Bfree, a fintech company focused on debt management, has secured $1.7 million in pre-Series A funding to support its expansion into emerging markets, where digital lending platforms have been experiencing significant growth.
The funding round was led by 4Di Capital, Octerra Capital, VestedWorld, Voltron Capital, Logos Ventures, and several angel investors, bringing the total capital raised by the Lagos-based company to $2.5 million, after an $800,000 seed round in May.
With plans to expand to 16 new markets, including Ghana, India, Uganda, Brazil, Colombia, Mexico, Russia, Poland, Pakistan, and Indonesia, Bfree is looking to scale its operations beyond Nigeria, where it launched in August 2020, and Kenya, which it entered in July 2022.The company was founded by Chukwudi Enyi (COO), Moses Nmor (CPO), and Julian Flosbach (CEO), who saw an opportunity to improve the debt collection process in digital lending. Their goal is to offer more ethical, customer-friendly debt recovery solutions, particularly after witnessing the inefficiencies in existing systems used by digital lenders in Nigeria.
Flosbach explained that many digital lenders excel at issuing loans but struggle with the aftersales aspect, especially in debt collection. Traditional methods of collection, which often include penalties and aggressive tactics, are less effective and harm customer relationships. Bfree seeks to revolutionize this by offering flexible, ethical solutions designed to ensure better repayment rates while improving customer satisfaction.
The startup works with over 30 credit institutions, such as digital lenders, microfinance institutions, and banks, leveraging customer data to create user profiles and predict repayment behavior. Based on these profiles, Bfree applies a variety of collection strategies, including automated communication, chatbots, and direct calls. The company also runs regular financial literacy campaigns to help borrowers better manage their finances.
In response to the growing demand for credit in emerging markets, particularly in areas underserved by traditional banks, Bfree provides a vital service. Digital lending is on the rise in these markets, offering collateral-free loans, but high default rates remain a challenge. In Kenya, for example, defaults on digital loans reached 23% in mid-2020, prompting many lenders to turn to collection agencies, some of which use aggressive tactics like calling the borrower’s family and friends.
To date, Bfree has worked with 1.1 million defaulters, managing approximately 800,000 active customers, primarily in Nigeria. The company expects this number to grow to 1.4 million by the end of next month as it scales its operations across new markets.
As part of its growth strategy, Bfree has hired top industry professionals, including Konrad Pawlus, former CTO of SALESmanago, and Yohan Theatre, a former data decision-making expert at investment firm PIMCO. Theatre, who now leads Bfree’s data and financial engineering efforts, emphasized the role of blockchain technology in the company’s future.
He explained that while lenders in developed markets can sell portions of their debt portfolios to mitigate risk, this practice is not common in emerging markets. Transaction costs and contractual uncertainties make it difficult for lenders to offload their debt. However, the advent of decentralized finance (DeFi) and blockchain technology is expected to reduce transaction costs and increase contract reliability, providing new opportunities for lenders and borrowers in emerging markets. Bfree is actively exploring these innovations as part of its strategy to disrupt traditional finance.
