South African fintech startup Sava has raised $2 million to develop an expense management platform that will help African businesses manage their expenses, helping them reduce the time spent on record keeping and reconciliations.
According to Crunchbase, investors who participated in the pre-seed funding round include Unicorn Growth Capital, Sherpa Africa Partners, RaiCap, Quona Capital, Ingressive Capital, CRE Venture Capital and Breega.
In an interview with TechCrunch, Sava CEO Yoeal Haile mentioned that the platform, which has not yet been launched, will not only help African businesses manage their financial operating systems, but also enable them to capture data that will allow them to stay informed about the true financial health of their business.
Figures from Statista show that South Africa, where Sava will launch its beta in Q3, has a credit card penetration rate of 9%. With the fintech intending to earn a portion of its revenue from interchange fees on credit card transactions and also use credit cards issued to customers’ employees to form the basis on which the company provides liquidity to its business customers, it will be interesting to see how the low credit card penetration rate in the country will affect the startup’s business model.
Commissions on credit card transactions aren’t the only way Sava makes money. The fintech company will also charge subscription fees when businesses use its platform, charge interest on loans issued as well as upsell customers on third-party financial products.
Africa’s dysfunctional credit system along with its low credit card penetration rate, which stood at 4% in 2017 according to a Banking Payments Context report, makes it difficult to assess the sustainability of consumer credit and to businesses through expense management platforms. To circumvent this challenge, Sava, according to Haile, will use alternative data points such as bank accounts, mobile money accounts, payroll and invoices, all of which will be hosted on the platform, to assess the viability of the customer credit.
Sava, which was founded this year by Baile and co-founders Federico Von Bary Landesmann and Kolawole Olajide, plans to launch its platform in Kenya in the fourth quarter and eventually expand to other major addressable markets like Nigeria. and Kenya.