“Nobody goes there anymore. It’s too crowded”
Access to credit is an incredibly empowering thing. It’s a bet on the future; it’s a bet that most humans are good. It’s also the foundation of the entire monetary system as we know it today.
But credit is not evenly distributed — people who have the means, motivation, and opportunity to repay are nonetheless denied access to credit every day by an archaic and byzantine system. It usually comes down to this catch-22 in the developed world: You can’t get access to credit unless you have a credit score, and you can’t get a credit score unless you have access to credit.
In the United States, there are too many companies tripping over themselves to give the exact same customers credit — the customers that everyone knows will pay back the loan and offer a good risk-adjusted return to the lender.
In emerging markets, there’s not even the aforementioned catch-22. There are often no credit “bureaus” or infrastructure, much less second-order innovations like credit cards, mortgages, etc. Cash is king.
This holds people and countries back. Things we take for granted are not possible. We think of Uber and Lyft empowering drivers to control their schedule and monetize their off-hours. But how do drivers pay for gas before they get their earnings? How does a local entrepreneur procure goods to sell — without having money (credit) to buy them to begin with?
Enter Branch, which aims to become the largest branchless bank in emerging markets, starting in Kenya. Based in San Francisco and founded by Matt Flannery, formerly CEO and founder of Kiva, Random Bares, and Daniel Jung, there is no team better equipped to handle this challenge. And the volume, profitability/sustainability, and cost of loans is among the best we’ve seen of any fintech company.
The combination of smartphones, digital money, and machine learning offers an opportunity to leapfrog old-fashioned credit infrastructure, and that’s precisely what Branch is doing. It’s like a combination of proprietary credit bureau and bank all in one, all wrapped into an Android app that anyone can download. It works by referencing the data on your phone, with your permission, for underwriting. Once the loan is approved, the funds are transmitted instantly, digitally, via M-Pesa.
We are incredibly excited to partner with Matt and the Branch team, and today are announcing that we are leading a $9M Series A investment in the company. The funding will go to help them expand to new geographies, such as Tanzania, which they just launched in this week, and become the best branchless bank in underserved regions across the globe.