FSD Africa Investments (FSDAi), the investing arm of FSD Africa, has announced around US$4mn investment into IMFact, an expanding fintech company that uses supply chain financing to provide working capital to micro, small and medium enterprises (MSMEs)
FSDAi’s funding, the first external equity investment in IMFact, comes at a critical time, with Covid-19 having placed undue pressure on MSMEs in many sectors, most notably in the healthcare sector.
Under current plans, and subject to further fundraising, IMFact is projected to provide funding totalling around US$633.03mn to around 570 businesses over the next five years and support around 5,600 jobs.
Many of the MSMEs expected to benefit are family-owned businesses including those that distribute medical equipment and pharmaceuticals to public and private organisations. However, IMFact will also be working with supply chain businesses in other industries.
Among the first to partner with IMFact is ABC Pharmacy Ltd, which supplies pharmaceutical products to pharmacies, hospitals, and clinics across the country but had faced challenges due to inadequate working capital.
Through IMFact’s financing, ABC Pharmacy aims to make a transition in its business model by extending its credit terms to clients. With the increase in capital available the company has been able to increase sales and grow its business.
FSDAi’s ultimate objective in making the investment is to encourage the development of technology-enabled, ‘pooled receivables’ financing across Africa. Their analysis shows that Africa lags behind global averages for this kind of financing representing less than 1% of global volumes. On the continent, only South Africa has a markedly developed factoring model while the penetration in Kenya stands at less than 2%.