Small and medium enterprises (SMEs) in Africa face significant challenges in accessing financial support, but a Ghana-based fintech company, OZÉ, is working to change that dynamic.
In Nigeria, SMEs constitute a substantial part of the economy, making up 96% of businesses and employing 84% of the workforce. They also contribute 46% to the nation’s GDP. Ensuring the success of SMEs is essential for improving Nigeria’s economic growth, yet one of their biggest hurdles is securing loans.
The issue stems from the Banking and Other Financial Institutions Act (BOFIA), which mandates that loans be backed by collateral. As a result, banks typically lend only to larger corporations or more established firms, leaving SMEs struggling to access credit.
One of the key issues facing African SMEs is their inability to provide banks with the data necessary to assess creditworthiness effectively. Many banks rely on sophisticated scoring systems, which often overlook small businesses due to their lack of a financial history or meaningful data.
OZÉ aims to address this issue by providing SMEs with the tools to track their business data, which can then be used to secure financing. The app helps business owners monitor their cash flow, offering real-time updates on their financial health and encouraging the habit of tracking essential business metrics. This data is crucial when seeking credit from financial institutions.
OZÉ was founded in Guinea, initially as an offline solution. The idea evolved after the Ebola outbreak in Guinea prompted the team to consider how they could support SMEs remotely. The app’s prototype was tested in Guinea but later expanded to Ghana, where mobile penetration is the highest in West Africa.
In 2018, the company launched in Ghana, and it began to refine its product, tackling issues related to the sharing of financial data. Although the company initially had only 36 entrepreneurs on its platform, it has since grown substantially. With $700,000 in seed funding from investors like Anorak Ventures and Matuca Sarl, OZÉ is now preparing for its expansion into Nigeria and other African countries.
The company sees Nigeria’s competitive market as an opportunity for growth. While many SMEs struggle in Nigeria’s difficult business environment, OZÉ wants to offer business owners the edge they need to succeed.
OZÉ’s approach stands out by offering not just financial tools but also access to financing. Through its app, the company connects businesses with financial institutions based on their tracked data. The app’s proprietary algorithm helps determine an appropriate loan size by analyzing invoices, receipts, and transaction history. To qualify for a loan, businesses need to use the app for 90 days.
Unlike traditional microfinance banks, which often rely on relational marketing, OZÉ’s data-driven model allows businesses to better understand their financial situation and make informed decisions, thus reducing risks.
The app operates on a freemium model, where basic features are free, while premium features, including advanced analytics, are available for a subscription fee. OZÉ also generates revenue by collecting commissions when users obtain loans through its platform. Although the company hopes to primarily generate revenue from its app, the growth of its lending business offers additional potential.
