Bfreea tech-enabled debt collection startup based in Nigeria, founded to automate and introduce ethical debt recovery processes after its founders saw the use and negative effects of aggressive recovery techniques, such as cold calling and debt settlement, by predatory digital lenders.
After launching in 2020, the startup introduced a number of scalable debt recovery methods, including a self-service platform that allows borrowers to create new payment plans and conversational AI tools (chatbots and callbots), as part of its collections. -service offer. These tools ensure human after-sales service for borrowers and action based on behavioral and financial data.
Over the years, its customer base has grown to include some of the major banks in Ghana, Kenya and Nigeria, where it plans to continue scaling, backed by the $2.95 million in new funding it just secured in a round led by Capria Ventures. Angaza Capital, GreenHouse Capital, Launch Africa, Modus Africa, Axian CVC and several angel investors also participated in the round which brought the total funding raised to $6.5 million, including last year’s undisclosed bridge round of 1.1 million dollars.
Julian Flossbach (CEO), who co-founded the startup together Chukwudi Enyi (COO) and Moses Nmore (CPO), told TechCrunch that while Bfree started with digital lenders, who it says are quick adopters of its products, it currently only works with a few of them, as its main focus is on banks, which contribute up to 70% income.
“Because of the enormous pressure to increase our margins, we basically had to either raise prices or let go of a lot of smaller customers,” Flosbach said, adding that it makes sense to work with banks because of their large loan portfolios compared to digital lenders. . The startup currently serves 14 clients, though it has partnered with 45 since launch.
Bfree says 92% of its customer interactions are fully automated, but it has maintained a call center, staffed by a small team, for when customers call or for follow-ups that require phone calls. It also launched a loan collection management SaaS called Workflow, which targets companies with in-house collection teams or those unwilling to outsource.
The startup is arguably the only technology-enabled debt recovery company across Africa, where collectors continue to rely heavily on traditional options such as call centers to track settlements.
Bfree to create a secondary market for loans
Its current loan portfolio exceeds 400 million dollars, of which it has managed to collect 12.5%.
The startup also plans to create a secondary debt market to allow third-party investors such as hedge funds, who want to diversify their investments, to buy non-performing loans (NLPs) from banks in Africa. Debt buyers buy loans from banks at a fraction of the face value of the debt and make a profit on the collection. Banks sell NLP to minimize their risk, manage their loan portfolios and free up capital.
“We collect so much data on borrowers, especially defaulting borrowers. We were able for the first time to actually develop an algorithm that can value these assets. We can predict how much a loan is outstanding for, say, 90 days. how likely it is to be paid back within the next year. We then go to the banks and buy those assets and take them off their balance sheets, allowing them to offload the risk,” Flosbach said.
He added that they also have an analytics solution for banks to help them gain insights into secondary debt markets.
Commenting on the investment, Susana García-Robles, managing partner at Capria Ventures, a VC firm specializing in the Global South that invests in applied Generative AI, said: “The advent of Generative AI provides a path to more efficient scaling, allowing the company to expand on the continent at a reduced cost. Bfree is well positioned to play a critical role in improving accessibility and mitigating risk in financial services.
“We foresee the growing prominence of credit management and are confident that Bfree will lead the way in creating a secondary market on the continent for distressed assets. Bfree has secured important partnerships with leading banks and fintechs, confirming the effectiveness of its product and reinforcing our belief in its potential to transform credit collection in Africa,” said García-Robles.
As the startup diversifies its offerings, it has also slowed its aggressive expansion plans announced two years ago, when venture capital flowed freely and “growth at any cost” was the mantra, to focus on its three core markets in Africa. This is due to the awareness of varying market dynamics and the realization that each market needs different approaches and products.
