FrontEdge raises $10m to facilitate trade for African exporters
To facilitate the growth of African cross-border trade, FrontEdge, a fintech based in Lagos, has raised $10 million in a seed round, comprising both debt and equity, with over 70% of the funding derived from the debt component.
Founded in 2021 by Moni Alli, a former McKinsey consultant with a background in digital transformations for major banks in Nigeria, South Africa, and Morocco, FrontEdge is addressing the SME financing gap in Africa. The fintech operates a lending-first platform that diverges from traditional banking models, allowing SMEs to access upfront capital without needing collateral.
The company aims to provide SME exporters and importers with working capital and innovative software tools. FrontEdge plans to utilize the capital to expand its team, extend its financing product to multiple African countries, and introduce additional products to diversify revenue streams. TLG Capital, the lead investor, expresses confidence in FrontEdge's mission to empower African SMEs and enhance their participation in global trade.
Key Takeaways
In African international trade, only 30% of trade volumes involve financial intermediaries in banks. This financing gap poses a particular burden on small and medium-sized enterprises (SMEs), as their larger counterparts dominate the majority of the limited available capital. The potential to reshape African trade becomes evident when considering the annual value of international trade volumes, which amounts to a staggering $1.2 trillion. This untapped market underscores the opportunity for startups to address this financing gap. Since its inception, FrontEdge reports a remarkable 20% month-on-month growth of SME exporters on its platform, with customers reportedly tripling their sales. The fintech generates revenue from a spread of the transactions it finances, emphasizing a focus on avoiding losses while demonstrating successful repayments. This approach positions FrontEdge as a key player in facilitating the growth and financial inclusion of SMEs in the African international trade landscape.
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