TradeDepot secures $110m to scale Buy-Now-Pay-Later model in Africa
TradeDepot, a business-to-business ecommerce, and embedded finance company has secured $110 million in an equity and debt funding round to expand the delivery of Buy-Now-Pay-Later services to 5 million SME retailers in Africa. The company is also planning to scale its merchant platform in new cities across the continent.
The company’s SEC filing showed that the equity share of the funding was about $42 million. TradeDepot is incorporated in Delaware, United States. The equity round was led by the International Finance Corporation (IFC), with participation from Novastar, Sahel Capital, CDC Group, Endeavor Catalyst, and existing investors, Partech and MSA Capital. The debt funding was led by Arcadia Funds.
TradeDepot had raised $10 million in January. Its total equity funding currently stands at $54.9 million.
Buy-Now-Pay-Later is a growing model that allows consumers to make purchases and pay for them at a future data, often interest-free. It has gained traction over the months driven by the pandemic which saw a surge in online shopping. The attraction for consumers is the option to defer payment to a later date giving them room to use funds for other necessities. Adoption is also being aided by major retailers pushing the payment method.
While the model is a big draw for young internet-savvy shoppers, it also appeals to small business owners that need to get supply from wholesalers. In Africa, small and medium enterprises (SMEs) are many and generate about $1 trillion in sales annually. They also contribute $2.6 trillion to the continent’s nominal GDP. however, they bear the brunt of a fragmented distribution network and lack of access to financing which leads to inefficiencies in distribution and many missed opportunities across the value chain.
Founded in 2018, TradeDepot has found these challenges as opportunities for innovative solutions. The company offers a broad range os consumer goods to SME retailers within its network and provides credit lines to enable these retailers to access inventory and pay in installments as they sell on to their own customers.
“We remain super focused on making digital commerce and financing both accessible and affordable to neighbourhood retailers across key cities in Africa,” Onyekachi Izukanne, CEO and co-founder of TradeDepot, said. “We are delighted to be joined by an elite group of new investors and have IFC’s Wale Ayeni and Brian Odhambo of Novastar joining our Board of Directors, to support us on this journey to drive growth and prosperity across the continent.”
With the new funding, TraeDepot hopes to accelerate the delivery of its service to more retailers, increasing penetration for consumer goods brands and driving prosperity in one of the continent’s most critical sectors. It has active operations in 12 cities across Nigeria, Ghana, and South Africa and leverages data, technology, and robust logistics operations to connect retailers with suppliers and unlock financing to fund inventory purchases for retailers, enabling increased sales, higher margins and other value-added services for all parties.
“The informal sector is a large and critical part of Africa’s economy, accounting for around 80 per cent of jobs in the region,” said Makhtar Diop, IFC’s Managing Director. “We are excited to work with TradeDepot to leverage technology to help small businesses across the continent, particularly the many retailers led by women, access the resources they need to grow and scale.”
TradeDepot has built a network of leading consumer goods brands and SME retailers across Africa, and created a proprietary risk scoring engine that uses retailers’ purchase history, previous repayment performance and other related data points to predict their creditworthiness. This game-changing financing model coupled with industry-leading technology to support logistics operations has led to a 200 percent increase in transaction volumes for retail store owners.