SoLo Funds, a community lending platform created to offer credit to the underbanked and American consumers long shut out of the financial services sector due to pervasive discrimination in the loan process, is expanding for the first time overseas, to Nigeria.
Founded by Rodney Williams and Travis Holoway (CEO) in 2018, SoLo Funds has grown to over one million users, the vast majority (82%) of which are from underserved zip codes in America. The company has issued over $200 million in loans and a total of $400 million in transaction volume through a fintech offering that caters to communities that have historically been economically disenfranchised.
Expansion to Nigeria, Williams said, is a first step on the path to further international growth. “It is the test case. It is the template. It is the first,” Williams said in an interview with CNBC after revealing the Nigeria plans during a session at the Aspen Ideas Festival earlier this week. “We are not stopping with Nigeria – we look at Nigeria as the gateway to the continent,” he said.
Nigeria has both the largest economy in Africa and the fastest-growing middle class. The economic profile of the nation was an important factor in SoLo’s decision, which sees its product as an important tool for empowering the middle class, giving them a chance to both make ends meet during times of financial hardship and make a return when they have a bit more of a reliable cash flow.
Nigeria’s existing fintech ecosystem was also a plus. “For us to do what we do, we have to partner,” Williams said. “We have to leverage many partners to deliver our solution and those partners have to be in market and be successful in market. And in Nigeria, we saw many examples of that.”
Opay and Flutterwave, which made the 2021 CNBC Disruptor 50 list, are two examples of the various fintech unicorns that have found immense success in the country.
SoLo Funds ranked No. 50 on the 2023 CNBC Disruptor 50 list.
Williams is one of only two founders (the other being Elon Musk) to have two companies make the annual list. Williams, who came from an executive background at Procter & Gamble, first founded Lisnr, whose investors include Visa, Intel, and Synchrony Financial, and has deals in eight countries for its secure digital data transfer technology.
In Nigeria, SoLo Funds has already connected with Paga, a mobile payment company, Platform Capital, an African investing firm based in Nigeria, and Endeavor, an entrepreneurial community network.
Williams said the lack of investment opportunities that currently exist in Nigeria is part of the market opportunity for the company. The bank rate offerings for savings in Nigeria are far below the level of inflation.
“The average Nigerian consumer with savings is not growing in any capacity. And that’s a characteristic of many developing nations, not just Nigeria. So what that ultimately means is that it has a very, very attractive group of citizens that want to grow their money,” Williams said.
SoLo Funds users have the opportunity to lend small amounts of money, ranging from $50-$1,000, to peers on the platform. Borrowers lay out the terms of their loan, including if they want to tip the lender. Through these tips, lenders are able to generate a return. Approximately 99% of users choose to tip their lenders, according to the company.
“We believe SoLo is the evolution of microfinance and community finance,” Williams said. “We are building a financial product for the masses, and not just the people who have money.”
That mission has not come without controversy, and allegations that SoLo Funds is creating a new form of predatory short-term lending. Williams referred to the controversy that has trailed the company himself during the Aspen talk, telling attendees, “Go to Google Search.”
A case brought by banking regulators in Connecticut was recently settled, following resolution to cases in California and Washington, D.C. SoLo Funds has added several lawyers to its staff with experience in the banking, fintech, and regulatory sectors. Williams has argued throughout the controversies that policymakers fail to consider the needs of “everyday Americans” when making their decisions.
“Every day I wake up,” he said, “and I can see a single mom or a dad put food on the table. And I can also see a single dad or a mom make a return. And that return can pay for taking their kids out to the movies this weekend, just as much as it can pay to keep someone’s lights on. That’s what makes me know that I’m doing the right thing. And what excites me about Nigeria, and anywhere else in the world we go, is that we’re gonna do it for more people in more places than I think I ever thought we could.”
Many startups that have expanded internationally have had to pull back, especially as venture funding has dried up and the growth-at-all-costs startup strategy that dominated for a decade has been replaced by a focus on a quicker path to profits.
The risks of expanding to a middle class market on an international scale, Williams says, are very similar to those in America.
“I was just looking at a Twitter post, and it mentioned that banks don’t serve [the middle class] because they have said that it’s too expensive to serve. And they have said that this consumer is not credit worthy and that’s why banks don’t build products for them. Well, that’s the risk of building a product for mass market,” Williams said. “We face the same conclusion or the same challenge of why build products for everyone, when, you know, you could build products for the top 10% and be a billion-dollar company?” he added.
Williams said that he plans to address international risk the same way that he addressed risk in the United States – with data, testing, and partnerships with ecosystem leaders. The complexity of lending regulation in the U.S. on a state-by-state basis has prepared SoLo Funds for the equally complex international launch. “Even though international expansion sounds like a massive undertaking, when we have analyzed it, it’s very similar to introducing new products in the United States on a state-by-state basis,” he said.
The company has plans for additional international markets over the next 12-18 months across multiple continents, starting with key entry countries.
“We’ve identified that country in Latin America as well. We’ve also identified that country in Southeast Asia,” Williams said.