Amaka, a market woman operating in the Mushin market in Lagos, was drowning in debt and did not know a way out of the downward spiral. She had taken several loans from lenders and defaulted on all of them.

“I felt like I was drowning in debt. That’s when I discovered BFREE. The team heard me out, understood my situation without judgment, and offered me a solution that felt tailored to my needs. Thanks to BFREE’s assistance, I was able to negotiate a manageable repayment plan with my lender,” Amaka said.

Today, Amaka is debt-free and back on track towards achieving her financial and personal goals.

Traditionally, banks in Africa have struggled to meet the needs of retail borrowers like Amaka, paving the way for the growth of digital lenders and neobanks. However, credit collection practices in Africa remain outdated, relying mainly on call centers that lack customization and efficiency. This approach has led to lower repayment rates and higher costs for lenders, which translates to higher interest rates for borrowers. 

The financial services industry has also faced ethical concerns, such as the sharing of confidential borrower information and engaging in borrower harassment, which negatively impact both borrowers and lenders.

Enter BFREE, a credit management platform addressing the challenge of loan defaults for lenders and borrowers following the surge in digital lending in Africa. BFREE’s solution, a technology and data-enabled debt management platform, coupled with its ethical collection practices, results in enhanced recovery rates for lenders and a positive customer experience for borrowers.

BFREE’s solution aims to incentivize consumers who have fallen behind on their credit repayments to sustainably clear their balances by deploying a combination of self-servicing solutions, communication automation, and human operations, supported by machine learning algorithms that cluster and predict customer behavior.

The company initially offered collections-as-a-service, focusing on collecting overdue loans for banks and fintechs. This approach preserved borrowers’ dignity and educated them on improving their credit scores. Leveraging the insights gained, the company began purchasing impaired loan portfolios from financial institutions and recovering them independently. This practice, commonly known as distressed asset financing, has historically been underexplored in Africa due to challenges relating to:

• Acquiring accurate data and analytics for valuing loan portfolios
• Formulating effective solutions for collecting on past-due loans
• Navigating liquidity and regulatory requirements within respective countries

Why We Invested in BFREE

• Data & Generative AI: BFREE has developed a loan book pricing model using proprietary data to predict collection rates from impaired loan books. We believe this technology, coupled with an in-depth understanding of the African market, is crucial for the company’s success. BFREE has integrated a GenAI component through a strategic partnership with a third-party provider. This collaboration facilitates accelerated scaling across Africa without the necessity of establishing physical call centers in new markets. This operational efficiency enhances their competitiveness compared to rivals. 
• Debt: One of the primary challenges for distressed asset purchasers is securing debt capital on favorable terms. BFREE has obtained term sheets from tier-1 lenders, affirming our confidence in the company’s ability to raise additional capital as it scales.
• Strong partners and external validation: The company has demonstrated early traction in distressed asset acquisition, signing contracts with several large banks and Fintech lenders in Nigeria. 
• Strong founding team: BFREE’s co-founders have deep, hands-on experience in Fintech and the broader financial services industry. All three have worked at leading Fintechs as executives and have significant experience raising debt capital as well as deep relationships with banks, leading fintechs, and regulatory bodies. 
• Impact: BFREE gives individuals a second chance to repair their credit history, enabling them to access credit in the future. The company aims to change the negative perception of defaulters and create a more inclusive credit ecosystem. Further, developing a market for distressed debt prevents the build-up of high levels of non-performing loans and resolves existing ones, improving the resilience of a country’s financial system.

Capria Ventures invested in BFREE’s pre-Series A, after we were introduced to the co-founders Julian Flosbach, Chukwudi Enyi, and Moses Nmor via our relationship with early-stage VC investing partners Tomorrow Capital and Modus Capital.

Read more about the announcement here