South by Southwest but ended up playing a big role in the Arab Spring.”
Andreessen Horowitz led the Series A round, which represents something of a first for General Partner Alex Rampell. It’s the first deal he’s managed since signing on with the firm and the firm’s first U.S.-based company that serves sub-Saharan Africa as its primary market.
Rampell said, “Lots of entrepreneurs try to do things with financial services for unbanked or underbanked people in the U.S. and Western Europe, but this need is nowhere near what it is in the developing world.”
The demand is also greater. While mobile payments have struggled to gain traction in the developed world, a majority of mobile phone users in sub-Saharan Africa make payments with them. And though previous mobile payment methods have relied on SMS text messaging and “candy bar” phones, smartphone use is on the rise in Africa and fast. According to GSMA Intelligence estimates, 400 million new smartphone connections will be online by 2020, bringing the installed base to more than half a billion at that point.