FSD Africa Investments (FSDAi), the investing arm of FSD Africa, has announced a £3m investment into IMFact, an expanding fintech company that uses supply chain financing to provide working capital to micro, small and medium enterprises (MSMEs).
As a “pooled receivables” factoring business, IMFact purchases bulk invoices from MSMEs for a mix of upfront cash and deferred payments. This gives the sellers access to cash without the need to follow up or wait for invoices to be paid, freeing up capital to buy new inventory, pay suppliers, and grow the business.
IMFact’s “pooled receivables” model differs from the pre-existing invoice discounting practice where the best receivables or invoices are cherry-picked by the financing company meaning the rest of the receivables pool cannot be used as collateral. It also provides faster access to working capital than the invoice discounting usually offered by banks because it does not require an upfront deposit or guarantees.
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. IMFact’s innovative solution is particularly timely owing to its ability to release additional cashflow that hitherto was locked up.
Under current plans, and subject to further fundraising, ImFact is projected to provide funding totalling £475m to around 570 business 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 is now making 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. Dr John Muturi, CEO of ABC Pharmacy said:
“The financing from IMFact will be a game changer for our future business operations.”
FSDAi’s ultimate objective in making the investment is to encourage the development of technology-enabled, “pooled receivables” financing across Africa. Analysis shows 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%.
IMFact was established in 2019 by Cardano Development (CD), an incubator and fund manager based in Amsterdam, The Netherlands, with financing from KfW on behalf of the German Ministry for Economic Cooperation and Development (BMZ). It received initial capital from Rockefeller Foundation and Convergence. IMFact Kenya is the first regional hub to become operational and was developed by CD with funding support from Total Impact Capital Advisors (TIC).
About IMFact Kenya
IMFact is a pan-African, non-deposit taking financial institution, using supply chain financing to provide working capital to SMEs, which at present have limited access to both financial and banking systems across the continent. Launched in 2019, their fintech factoring solution is nimble, responsive, and flexible in meeting the financing needs of clients. IMFact was incubated by its parent company Cardano Development (CD), an incubator and fund manager based in Amsterdam, The Netherlands, with financing from KfW on behalf of the German Ministry for Economic Cooperation and Development (BMZ). IMFact has also received early- stage grant funding from The Rockefeller Foundation and Convergence. Further to CD’s initial investment, FSD Africa Investments has provided the first external equity investment in IMFact. IMFact Kenya is the first regional hub to become operational and was developed by CD with funding support from Total Impact Capital Advisors (TIC).
