Lulalend co-founder and CEO Trevor Gosling

South African digital lender Lulalend has secured US$35-million (R600-million) in new funding through a series-B round it has described as “transformational” to its business.

Lulalend will use the money to scale its business, its CEO, Trevor Gosling, said in a statement on Wednesday.

It will also use the capital to “address South Africa’s enduring SME (small and medium enterprise) credit gap, which is estimated to be more than $20-billion (R340-billion) per year, including to the International Finance Corporation”.

The company’s series-B round was led by Lightrock, a global “impact investor”, with participation from new investors. These include the German development finance institution DEG, Triodos Investment Management and Women’s World Banking Asset Management. Existing investors the International Finance Corporation (IFC) and Quona Capital also participated in the round.

“The company’s digital-first approach, alongside its proprietary credit-scoring algorithm, has allowed it to offer a faster, simpler and more transparent service for SMEs to access business funding,” Lulalend said in the statement.

“By leveraging data from a diverse set of alternative sources, which support quicker and more accurate assessments of business health, Lulalend can review applications and distribute funds in hours as opposed to the weeks or months it takes traditional lenders. To date, Lulalend has disbursed billions of rand to SMEs across South Africa.”

‘Neobank’

The company was founded in 2014 as a provider of funding for SMEs. It has also recently launched a “neo-banking” solution called Lula, built in partnership with Access Bank. Lula offers a bank account specifically tailored for SMEs, an artificial intelligence-driven cash flow management tool and real-time access to funding via the existing Lulalend funding solutions.

The R600-million raised in the latest funding round will allow Lulalend to increase the size of its loan book, bring new solutions to market, and invest in the technology and talent that will accelerate the roll-out of its new digital business banking proposition, it said.