Lulalend raises R606 million & will unveil a new bank in SA by March 2023

South African digital money lender Lulalend is planning to introduce a new bank in the market as early as March 2023.

As it remains a challenge for business owners in some African countries, Lulalend is making it easier for local startups to source funding.

In South Africa, where the annual SME gap is about $20O billion, the company is providing various loans to small and medium-sized businesses.

The digital lender now offers its customers Lula, a credit-led neo-banking solution — in partnership with Nigerian banking group Access Bank — which they can use to open bank accounts.

“We had more time to think about how to engage with our customers and understand their needs and problems and eventually realized that access to credit is just one of the big parts we can be doing for our businesses,” said co-founder Trevor Gosling per TechCrunch.

“So, we went down the road of building our digital bank. Also, we know businesses need cash flow management and so we’ve broadened our horizon from just access to funding to how we solve end-to-end cash flow.”

Most businesses are accessing Lulalend’s services through mobile or web apps but still use other bank accounts to receive loans because the neo-banking platform is in beta and only available to about a hundred testers for now; more than 20,000 businesses on its waitlist could access it by next month.

“If someone banks with us, we have access to their transactional data, which we can score regularly, pushing funding offers to the client base,” he added.

“We also give them tools that can accurately show where their businesses are at any point, projections, make payments, and all of that.

“We’ve been able to embed credit solutions utilizing our technology into partners to help them scale, which has also been a large part of our growth.

“We’ve also worked with them to understand their SME bases and consider how we service them. So that’s been a big component of our business since our Series A raise that has helped us significantly scale distribution efforts.”

Over the past three years, Lulalend embedded credit solutions into partners such as telecom operator Vodacom, fintech Yoco, and e-commerce giant Takealot as part of a credit distribution strategy that seemed to have had some success.

Construction, retail, and hospitality are some sectors whose businesses use the platform to get bridge financing, revolving capital facility, equipment financing, inventory finance, and trade capital. In 2019, these clients accessed loans ranging from $1,500 to $70,000 for 6-12 month tenors with a 2-6% interest.

But the company now offers between $250 to $300,000 worth of loans for 12 months with a 1.5-3% monthly interest. The digital lender, which has distributed “hundreds of millions of dollars” in loans, claims its non-performing loan ratio is about 4-5%.

BusinessTech Africa understands that Cape Town-based start-up will unveil the country’s newest digital bank, Lula, by March after it secured $35 million to expand its business.

Lulalend, a startup founded in 2014, will partner with Nigerian lender Access Bank to establish Lula.

The neo-bank will offer a bespoke suite of products that address the challenges faced by small and medium-sized enterprises in managing their finances as Bloomberg reported.